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Consideration
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Everything you need to know on consideration and its rules for contract law
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Contract law lecture week 3:Consideration:
Definitions of consideration:
Thomas v Thomas “Consideration means something which is of some value in the eyes of the law...moving
from the plaintiff…” per Patterson J
Currie v Misa “…valuable consideration, in the sense of the law, may consist either in some right, profit or
benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other…” per Lush J
Dunlop v Selfridge “an act or forbearance of one party or the promise thereof, is the price for which the
promise of the other is bought, and the promise thus given for value, is enforceable,” per Lord Dunedin
1. Consideration must not be in the past:
Eastwood v Kenyon [1840] 11 A & E 438
Past consideration is not good consideration, so the heiress’ promise to reimburse the sum of
money borrowed was not enforceable in court since the action was in the past.
Re McArdle [1951] Ch 669
Court held that the promise was not enforceable since the consideration was 2 years prior to the
promise being made.
“the beneficiaries’ agreement for the repayment of £488 out of the estate was a bare promise, a
promise with no consideration to support it…” per Jenkins LJ
EXCEPTION TO RULE 1:
Lampleigh v Brathwaite [1615] Hob 105
(Brathwaite found guilty of murder, defendant asks Lampleigh to get a pardon from the king,
subsequently the defendant promised to pay the claimant, plaintiff £100.
He later changed his mind and refused to pay £100 (is this enforceable?))
A voluntary act will not amount to good consideration, if the act is done at the request of the other
party then it is considered good consideration, so it is enforceable.
Past consideration may be effective if the promisor has asked the promisee to perform a particular
act.
Pau On v Lau Yiu Long [1979] 3 ALL ER 65
- The service must have been rendered at the promisor’s request
- The parties must have understood that the act would be paid for, or that the other party would
derive some benefit
- Payment would be legally enforceable had the promise been made before the act
2. Consideration must move from the promisee:
Tweddle v Atkinson [1861] 1 B & S 393
“no stranger to the consideration can take advantage of the contract [even though] the contract is
made for his benefit” per Wightman, J
, 3. Consideration must be sufficient in the eyes of the law but need not be adequate for the promise
given:
Adequacy:
Consideration given must have some value in the eyes of the law. (the court will not look at the
actual value, it is not for court to interfere with other people’s bargains)
Sufficiency:
White v Bluett [1853] 23 LJ Ex 36
(son owed his father money; the son was constantly complaining about money being spent on
other siblings. Father then dies and executives find the IOU notes from the son. Father had
promised that he wouldn’t need to pay if the complaints would stop. The court held that the son
had no right to complain about the distribution of his father’s wealth. Secondly there was no
adequate consideration in exchange for the promise, so the promissory notes were enforced
against him)
4. Forbearance to sue:
Forbearing your rights to bring a legal action against someone is deemed to be good consideration
in the eyes of the law
Horton v Horton (No 2) [1961] 1 QB 215
- Legal principle forbearing your right to sue foregoing your right to bring a legal action against
someone can constitute good consideration in the eyes of the law so if you have a Bonafede
legal right to bring a action against the promise or the act of giving that up will be good
consideration.
5. Performance of a duty imposed by law:
General rule is that performance of a duty imposed by law does not amount to good consideration
o Collins v Godfrey [1813] 1 B & Ad 950
BUT
A promise to exceed a duty imposed by law will amount to good consideration
o Glasbrook Bros v Glamorgan County Council [1925] AC 270
6. Performance of a contractual duty owed to a third party:
- Shadwell v Shadwell [1860] 9 CB (NS) 159
(nephew argued that his consideration was the agreement to marry his fiancé, the question was
can performance of the contractual obligation that you owe to the third party (fiancé) be good
consideration for the promise made to him by his uncle. Court said yes.
- New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1974] AC 154
(limitation clause between cargo owner and the cargo carrier, under which essentially the cargo
owner was promising that the cargo carrier or their agents could limit their liability)
Contract of Employment
CARGO CARRIER STEVEDORE
Contract of carriage
including limitation clause
CARGO OWNER
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