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Doctrine of Consideration - Intention to Create Legal Relations
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Doctrine of Consideration - Intention to Create Legal Relations
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Doctrine of Consideration – ConsiderationConsideration
The key tool that the court looks for once there is agreement and consensus.
Is the agreement one that the law will enforce?
Is it a binding contract with legal consequences?
The key test of enforceability of contracts.
Test of Enforceability
Thomas v Thomas.
‘Consideration means something which is of some value in the eyes of the law…
moving from the plaintiff, it may be some detriment to the plaintiff, and benefit to
the defendant, but it must move from the plaintiff’. – per Patterson, J.
Currie v Misa.
‘A 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.
Executory Consideration
A promise in return for a counter-promise. (bilateral).
Executed Consideration
An act or forbearance in return for a promise. (unilateral).
,Rule 1 – Consideration Must Not be Past
A promise given after the consideration has been provided will be gratuitous and
thus not enforceable.
Eastwood v Kenyon 1840.
Eastwood was a guardian to a young heiress, and he borrowed £140 in order to
improve her estate and to pay for her education. When she came of age and
inherited her fortune, she promised to pay him back, and when she got married her
husband repeated the promise.
When they got married, they forgot about this and they didn’t give the money.
He sued for the £140.
Although he did something, a promise wasn’t made at the time. The consideration
was in the past.
No causal connection between his acts and her promise.
The court held that his acts were done freely, he didn’t do these things thinking he
would get paid, he did them before she offered to pay him back.
Re McArdle.
William McArdle left a house to his five children in equal shares, subject to a life
interest for his widow.
The wife of one of these sons, Mrs Marjorie McArdle, carried out improvements to
the house amounting to £488. She also bore the cost of these repairs.
After the repairs had been carried out, she got all the five children of McArdle to sign
a document in which they promised to repay Mrs McArdle the £488 out of the estate
when it was eventually distributed.
After the testator’s widow died, Mrs McArdle asked for payment. However, the
other four sons refused to pay her. She tried to enforce her interest in the property
in court.
The Court of Appeal held that the transaction had not been completed and was
imperfect. Therefore, it was only a promise to pay and not a gift.
Mrs McArdle had already performed the work before she asked for payment. Her
consideration was in the past. Past consideration is not good consideration.
Therefore, the agreement was unenforceable.
‘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.
, Exceptions:
Lampleigh v Braithwait 1615.
The defendant had been found guilty of murder and was waiting in prison to be
executed. The defendant asked the plaintiff to go to the King and seek a pardon for
him. The plaintiff did this at considerable time and effort for himself, and did get a
pardon for Braithwait.
After Lampleigh was successful, Braithwait promised to pay him £100.
After he was released, he refused to pay the money.
Lampleigh did the action before Braithwait promised to pay the £100 (normally not
good consideration). However, in this situation, Lampleigh was asked to do the act
by Braithwait.
The promise was enforceable. ‘A voluntary act done before the promise will not be
good consideration, but if the act is done at the request of the other party, it can be
good consideration’.
Re Casey’s Patent.
Bowen, LJ – ‘the fact of a past service raises an implication that at the time that
service was rendered, it was to be paid for, and if it was a service to be paid for,
when you get in a subsequent document, or orally, a promise to pay, that promise
may be treated either as an admission, which evidences, or as a positive bargain
which fixes the amount of reasonable remuneration on the faith of which the service
was originally rendered’.
Where there is a request to do something, if this is something you may anticipate
that you will be remunerated for, or if this is an action that normally would be paid
for, even though the promise hasn’t come yet, when it does come, it is just fixing
what was known to come.
Pao On v Lau Yui Long.
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.
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