Chapter 4 Consideration
Chapter 4 Consideration
Chapter 4 Consideration
Please note that these cases have been categorized into subtopics based on how questions
have been asked on the different areas within each chapter. However, this categorization is
only for the convenience of the reader. When preparing for exams you are required to know
about all the cases relevant to a particular chapter and not just a particular subtopic. For more
information on each case, please consult the accompanying notes. If you find any cases in these
tables about which details have not been mentioned in the notes, the information in these
tables is sufficient.
CHAPTER 4: CONSIDERATION
SUBTOPIC: Introduction to Consideration and General Rules of Consideration
SUBTOPIC: The Rule in Pinnel’s Case and its Exceptions (Promissory Estoppel)
NOTE: For Full Facts of each case, please consult your textbook.
CHAPTER 4: CONSIDERATION
SUBTOPIC: Introduction to Consideration and General Rules of Consideration
Introduction:
As we know by now, a contract is an agreement between parties where either party promises
to do something for the other. The topic of Consideration is concerned with providing
contracting parties rules on when and how the promises made by them to each other under a
contract may be enforced by the courts in cases where one of the parties refuses to fulfill their
promise to the other.
Definition of Consideration:
In Dunlop v Selfridge (1915) Sir Frederick Pollock defined consideration in the following terms:
“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”.
Accordingly, if any party wishes to enforce a promise made to them by the other party (who has
afterward not fulfilled their promise), such a party must show that they are providing/
giving/doing something in return for the promise made by the other party i.e., they have
provided consideration in return for the promise made to them by the other party.
Example: (This is for your understanding do not write this in the exam) Ali wants to buy Tahir’s
mobile. Ali (Promisor) Promises to pay Tahir (Promisee) Rs.5000/- if Tahir gives his mobile to
Ali. In return, Tahir (Promisor) Agrees to sell his phone to Ali and promises to give his mobile to
Ali (Promisee) if Ali gives him Rs.5000/-. Here we can see that both parties have made a
promise to each other. If either party refuses to fulfill the promise they have made to each
other, the other party (Promisee) may request the courts to make the promise-breaking party
(the promisor) fulfill their promise by enforcing them to do so. In such a case the promisee will
have to show that they had provided consideration in return for the broken promise made to
them by the Promisor: If Ali does not pay Tahir and Tahir gives his mobile to Ali, Tahir can go to
court, and ask them to Make Ali fulfill his promise of paying Rs.5000/-, as he (Tahir) has
provided consideration for Ali’s promise to pay Rs.5000/- by giving Ali his mobile.
TYPES OF CONSIDERATION (NOT NECESSARY TO WRITE THIS IN EXAM, BUT THE STUDENT
MUST KNOW WHAT THIS IS)
There are two valid types of consideration: executory consideration and executed
consideration.
Executory Consideration is where both parties to the contract will do something in the future in
exchange for the promise of the other. For example: on making a contract A promises to
deliver some goods to B and B promises to pay for them when they arrive. Usually, such
consideration will be found in Bilateral Contracts.
Executed Consideration is where one of the parties has already done all that was required of
them under the contract, i.e., they have already done something they had promised to do in
exchange for the other parties’ promises. For example: If A promises to give £20 to anyone who
finds his lost handbag, returning the bag is both acceptance of his offer (and thus the time
when the contract is formed) and executed consideration for A’s promise. Executed
consideration usually occurs in unilateral contracts.
English law has developed certain rules about Consideration, which help in understanding
whether any promisee can show consideration in a court of law. These are:
Under this rule, a party wanting to enforce another party’s promise made to it does not have to
show that whatever they have done in return for the other party’s promise necessarily
benefitted this other party. For example: where a party enters a contract with another to
provide services to a third party, the benefit will be gained by this third party and not the party
with whom the contract and promise was made.
