Lec 8 - Consideration

CONSIDERATION
● Requirement under English contract law

● Not a requirement in civil law systems:
“causa” (reason for enforcement) allows for
broader enforcement of promises..even
gratuitous promises
THE RULE: a promise cannot be enforced
unless it is supported by consideration
Exception: Contracts made under seal
Definition
Currie v Misa
“some right, interest, profit or benefit accruing to one
party, or some forbearance, detriment, loss or
responsibility given, suffered, or undertaken by the
other.” Lush J
Pollock: an act or forbearance of the 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
Key concepts: Exchange and Reciprocity.
Hamer v Sidway 124 NY 538, 27 NE 256
● An uncle promised his nephew £5000 if he
gave up drinking, smoking, swearing and
playing cards for money till his 21st birthday.
● The nephew agreed to stop and did stop
● The uncle died and his executors refused to
enforce the agreement.
● Held: nephew had furnished good
consideration by giving up things he was
legally permitted to do.
Role of Consideration
● To distinguish between bargains and bare promises

or gifts. It proves that a bargain exists.
● Serves as evidence of the bargain.
● Cautionary: demonstrates seriousness of a promise
● To ensure that there is reciprocity in the parties’
promises.
● Distinguishes between social / economic
relationships
Types of Consideration
Executory: A promise for a promise. Exchange

of promises to perform certain acts in the
future
Executed: Performing an act rather than
promising to perform.
A promise for an act: Unilateral contracts
LK
Distinguish consideration from:
● Gifts
Read & brief: Esso Petroleum vs Customs &
Excise Commissioners (minority & majority
view)
● Conditions : gratuitous promises made subject to
a condition. Anson: “If you break your leg, I’ll pay
you Kshs.500”
- Carlill contracting influenza: condition or
consideration?
LK
RULES:
1. Consideration should not be illegal
Example
I promise not to kill you if you sell me your farm
OR contracts to sell illegal substances
Courts will not enforce agreements which are

tainted with illegality (ex turpi cause non
oritur actio)
2. Consideration must be real and
not illusory
● An illusory promise does not amount to

consideration
● It is discretionary since a party is not binding
himself to the terms of the contract.
● It creates uncertainty
Example: If I wake up early, I will supply you
with eggs OR
If I get money, I will buy your cow
Biotechnology Australia Pty v Pace (1988) 15
NSWLR 130
● An employment contract provided that Pace would have

“the option to participate in the company’s senior staff
equity sharing scheme.”
● There was no such scheme and it was never created
● Pace sued for breach of contract
Held: the term was far too uncertain to be enforced – no
agreement on number and type of shares to be created
● Illusory: It depended entirely upon the decision of one party
(biotech) to provide the scheme.
3. Consideration must be sufficient but it
need not be adequate
Adequacy
● Connotes fairness in the bargain
● Is decided by the parties themselves (FOC)
● The parties themselves should decide whether they are
satisfied with their bargain. Each determines what the others
performance is worth to him.
● The court’s role is to determine whether a bargain exists. It
does not engage in determining the value
● There is no remedy for making a poor bargain – parties
assume the risk or gain associated with the bargain
Thomas v Thomas
● A man stated that if he dies, his wife should

remain in his house. He didn’t indicate this in
his will. The executors carried out his wish
and charged her nominal rent of £1 p.a. Later,
they tried to evict her.
● Held: the ground rent, no matter how small
and inadequate was sufficient consideration.
Consideration means something of value in the
eyes of the law
Sufficiency
● Is a legal term
● Means that what is promised must be real,
tangible and have value in the eyes of the law
White v Bluett
a son’s promise not to complain about the
distribution of assets in his father’s will was
held to be too intangible to amount to
consideration. Also, he was not giving up
anything since he had no right to complain.
Ward v Byham
(doing something one is NOT required to do results

in sufficient consideration).
The father of an illegitimate child promised the
mother money (£1 per week) for the child’s
upkeep if she kept the child ‘well looked after and
happy”; and if the child agreed to live with her. He
stopped payments after she remarried. He argued
that the mother was already bound by law to
maintain the child.
HELD: keeping the child happy was good
consideration.
Other Examples
Because adequacy is not looked at, things of no

apparent worth can be good consideration
● A promise not to enforce a doubtful claim (not
to sue)
● Peppercorn: symbolic payment which does
not reflect the actual value of property
● Onerous Gift: A gift with several liabilities
attached to it e.g. land with unpaid rates
Principles of Contract Law -

MUSOL
Chappell v Nestle Co
Plaintiffs were the © owner of a song called “Rockin’

