CHAPTER 4
Consideration
Consideration
In order to be entitled to enforce a promise a promisee must have given something in return for the promise
– where there is no consideration, it is merely a promise to make a gift – which is not enforceable unless it is
made in a deed.
Consideration “may consist either in some right… accruing to one party, or some forbearance … suffered or
undertaken by the other” (Currie v Misa). The requirement of consideration can therefore be satisfied by the
presence of detriment or benefit; both elements need not be present – but it is also necessary that the consideration, the right accrued or the forbearance suffered, is something of value in the eyes of the law – e.g.
promises of love will not suffice (Trietel).
1. Consideration must be sufficient but need not be adequate
Where consideration is monetary, the court will readily find that consideration is sufficient. There is no requirement that the consideration is adequate, i.e. of market value, so £1 in exchange for a house would be
sufficient (Chappell v Nestle). Where consideration is non-monetary, the court reserve the right to decide
whether the alleged consideration has in law any value and so whether or not it amounts to consideration though in commercial cases the court tends to give credence to what the parties decide is or is not of value
(Bainbridge v Firmstone).
2. Consideration must not be past
Where the promise to perform is given after the relevant act of the other party has already been performed
(e.g. A paints house, then B offers to pay £100 for painting house), this will not amount to good consideration (Re McArdle). However, there may be consideration for a promise made after acts have been performed where:
1. the act is done at promisor's request;
2. the parties understood that the act would be remunerated by payment/other benefit; and
3. the payment/benefit is legally enforceable if promised in advance (Lampleigh v Braithwait).
3. The pre-existing duty rule
a. Performance of contractual duty for a 3rd party
Where X contracts with Y to do something for a sum of money, and X contracts with Z to carry out his preexisting contractual duty to Y for another sum of money - the performance of, and the promise to perform a
pre-existing contractual duty owed to the third party, Y, will constitute valid consideration (Shadwell v Shadwell).
b. Performance of duty imposed by law
Where a duty to perform is imposed by law, performance of this duty or the promise to perform this duty
does not in law amount to consideration (Collins v Godefroy). However, where the claimant exceeded their
6
duty in some way and done more than they are legally bound to do, this may amount to valid consideration
(Glasbrook Brothers v Glamorgan CC).
c. Performance of contractual duty owed to the promisor (increasing pact)
Where there is a contract between A and B, and then there is an alteration agreement whereby A promises to
pay B more for doing the same work (an increasing pact), but refuses to honour his promise after the work is
completed - the traditional view is that B cannot claim the additional money because he has simply performed his existing contractual duty and performance of an existing contractual duty is not good consideration (Stilk v Myrick; Foakes v Beer). However, where the claimant goes beyond their existing duty (Hartley v Ponsoby); or the defendant obtains a practical benefit as a result of the claimant's promise to perform
his existing contractual duty, such as having the work completed on time, consideration may be found (Williams v Roffey Bros).
d. Part-payment of debt (decreasing pact)
Where there is a contract between A and B, and then there is an alteration agreement whereby B agrees to
accept less than was due under the original contract (decreasing pact), the part-payment of the debt will not
extinguish the obligation to pay the whole because there is no consideration (Pinnel). This was approved in
Foakes v Beer. However, there are exceptions, including where at the promisor's request part-payment is
made (i) before the due date; (ii) with a chattel ("hawk or robe"); or (iii) to a different destination. In addition, other the debt will be discharged where part-payment is made by a third party (Hirachand Punamchand v Temple); or where the defendant can successfully raise the defence of "promissory estoppel" (Central London Trust v High Trees).
4. Consideration must move from the promisee and not be illegal
The consideration must come from the promisee, i.e. from someone who is privy to the contract, and not a
third party. However, a person who is not party to a contract (a third party) may enforce a term of the contract if (a) the contract expressly provides that he may; or (b) the term purports to confer a benefit on him,
though the third party must be expressly identified by name, as a member of a class or as answering a particular description. If it appears that neither party intended the term to be enforceable by a third party, s1(1)(a)
and (b) will not apply (Contract (Rights of Third Parties) Act 1999). If consideration amounts to an illegal
act, it will not be enforceable (Foster v Driscoll).
5. Establishing the necessary link
In order to constitute consideration the act must have been performed at the request, express or implied, of
the promisor (Combe v Combe).
The Defence of Promissory Estoppel
Where there is a promise but it has no consideration (e.g. A accepts part-payment of a debt and promises not
to sue for the rest of the debt at a later debt), the defence of promissory estoppel may prevent the party withdrawing its promise if the other party has reasonably relied on that promise.
What is required for promissory estoppel is:
(i) a contractual relationship must exist (Brikom v Carr).
(ii) there must be a clear and unambiguous promise by the promisor that he will not enforce
h i s
legal rights. it would be up to the court to decide based on all of the facts if this was so S c a n d a n a v i a n
Tanker Trading Co. v Flota Petrolera Ecuatoriana).
(iii) there must be reliance on the promise by the promisee. In Hughes v Metropolitan R a i l w a y s ,
the court held that there must be detrimental reliance, but in W J Alan v El Nasr Export & Imports the
court said there need not be detriment, the promisee must have been led to act differently than he would
otherwise have done. Also in James v Heim Galleries, the court said that the promise must be made with
the intention or at least the knowledge that it would be acted upon.
7