This means when a contract is made between the parties and thus promises are made to one
another, consideration must be given in return for the promise or act of the other party. If
consideration is given or performed before the promise of the other has been made, that will
not be valid consideration and a party seeking to enforce the other party's promise through
such consideration will not be able to enforce the promise, as the court will hold that the
consideration is past. This was the case in Roscorla V Thomas [1842], where the seller had
promised to the buyer of a horse that the ‘horse was free from any vice’ after the buyer had
bought the horse. It was held that the buyer could not enforce such a promise made by the
seller as it had been made after the horse had been sold. If such a promise was made before
the horse was bought, the buyer would be able to enforce the seller’s promise and return the
horse to the seller. Another case on the same rule is Remcardle [1951], in this case, the
wording of the contract, which seemed to suggest that performance for the promise would be
done in the future was overlooked, and the court again held that where a daughter in law tried
to recover money for the housework she had carried out on her mother in law’s house earlier,
and regarding which it was later promised that she should be paid, the court held that the
daughter in law could not recover the money as the promise was made after she had provided
consideration.
An Exception to the rule that consideration must not be past comes from the case of Lampleigh
vs. Brathwait [1615], where it was decided that past consideration would be sufficient to
enforce a promise if it was provided at the other party’s request and the court felt that such a
request would result in a payment being made by the party to whom the request was made,
even though no payment was discussed before the making of such a request.
FACTS (You are not expected to write these in the exam, but you must know about these):
Brathwait was convicted of murdering a man and put in jail, he requested Lampleigh to seek a
pardon for him from the King. Lampleigh did so after making considerable expense, and upon
release, Brathwait promised him 100 GBP for his efforts. Later, Braithwaite refused to pay and
Lampleigh went to court and was successful in having Brathwait’s promise enforced. The court
held that Braitwait by making Lampleigh such a request had made an implied promise to make
payment to him, and the latter promise of 100 GBP was just the determination of the amount
that would be paid under this implied promise made earlier by Brathwaite.
The rule laid down in Lampleigh v Brathwait has been more recently followed in Recasey’s
Patents [1892] (See your textbook for full facts of cases).
This rule means that the court in determining the question of valid consideration will not
consider the amount or value of consideration as long a minimal value can be given to it. This
approach of the courts can be seen in the cases of Thomas V Thomas (1842) and Chappell V
Nestle (1959). In Thomas, it was held that a promise by a widow to pay 1 GBP per year and
keep the house in good condition was sufficient consideration, in exchange for the deceased
husband’s promise to leave the house to her after his death. The point that 1 GBP a year was
too low to be considered an appropriate amount of consideration was rejected by the court.
Similarly in Chappell, empty wrappers of chocolate bars were sufficient consideration to make a
promise made in return binding, even though these wrappers had very little market value.
4. CONSIDERATION MUST HAVE SOME ECONOMIC VALUE
This rule requires that consideration (whatever has been done in exchange for enforcing the
promise of the other party) must have some economic value rather than an emotional or
sentimental value. This can be demonstrated through the case of White V Bluett [1853], where
a son’s promise to bore his father with complaints was not regarded as a valid consideration in
exchange for the father’s promise to not make his son repay the money that the son had earlier
borrowed from him.
This rule states that a person who has not provided consideration (i.e. has not done something
in exchange for the promise made by the other) will not be able to go to court and enforce a
promise of another. In Tweedle V Atkinson, it was held that the son-in-law could not enforce a
promise made by his father-in-law to give them money, as the promise was made by the father-
in-law to the son’s father. The son was not a party to these promises and therefore could not
sue his father-in-law when he failed to fulfill his promise of payment.
SUBTOPIC: 6. Performance of Existing Duty (This is point no.6 from above but also a
new subtopic)
Generally, if a person, who is already obliged to do something in exchange for a promise, does
the same, doing so will not in itself amount to consideration for a new promise. However, in
certain cases, the courts of England have discovered consideration in the performance of an
existing duty.
This was held to be the case in Collins v Godefroy (1831), where a policeman (claimant) was
summoned to give evidence in court. It was held that the policeman’s duty to appear in court to
provide evidence could not be considered on his behalf to enforce a contract in which he was
promised to be paid money if he appeared before the court.
