What is consideration?

1. What is consideration? Consideration is the price paid for the promisor’s promise and is the benefit received under the contract. The promisor is the person undertaking the promise, while the promisee is the person who is receiving or the recipient of the promise. It may be:- • something the promisee gives the promisor; or • the carrying out of some act (an act of consideration may be a forbearance, deliberately and intentionally not doing something, e.g. forbearance to sue); or • not doing something that the promisee had a legal right to do.

2. Rules relating to consideration • Consideration: • is essential in every simple contract. • should be present or future but not past. • must move from the promisee. • must have some value, although the court is not concerned with its adequacy. • must be something more than the promise of an existing obligation. • must be possible of performance. • must be definite, legal and referable to the other party’s promise.

3. Consideration in contracts Formal Contracts No need for consideration as the contract is valid because of its form (e.g. deeds). Simple Contracts Valuable consideration is required for the ‘agreement’ to become a contract.

4. Past, present and future Principles: Consideration may be executed or executory but may not be past: • executed consideration – the act of consideration has been performed in return for the promise (in the present) • executory consideration – the act of consideration is yet to occur, e.g. a promise to do something (in the future) • past consideration – the promise is given after the act of consideration CASE: Roscorla v Thomas [1842] CASE: Anderson v Glass [1869] CASE: Lampleigh v Braithwait (1615)

5. Movement of consideration Principle: Consideration must move from the promisee, but not necessarily to the promisor. CASE: Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] CASE: Coulls v Bagot’s Executor & Trustee Co Ltd (1967)

6. The value of consideration Principles: Consideration need not be ‘adequate’. CASE: Chappell & Co Ltd v Nestle Co Ltd [1960] BUT consideration must be ‘sufficient’, i.e. not: • performance of a public duty or a duty imposed by law CASE: Glasbrook Bros Ltd v Glamorgan County Council [1925] • performance of a previous contractual obligation CASE: Stilk v Myrick [1809] CASE: Hartley v Ponsonby (1871) CASE: Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990]

7. The value of consideration cont… consideration must be ‘sufficient’, cont…: • not illusory (Consideration must be something of value in the eyes of the law. An agreement will not be enforced if the consideration is so vague as to be illusory.) CASE: Eastwood v Kenyon (1840) • not past • part-payment of an existing debt CASE: Foakes v Beer (1884)

8. Promissory estoppel Principle: A party may be prevented from insisting on his or her strict rights if, having regard to the dealings that have taken place between the parties, it would be inequitable to allow such insistence because the promisee has altered his or her position in reliance on the promise. CASE: Central London Property Trust v High Trees House Ltd [1947] CASE: Waltons Stores (Interstate) Ltd v Maher (1988)

9. Elements of estoppel • There must be a clear and unambiguous assumption or expectation on the part of party A which was encouraged or induced by party B • Party A acts in reliance upon the assumption or expectation • Party A will suffer detriment if the assumption or expectation goes unfulfilled • Party B knows party A will suffer detriment if the assumption or expectation is unfulfilled • Party B fails to avoid that detriment by fulfilling the assumption or expectation or otherwise