Consideration: Nature and Function

Currie v Misa (1875) LR 10 Ex 153

Facts

• Case concerned whether value had been exchanged between parties sufficient to support a contractual promise.

Judgment

• Consideration existed.

Legal Principle

• Lush J defined consideration as:
  • “Some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility suffered or undertaken by the other.”

Application

• Most frequently cited judicial definition of consideration.
• Forms the foundation of modern consideration doctrine.

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847

Facts

• Dunlop attempted to enforce a resale price maintenance agreement.

Judgment

• Claim failed.

Legal Principle

• Consideration is an essential requirement of a binding contract.
• Only a person who has provided consideration can generally enforce a contractual promise.

Application

• Leading House of Lords authority on the function and necessity of consideration.

Thomas v Thomas (1842) 2 QB 851

Facts

• Husband expressed a wish that his widow should continue living in his house.
• Executors agreed to transfer occupation rights if she paid £1 annual rent and maintained the property.

Judgment

• Contract enforceable.

Legal Principle

• Consideration need not be substantial.
• Something of legal value must be provided.

Application

• Frequently used to explain the function of consideration.

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Sufficiency and Adequacy of Consideration

Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87

Facts

• Nestlé offered records in exchange for money and chocolate bar wrappers.
• Wrappers were discarded after receipt.

Judgment

• Wrappers constituted consideration.

Legal Principle

• Consideration must be sufficient but need not be adequate.
• Courts do not assess economic value provided it has legal value.

Application

• Leading authority on sufficiency of consideration.

Thomas v Thomas (1842)

Legal Principle

• Courts are concerned with legal value rather than economic value.

Application

• £1 annual rent was sufficient consideration despite being minimal.

White v Bluett (1853) 23 LJ Ex 36

Facts

• Son promised to stop complaining about his father’s distribution of property.
• Father promised to release debt.

Judgment

• No consideration.

Legal Principle

• Consideration must possess legal value.
• Merely refraining from complaints was insufficient.

Application

• Demonstrates limits of sufficiency.

Hamer v Sidway (1891) 124 NY 538 (Persuasive Authority)

Facts

• Nephew agreed to refrain from smoking, drinking and gambling.
• Uncle promised payment.

Judgment

• Promise enforceable.

Legal Principle

• Giving up a legal right may constitute valid consideration.

Application

• Useful comparative authority when discussing sufficiency.

Past Consideration

Re McArdle [1951] Ch 669

Facts

• Claimant carried out improvements to a property.
• Family members later promised payment.

Judgment

• Promise unenforceable.

Legal Principle

• Past consideration is not good consideration.

Application

• Leading authority establishing the rule.

Roscorla v Thomas (1842) 3 QB 234

Facts

• Horse sold.
• After sale, seller promised horse was sound and free from vice.
• Horse proved dangerous.

Judgment

• Buyer failed.

Legal Principle

• Promise made after consideration has already been provided is unsupported.

Application

• Classic authority on past consideration.

Eastwood v Kenyon (1840) 11 Ad & E 438

Facts

• Guardian borrowed money to educate a young woman.
• After marriage, husband promised repayment.
• Husband later refused.

Judgment

• Promise unenforceable.

Legal Principle

• Earlier acts cannot support a later promise.

Application

• Important authority on past consideration.

Exception: Lampleigh v Braithwaite (1615) Hob 105

Facts

• Defendant requested claimant obtain a royal pardon.
• After completion, defendant promised payment.

Judgment

• Promise enforceable.

Legal Principle

• An act performed at the request of the promisor may support a later promise.

Application

• Creates major exception to past consideration rule.

Pao On v Lau Yiu Long [1980] AC 614

Facts

• Commercial dispute involving a later promise following an earlier act.

Judgment

• Promise enforceable.

Legal Principle

• Past consideration is valid where:
  • Act performed at promisor’s request.
  • Parties understood payment would follow.
  • Promise would have been enforceable if made beforehand.

Application

• Modern authority explaining the Lampleigh exception.

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Performance of Existing Duties

Existing Public Duty

Collins v Godefroy (1831) 1 B & Ad 950

Facts

• Witness subpoenaed to attend court.
• Promised payment for attendance.

Judgment

• Promise unenforceable.

Legal Principle

• Performing an existing public duty is not valid consideration.

Application

• Leading authority on public duties.

Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270

Facts

• Police provided additional protection during a strike.
• Mine owners promised payment.

Judgment

• Payment enforceable.

Legal Principle

• Going beyond an existing public duty constitutes consideration.

Application

• Exception to Collins v Godefroy.

Existing Contractual Duty Owed to Promisor

Stilk v Myrick (1809) 2 Camp 317

Facts

• Two sailors deserted.
• Captain promised remaining crew extra wages if voyage completed.
• Captain later refused payment.

Judgment

• Crew failed.

Legal Principle

• Performing an existing contractual duty owed to the promisor is not consideration.