This position will, however, change if it can be shown that the person performing the existing
public duty has done something more than the duty imposed by law. This was the case in
Glasbrook Bros v Glamorgan County Council (1925), where, during a strike, a pit owner asked
for extra police protection and promised an extra payment in return. After the strike he refused
to pay, claiming that the police were just carrying out their public duty of preserving law and
order. The court held that the police had done something above and over what they were
required to do under their existing public duty, and this was sufficient consideration for the
owner's promise to pay.
The rule that applies to existing public duties also applied where there was an existing
contractual duty. Therefore, the mere performance of an existing contractual duty could not
amount to sufficient consideration for a new contractual agreement. This rule has however
been modified and an existing contractual duty will be held as sufficient consideration for
certain types of contracts. These will be discussed but only after examples of the classical rule
are first given.
The rule that existing contractual duty could not amount to sufficient consideration comes from
Stilk v Myrick (1809), where it was held sailors who were bound by their existing duty to sail
the boat home had not given any extra consideration in return for a new promise to pay them
more money for doing the same even though the new promise was made after a few sailors (2
out of 11) deserted the ship. This situation, however, changes when the defendant does
something over existing duties. In Hartley v Ponsonby (1857) it was held that sailors who were
originally contracted to sail the boat had given extra consideration for a new promise to pay
them more money for doing the same existing contractual duty because more than half of the
sailors deserted the ship, making the voyage more dangerous and therefore requiring an extra
effort on their part to sail the boat to its destination.
These rules, however, do not apply where there is an existing contractual duty to provide goods
and services [William v Roffey Bros and Nicholls Contractors Ltd (1990)]. In Williams, the
defendants built several flats and subcontracted the carpentry to the claimant for 20000 GBP.
The claimant was understaffed and ran into financial difficulty. The defendants had a clause in
their contract for building the flats saying that they would be liable to pay money if the flats
were not ready on time. The claimant said he would not be able to complete the carpentry on
time, so the defendants offered him another 10,300 GBP to do this. The Work was completed
on time, but the defendants refused to pay the extra money. The claimant was only doing what
he had been contracted to do, and it was held that the defendants were gaining the benefit of
not having to pay the penalty for not completing the work on time. In other words, it was seen
that the contractor had gained a benefit through not having to pay the penalty. Therefore, the
law considering Williams seems to be that where a party’s existing duty to provide goods and
services confers an extra practical benefit on the other party, then it will be sufficient
consideration to make a promise given in return binding.
The implications of Williams v Roffey on the doctrine of consideration are much less clear, as in
legal terms it is still a very recent case, and the boundaries of the rule are yet to be established.
It redefines consideration, giving it a wider definition and in many ways reducing the barriers to
making modifications binding. It has been suggested that consideration in the shape of a
Williams v Roffey practical benefit is likely to be present in most agreed modifications made to
commercial contracts since in such situations the parties are unlikely to agree to any change
unless it has some benefit for them. The Williams v Roffey view of consideration also allows the
courts more discretion than previous, tighter definitions since they will be able to find a
practical benefit in situations where traditional consideration was not present because there
was no legal benefit. This approach is in direct contrast to the earlier case of Stilk v Myrick,
which strictly conforms to the notions of traditional consideration. The question then arises;
Has Williams effectively overruled Stilk? In South Caribbean Trading Ltd v Trafigura Beeheever
BV (2004) the High Court judge, Coleman J, albeit obiter, was critical of the law in Williams v
Roffey and pointed out that the approach in Williams v Roffey directly conflicts with the
established case of Stilk v Myrick. However, it seems that this may not be the case, as
Reselectmove suggests that the principle in Williams would only be applied to contracts
involving provisions of goods and services and cannot be extended to those which involve the
payment of debts.