Shoes”. Nestle offered the record at a lower price
provided buyers handed in 3 chocolate bar wrappers
(which were thrown) and pay £1 6p. Music owners
sued for infringement of their ©.
Issue: whether the wrappers formed part of the
consideration.
Held: The wrappers constituted good consideration.
The offeror was free to stipulate the form of
consideration he wanted.
4. Past consideration is no
consideration
● A promise cannot be made after the

agreement has been completed.
● Performance must follow the agreement.
Re McArdle
● A son and his wife lived in his mother’s

house. The house was to be inherited by the
son and his siblings when she died. His wife
paid for substantial improvements and
repairs. The mother made the other children
sign an agreement promising to pay her back.
She died. They refused to pay.
● Held: her consideration was given before the
promise. She lost.
Roscorla v Thomas
Sale agreement for purchase of a horse at £30. After they

had agreed, the buyer asked the seller about the horse’s
character. Seller said it was “sound and free from vice”. It
turned out that the horse was vicious and used to bite
people. Buyer sued.
Held: There was no consideration for the promise regarding
the character of the horse. The price amounted to past
consideration.
See also: Eastwood v Kenyon
Consider : Goods purchased & guarantee issued – Does it
amount to past consideration?
Goldshed v Swan
If done in the same transaction (promise &

consideration), the sequence does not matter.
A promise to repay a loan of £750 was made in
consideration of “your having advanced me
that amount”.
Held: The amount could be recovered.
Exceptions to the past consideration rule:
Where someone requests for service, the law concludes he
is willing to pay for it.
Lampleigh v Braithwaite
Δ was accused of murder. He requested the ∏ to obtain
the King’s pardon for him. Π incurred huge expenses
in getting it. Δ was grateful & promised to pay £100.
He didn’t. Argued it was past consideration.
Held: Although price was not negotiated, the Δ’s
promise was clear evidence that he had requested for
the service.
2. Business/Commercial Context
It is presumed that services are rendered for a fee

Re Casey’s Patents
Patent owners promised their manager 1/3 share in
consideration for his having worked for them. They
later refused to pay arguing this was past
consideration
Held: Manager had worked implying his services were
to be paid for. The subsequent promise was an
acknowledgement of the bargain and was done to fix
the amount.
Pao On v Lau Yiu Long
∏s owned Shing On Co. Shing On owned a building in Hong
Kong. ∏s sold the building to the Δ (by selling all their shares).
In return, Δs allotted them 4.2m shares in Fu Chip Co. Pao on
undertook not to transfer 60% of the shares for a year. Later,
they demanded to be indemnified against loss of value. Δ
agreed. When the value of the shares dropped, Δ argued that
there was no consideration for their promise to indemnify
Held: There was (cited Lampleigh v Braithwaite, Re Casey’s
Patents)
For exception to apply: 1. act must have been done at promissor’s
request. 2. parties must have understood that payment was
due. 3. payment must have been legally enforceable.
Also, Statutory Exceptions
● Limitation of Actions Act, Cap 22 Laws of

Kenya . See e.g. S. 23(3)
● Bills of Exchange Act, Cap 27, Laws of

Kenya. See S.27. Ex. Writing a cheque to pay
off a debt.
5. Consideration must move from the
promisee…
A party must provide consideration before s/he can sue

to enforce the other party’s promise.
Tweddle v Atkinson
A couple intended to marry. Their fathers agreed (orally,
later in writing) to each give the couple some money.
The wife’s father died before handing over the money.
Husband sued his estate when they refused to pay.
Held: although he was named in the agreement, he
could not bring a valid claim. He had not furnished
any consideration.
BUT…it need not move to the promisor
Consideration can take the form of:

-Giving up something e.g. a job. See Hammer v
Sidway
- A benefit conferred on a 3rd party at the
promisor’s request.
Doctrine of Privity
Rule overlaps with the doctrine of privity of

contract.
A contract cannot confer rights or impose
obligations on a person who is not a party to it.
Only parties to a contract can sue each other but
3rd parties cannot sue on the basis of the
contract
Dunlop Pneumatic Tyres Ltd v Selfridge
Dunlop contracted with Dew (a trader) to sell him tyres at a

discounted price provided he did not sell them at below the
listed price and that any reseller who bought from him would not
sell at below that price.
Dew sold tyres to Selfridge and made him agree not to sell at below
the listed price.
Selfridge sold at below the listed price and was sued by Dunlop.
Issue: whether Dunlop could sue Selfridge although there was no
contract between them
Held: No. Only parties to a contract can sue for breach of contract.
See also: Tweddle v Atkinson
Critique
● Rule causes hardships to 3rd parties who are the

intended beneficiaries of a contract.
English Reforms: Contracts (Rights of Third Parties)
Act, 1999)
allows third parties to sue:
i. Where the contract was done to benefit them
ii. Where the contract expressly allows them to sue.
NB: Numerous avoidance devices exist. Ex.
Statutory(Insurance 3rd Party Risk, Bills of
Exchange);
Common law: Land law – restrictive covenants, Agency
agreements, Trusts, unjust enrichment,

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CONSIDERATION

● Requirement under English contract law

● To distinguish between bargains and bare promises

Executory: A promise for a promise. Exchange

Courts will not enforce agreements which are

● An illusory promise does not amount to

● An employment contract provided that Pace would have

● A man stated that if he dies, his wife should

(doing something one is NOT required to do results

Because adequacy is not looked at, things of no

Principles of Contract Law -

Plaintiffs were the © owner of a song called “Rockin’

● A promise cannot be made after the

● A son and his wife lived in his mother’s

Sale agreement for purchase of a horse at £30. After they

If done in the same transaction (promise &

It is presumed that services are rendered for a fee

● Limitation of Actions Act, Cap 22 Laws of

● Bills of Exchange Act, Cap 27, Laws of

A party must provide consideration before s/he can sue

Consideration can take the form of:

Rule overlaps with the doctrine of privity of

Dunlop contracted with Dew (a trader) to sell him tyres at a

● Rule causes hardships to 3rd parties who are the

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