Application

• Traditional rule.

Hartley v Ponsonby (1857) 7 E & B 872

Facts

• Large number of crew deserted.
• Remaining sailors faced significantly increased danger.

Judgment

• Extra payment recoverable.

Legal Principle

• Performance beyond original contractual obligations constitutes consideration.

Application

• Major exception to Stilk v Myrick.

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1

Facts

• Carpenter agreed to complete work.
• Contractor feared penalties for delay.
• Contractor promised additional payment.
• Carpenter continued performance.

Judgment

• Extra payment enforceable.

Legal Principle

• Practical benefit may constitute consideration.

Application

• Leading modern authority on existing contractual duties.

Existing Duty Owed to Third Party

Shadwell v Shadwell (1860) 9 CB(NS) 159

Facts

• Nephew engaged to marry.
• Uncle promised annual payments if marriage occurred.

Judgment

• Promise enforceable.

Legal Principle

• Performance of an obligation owed to a third party may constitute valid consideration.

Application

• Leading authority.

The Eurymedon [1975] AC 154

Facts

• Stevedores relied on contractual provisions.
• Work was performed under an existing obligation.

Judgment

• Consideration existed.

Legal Principle

• Performance of obligations owed elsewhere can constitute consideration.

Application

• Important commercial authority.

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Part Payment of Debt

Pinnel’s Case (1602) 5 Co Rep 117a

Facts

• Debtor paid part of debt before due date.
• Creditor agreed to accept reduced payment.

Judgment

• Creditor could still claim balance.

Legal Principle

• Part payment of a debt is not good consideration for a promise to discharge the whole debt.

Application

• Foundation authority.

Foakes v Beer (1884) 9 App Cas 605

Facts

• Creditor agreed to accept payment by instalments.
• Debtor paid as agreed.
• Creditor later claimed interest.

Judgment

• Creditor succeeded.

Legal Principle

• Part payment of debt does not satisfy the whole debt without fresh consideration.

Application

• Leading House of Lords authority.

D & C Builders Ltd v Rees [1966] 2 QB 617

Facts

• Debtor pressured creditor into accepting less than owed.
• Creditor accepted due to financial difficulties.

Judgment

• Creditor recovered remaining balance.

Legal Principle

• Economic pressure prevents reliance upon reduced-payment agreements.

Application

• Important limitation.

Re Selectmove Ltd [1995] 1 WLR 474

Facts

• Taxpayer sought instalment arrangement with Inland Revenue.

Judgment

• Claim failed.

Legal Principle

• Williams v Roffey does not generally apply to debt cases.

Application

• Confirms continuing authority of Foakes v Beer.

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Promissory Estoppel

Hughes v Metropolitan Railway Co (1877) 2 App Cas 439

Facts

• Landlord gave tenant time to negotiate regarding repairs.
• Landlord later attempted strict enforcement of original deadline.

Judgment

• Landlord prevented from enforcing rights during negotiation period.

Legal Principle

• Party may be prevented from insisting upon strict legal rights where conduct makes that inequitable.

Application

• Foundation authority for promissory estoppel.

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Facts

• Landlord reduced rent during wartime.
• After war, landlord sought full rent.

Judgment

• Full rent recoverable prospectively.
• Reduced rent binding during wartime period.

Legal Principle

• Clear promise intended to affect legal relations and relied upon may suspend strict legal rights.

Application

• Leading promissory estoppel authority.

Combe v Combe [1951] 2 KB 215

Facts

• Husband promised maintenance.
• Wife relied on promissory estoppel.

Judgment

• Claim failed.

Legal Principle

• Promissory estoppel is a shield not a sword.
• Cannot create a cause of action.

Application

• Essential examination authority.

D & C Builders Ltd v Rees [1966] 2 QB 617

Facts

• Debtor pressured creditor into accepting less money.

Judgment

• Estoppel unavailable.

Legal Principle

• Estoppel requires equity.
• Inequitable conduct defeats the doctrine.

Application

• Major limitation on promissory estoppel.

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761

Facts

• Royalty payments suspended.
• Creditor later sought reinstatement.

Judgment

• Rights revived following reasonable notice.

Legal Principle

• Promissory estoppel generally suspends rather than extinguishes rights.

Application

• Important authority on effect of estoppel.

Ajayi v Briscoe [1964] 1 WLR 1326

Facts

• Promisee altered position but later regained ability to comply.

Judgment

• Rights restored.

Legal Principle

• Promissory estoppel may cease when circumstances change.

Application

• Clarifies suspension principle.

Essential Statutory Position

Key Examination Point

• Consideration remains primarily governed by common law.
• There is no comprehensive statute governing:
  • Sufficiency
  • Adequacy
  • Past consideration
  • Existing duties
  • Part payment of debt
  • Promissory estoppel
• Examination answers should therefore focus overwhelmingly on judicial precedent.

Essential Examination Authorities Table

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course