#2196 - Requirements For Consideration - Contract Law

Requirements for Consideration

The basic idea

• Chen Wishart: In order to acquire the right to enforce undertaking (promise)

  • A party must undertake to give/actually give something stipulated by other as price of undertaking (consideration)

Other requirements

• The consideration of the promisee must move from the promisee, but need not move to the promisor

  • It could move from the promisee to a 3^rd party instead and still be good consideration

    • But under the Privity rule, that 3^rd party would not be able to enforce the giving of the consideration unless he fell into C(R3P) A 1999

• Consideration must be requested by the promisor

  • Smith: All that is necessary is that D should, expressly or impliedly, ask for something in return for his promise

    • If he gets what he’s asked for = good consideration.

    • BUT must have been desired by the promisor not just relied upon as being sufficient in return for the promise

      • E.g. Combe v Combe [1951]: Husband promised to pay ex-wife 100 a year upon their divorce. He stopped. Wife sought to enforce the promise b/c said she had given consideration by not suing for maintenance.

        • CoA: not enforceable b/c husband had not requested that she not sue for maintenance

          • Thus her forbearance (consideration) RESULTED FROM his promise to pay

          • BUT was NOT GIVEN IN RETURN for it

  • Chen Wishart: but courts will sometimes imply a request for forbearance as being consideration – shows that courts have considerable leeway in deciding whether or not to imply a request by the promisor

    • and so vest the promisee’s reliance on the promisor with the label of consideration (may depend on context).

    • Alliance Bank v Broom [1864]: B undertook to provide some security for its debt to A. When A sued B for the debt, B claimed A gave no consideration for it

      • Held that b/c B’s request, A had not sued

        • Although B had not expressly requested A to forbear, the court implied such a request though B attempting to rack up some security.

• Must result from the promise –

  • Must support the promise

    • Satisfaction of a condition only consideration if it was requested as a price of the promise by the promisor

      • Chappel v Nestle

        • E.g. 3 wrappers only valuable if they were those advertising special offer, were Nestle’s chocolate bars and were with 1s 6d postage for purpose of getting record

          • not if random wrappers for buying business instead

  • Past Consideration is not good consideration

    • Consideration has to be given in response to the promise – can’t cover something given or done before the promise was made

    • Ergo, is merely a gift and not enforceable.

    • Is past consideration if

      • Eastwood v Kenyon (1840): C was guardian of girl under age of 21. When she got married, D, her husband, promised to pay off the debt he had spent homing and educating her. D subsequently didn’t pay the money back, and C sued him.

        • Lord Denman CJ:

          • Only promises supported by consideration after promise are binding.

          • “consideration” given here long in the past of the promise to pay

            • Therefore, no consideration given for that promise

    • Major exception = Implied assumpit

      • Pao On v Lau Yiu Long [1980]:

        • Lord Scarman: An act done to make a payment or to confer some other benefit before the giving of a promise can sometimes be consideration for the promise IF

          • Act done at promisor's request,

          • Parties understood that act was to be remunerated

          • AND renumeration would have been legally enforceable had it been promised in advance.

• Must be of some factual value

  • Essentially, it all depends on the situation what consideration is good consideration

    • Might be a benefit or detriment

      • Normally, both are present. X is deprived X* but gains Y*, Y loses Y* but gains X*

        • Might only be one though

        • E.g. Jones v Padvatton: such as detriment to promisee with no benefit to the promisor (promise to pay a sum if promisee gives up job and retrains)

    • Might be “Invented”

      • Trietel: Courts can “invent” consideration by treating act/forbearance as valid consideration even though not the promisor’s purpose to obtain it, and although no prejudice to the promisee

        • Chappell v Nestle [1960]:

          • Main intention was to get chocolate that wouldn’t otherwise be bought, sold

            • Thus wrappers were of great value to Nestle even if the reception of them was not and they threw them away once received.

• Must be of “legal” value

  • Treitel: Must have some economic value

    • Benefit/Detriment might be factual, as in valuable in the eyes of the parties

      • But if it is not valuable in the eyes of the law

        • Then it is not consideration

    • Difficulty only arises when it is non-monetary performance or of doubtful economic value to the promisor.

    • BUT Courts are not majorly strict here unless they want to be.

      • Ward v Byham [1956]:Unmarried parents of illegitimate child Z split up, D said he would pay 1 allowance per week to C if C looked after her so that she was happy and well. D did so for 7 months and then stopped paying.

        • Denning LJ:

          • Promise to continue to perform pre-existing duty is always good consideration

            • Because gives a benefit to the person to whom it is given.

        • Morris LJ

          • Father was saying: irrespective of strict legal position

            • What I’m asking is you look after Z so she is well looked after and happy

            • If conditions filled

              • Father willing to pay

                • Thus ample consideration for his promise.

  • BUT need not be adequate

    • Imbalance of exchange does not offend doctrine of consideration

      • E.g. buying house worth 2 million for 2.20

      • Lord Somervill in Chappell v Nestle

        • Contracting party can contract for what consideration he chooses

          • Peppercorn does not cease to be good consideration if it is then established that the promisor does not like pepper and will throw away the corn.

      • McKendrick: might examine transaction for duress though...

  • Can be nominal/trivial

    • Nestle v Chappell

      • Lord Reid:

        • Nestle’s weren’t intending to trade records, but increase sales of their chocolate bars

          • Main intention of special offer was to get chocolate that wouldn’t otherwise be bought, sold

            • Thus wrappers were of great value to Nestle even if...