Chapter 14.1
Consideration
Consideration is either:
•some detriment to the promisee, that
the promisee may give value; or
•some benefit to the promisor, that the
promisor may receive value.
That the promisee suffer a detriment
Agreed Uncle !
Nephew, I will give
you $1000 if you do
not smoke for a year.
That the promisee suffer a detriment
Agreed Uncle !
The nephew promises in return
to give up something he is
legally entitled to do (suffers a
detriment).
Nephew, I will give
you $1000 if you do
not smoke for a year.
The uncle promises to pay
the nephew $1000.
That the promisee suffer a detriment
Agreed Uncle !
The nephew promises in return
to give up something he is
legally entitled to do (suffers a
detriment).
Nephew, I will give
you $1000 if you do
not smoke for a year
The uncle promises to pay
the nephew $1000.
The uncle’s promise, supported by
consideration, is enforceable.
The Categories of
Consideration
Executory consideration
Agreed
I will give you
$5000 for your
car.
The promise to pay the $5000 is
executory consideration, this is, it still
has to be done.
Executed consideration
LOST
A SMALL DOG
$100
Reward
LOST
A SMALL DOG
$100
Reward
Acceptance of this offer is by
finding and returning the dog.
Acceptance, provided there is the
specified consideration, which is
thus executed.
Past Consideration
Where a promise is made
in return for an act that has already been performed, or
for benefit that has already been received,
the consideration for the promise is said to be past and will not
support the promise.
I.e. the promise in return for past consideration is unenforceable.
Hunt v Bate (1568) 73 ER 605
Re McArdle [1951] 1 All ER 905
BUT
Where the act was performed, or the benefit conferred at the
request of the promisor,
in circumstances that suggested that some payment would be
made, then
the promise is enforceable since the consideration in that
case is not regarded as being past.
Sidenham v. Worlington (1585) 78 ER 905
Casey v. Inland Revenue Commissioner [1959] NZLR 1052
What will amount to
consideration?
There are two propositions:
Consideration need not be adequate.
Consideration must be real.
Adequacy of
Consideration
The court will not upset a bargain merely
because the exchange of values is unequal.
Thomas v Thomas (1842) 114 ER 330
Illusory
Consideration
Three situations where the
alleged consideration may be
illusory:
1.The consideration is performance of a legal duty.
2. The consideration is the performance of an
existing contractual duty owed to the promisor.
3. The consideration is the performance of an
existing contractual duty owed to a third party.
1. The consideration is performance of a legal duty.
The performance of a duty already required of the promisee by law
will not support a promise – the consideration is illusory.
Collins v. Godefroy (1831) 109 ER 1040
BUT
If, at the promisor’s request the promisee does
more than the law requires, this will be good
consideration.
Glasbrook Bros v. Glamorgan County Council [1925] 1 AC 270
2. The consideration is the performance of an
existing contractual duty owed to the
promisor.
Where the act is one that the promisee was contractually bound to
perform for the promisee, it cannot amount to consideration for a fresh
promise unless some additional act is performed at the request of the
promisor.
Stilk v. Myrick (1809) 2 Camp 217
Hartley v. Ponsonby (1857) 119 ER 1471
HOWEVER
Williams v. Roffey Bros
[1990] 1 All ER 512
If A is contractually bound to perform service or supply goods to B, and
it appears that A cannot perform the obligation in time, and
B promises A an additional payment or other benefit if A promises to
perform the obligation on time, and
as a result B obtains a practical benefit or avoids a disbenefit, then
the promise of extra payment will be enforceable, provided
A exerted no improper pressure amounting to economic duress.
3. The consideration is the performance of an
existing contractual duty owed to a third party.
•If A promises to deliver goods to B or to B’s order, and
•B sells the goods, and
•tells A to deliver the goods to C, then
• if A requires C to promise to, say, unload within a specified time frame, then
• C’s promise is enforceable.
Scotson v. Pegg (1861) 158 ER 121
Variation of existing
contractual rights
Waiver and forbearance
While variations in a contract require consideration, a
mere waiver or forbearance, such as an extension of time,
may be enforceable without fresh consideration.
Rickards (Chas.) Ltd v. Oppenheim [1950] 1 All ER 420
Satisfaction of debt by payment of a lesser sum
A debt can only be discharged
• by payment of the debt in full, or
• the substitution, at the creditor’s request, of some other
benefit, with or without payment of a lesser sum, the
intention being to discharg the debt.
Pinnel’s Case (1602) 5 Co Rep 117a; 77 ER 237
Foakes v Beer (1884) 9 App Cas 605
In New Zealand
Section 92 Judicature Act 1908
A written receipt from the creditor, marked in full
satisfaction of the entire debt, will bar further action
by the creditor.