The Bargain Element of Consideration

All contracts require something to be given in return for something else. This is called “consideration”. It is the bargaining element of the contract, where something is gained on each side. A classic definition of consideration, in terms of benefit and detriment, was given by Lush J in CURRIE v MISA (1875)

“A valuable consideration may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”

Consideration can also be described as the price paid for the contract (DUNLOP v SELFRIDGE)

Executed and Executory consideration

Executed consideration is when the act of the transfer of the goods has been carried out and executory is where a party has made a promise but it has not yet been carried out e.g. If A and B have both yet to fulfil their promises when the contract is made, consideration from both parties is executory. If C offers £20 for the return of her lost diamond ring and D returns it, D’s consideration would be executed because his side of the bargain is completed.

Consideration must be sufficient but need not necessarily be adequate. For consideration to be sufficient it should be of SOME VALUE TO THE OTHER PARTY. The courts do not concern themselves with the market price or adequacy because this would interfere with freedom to contract.

THOMAS v THOMAS (1842)

The two following cases illustrate sufficiency and adequacy of consideration

BAINBRIDGE v FIRMSTONE (1838)

CHAPPELL v NESTLE (1960)

Consideration need not be adequate (generous enough to appear a fair bargain in terms of monetary value) but must be sufficient (of enough recognisable value to satisfy the courts).

Consideration must not be vague

Consideration must be something tangible or discernable

WHITE v BLUETT (1853)

Consideration must move from the promisee

For a contract to be enforceable, consideration must be provided by the two parties involved, therefore if A pays B £50 and B agrees to cut Cs lawn, C cannot claim as C has provided no consideration.

TWEDDLE v ATKINSON (1861)

This was known as the doctrine of privity of contract but since Contracts (Rights of Third Parties) Act 1999 it has become a little unclear.

Past consideration

Consideration provided for a promise must be done in relation to that promise. If something has already been completed and the promise comes AFTER, this is past consideration

ROSCORLA v THOMAS (1842)

The more recent case of REMcARDLE (1951) also illustrates this

REMcARDLE (1951)

However, if an act is done at the request of the promisor, or it is understood payment will be forthcoming from the outset, the situation is different

LAMPLEIGH v BRAITHWAIT (1615)

RE CASEY’S PATENTS (1892)

It is often obvious in an employer/employee scenario that work will not be undertaken for nothing and payment will be fixed later.

Forbearance to sue

Abandoning a legal claim against someone may be good consideration e.g. out of court settlements

HAIGH v BROOKS (1839)

Performance of an existing duty

Generally, doing something, which is already an obligation, is not sufficient consideration. Cases fall into two categories: those where an obligation already exists under the general law of the land, and those where a duty is owed to another under a contract.

Performance of an existing duty under the general law of the land

COLLINS v GODEFROY (1831)

However doing something extra (plus factor) may amount to consideration.

GLASBROOK COLLIERY v GLAMORGAN COUNTY COUNCIL (1925)

WARD v BYHAM (1956)

Performance of an existing contractual duty

If a person has already made a contract to do something this same duty cannot be used as consideration

STILK v MYRICK (1809)

HARTLEY v PONSONBY (1857)

The following case also had a great impact on the doctrine

WILLIAMS v ROFFEY (1990)

Part payment of a debt

This has become known as the rule in PINNEL’S case

PINNEL’S CASE (1602)

This rule was supported in the later cases of FOAKES v BEER (1884), RESELECTMOVE (1995) and FERGUSON v DAVIES (1997). This rule still stands as good law but there are exceptions:

If at the request of the creditor something else is added to the payment

If, at the creditor’s request, the debtor pays a lesser sum before the date on which it is due

If, at the request of the creditor, the method of payment is changed

Where there is a composition agreement with the creditors

Where payment of a lesser amount by a third party is accepted, the creditor cannot then sue the original debtor for the full amount

PROMISSORY ESTOPPEL

CONSIDERATION – CASES

THOMAS V THOMAS (1842)

A husband wanted his wife to have the right to live in the house owned by him when he died. She paid £1 per year rent

BAINBRIDGE v FIRMSTONE (1838)

The need arose to know the weight of some boilers. It was agreed that they would be returned in good condition. On return they were damaged and the owners sued.

CHAPPELL v NESTLE (1960)

The case concerned whether Nestle should pay Chappell royalties on records given away in return for chocolate bar wrappers (plus money for postage and packing)

WHITE v BLUETT (1853)

A son promised to cease his complaints about the distribution of his father’s estate

TWEDDLE v ATKINSON (1861)

Tweddle and Atkinson agreed to give their son and daughter in law a sum of money on marriage. Tweddle did this, then died but Atkinson did not and Tweddle (junior) sued

ROSCORLA v THOMAS (1842)

After a horse had been sold the seller told the buyer that it was “sound and free from vice”. The horse was actually vicious and unmanageable.

REMcARDLE (1951)

The McArdle family did work on a house for an elderly relative. Other members of the family were so impressed that they offered them money, which was not forthcoming

LAMPLEIGH v BRAITHWAIT (1615)

A lawyer obtained a king’s pardon for a prisoner. He promised £100 and when it was not paid, the lawyer sued

RE CASEY’S PATENTS (1892)

Work was undertaken and in lieu of payment, some shares in patents were promised

HAIGH v BROOKS (1839)

A sum of money was to be paid in return for an agreement to abandon a legal claim under a guarantee

COLLINS v GODEFROY

A lawyer was obliged to appear in court and he had agreed that one party would pay him to stand in court and give evidence

GLASBROOK COLLIERY v GLAMORGAN COUNTY COUNCIL (1925)

The council had suffered bouts of strikes etc around the coalmines in South Wales. The plaintiffs requested a larger patrol be stationed at their mine and the defs said they would provide the police with extra money which was not paid. The claimants sued.

WARD v BYHAM (1956)

A single mother was promised £1 a week for maintenance of a child provided it was “well looked after and happy”. There was a legal obligation for the mother to maintain her child. The father defaulted on the payments

STILK v MYRICK (1809)

Two sailors deserted a ship during a journey in the Baltic. Eight sailors agreed with the captain they would share their two wages if they got the ship home. The captain defaulted on payment

HARTLEY v PONSONBY (1857)

17 sailors deserted a crew of 36, leaving only a few experienced seamen. They agreed to share wages but were dangerously short handed

WILLIAMS v ROFFEY (1990)

The def builders contracted with pl carpenters to do work on flats. When they found the carpenters were in financial difficulty, they offered extra money to ensure the work was finished on time and they did not incur a liquidated damages fee