Another aspect is the flexibility that Williams may afford judges when deciding which contracts
to enforce upon a finding of consideration. This may lead to dubious decisions where the court,
due to public policy reasons, may stretch the concept of consideration to enforce a contract. In
Ward v Byham Ms. Ward and Mr. Byham had a daughter, who after separation lived with
Byham. Some months later Ms. Ward asked to take the child to live with her, and Mr. Byham
wrote to say that she could do so, and he would pay £1 a week maintenance if she could ‘prove
that [the daughter] will be well looked after and happy’. When Byham refused to provide the
maintenance, he alleged that there was no consideration because, as the mother of an
illegitimate child, she was already under a statutory duty to maintain the little girl, so her
promise to do so was not considered. On the facts, most of the court held that there was a valid
contract because her promise to see that their daughter was happy, went beyond her statutory
duty, and could therefore be considered. Thus, the finding of consideration on the mere fact of
keeping the daughter ‘happy’, seems to be hard to justify except if one is to consider public
policy.
Williams v Roffey could also affect the rules on promissory estoppel. Similarly, if in a case like
High Trees, there was a practical benefit to the landlord in reducing the rent (such as avoiding
ending up with a bankrupt tenant and no rent at all), would that bar him from later returning to
his strict rights by giving reasonable notice? It would seem unlikely because the promissory
estoppel is meant to only suspend rights.
As stated earlier, it is hard to provide a definitive answer to all the issues concerning Williams,
because of a lack of Supreme Court judgments on the matter.
In this case, Scotson contracted with a party for the supply of coal who instructed him to deliver
the coal to Pegg (a third party). Pegg promised to unload the coal at a stated rate of pay. He
subsequently failed to do the agreed unloading. Scotson sued Pegg, claiming that their promise
to deliver the coal to him was a consideration for his promise to unload it. Pegg claimed this
could not be considered, since Scotson was already bound to supply the coal under the contract
with A. The court upheld Scotson’s claim: delivery of the coal was considered because it was a
benefit to Pegg and a detriment to Scotson in that it prevented them from having the option of
breaking their contract with A (in which case they would just pay damages to A) and having no
liability to Pegg.
Key Case
SUBTOPIC: 7. Part Payment of a Debt [The Rule in Pinnel’s Case (P and its exceptions
(Promissory Estoppel)]
This rule was laid down in Pinnel’s Case (1602) and it states that if a party (debtor) who has
borrowed money from another person (a creditor), offers (at the time of repaying the money)
to pay back a smaller sum of money (and not the entire amount) in exchange for the creditor’s
promise not to claim the remaining money, they said party will not able to enforce the creditors
promise and prevent the creditor from later claiming the remaining amount as his/her part-
payment of the debt will not amount to sufficient consideration.
This rule was later confirmed in Foakes v Beer (1884), where it was held that a promise by
Beer(creditor) to accept payment of a debt by Foakes (Debtor) in installments did not prevent
her from claiming interest on the debt, which Foakes had refused to pay after repaying the
original debt. The court held that Beer was fully capable of claiming interest from Foakes on the
debt and Foakes's payments of the original debt in installments did not amount to sufficient
consideration.
There are however two exceptions to the Part Payment of a debt rule laid down in the Pinnels
Case. The first was laid down in Pinnel’s Case itself; where the debtor does something extra in
addition to offering part payment of a debt, that extra could be regarded as adequate
consideration in exchange for the creditor's promise not to accept full payment. This doing
‘extra’ may include anything such as offering to pay back a smaller sum of money before the
date at which the creditor was supposed to receive their money.
The second exception is that of Promissory Estoppel. This is the defense to a claim by a creditor
for the remainder of the debt where part payment has been accepted. The doctrine of
promissory estoppel stops the claimant from going back on their promise and has been
established in equity as to do so would be unfair. The concept, it is brought, was originally seen
in Hughes v Metropolitan Railway (1877), where it was held that a creditor’s promise to accept
part payment as full settlement should be binding. The modern development of the doctrine is
found in Central London Property Trust Ltd v High Trees House Ltd (1947). In this case, the
defendants leased a block of flats from the claimants in 1937. When World War II started, it
became impossible to find tenants and the defendants could not pay the rent. As a result, the
claimants agreed to accept half the rent. By 1945, all the flats were rented, and the claimants
wanted the rent to be paid in full again. It was held that they could have the original rent only
from 1945 onwards when the flats were rented out; they could not claim for the previous
period (during the war) as they had promised to accept the rent only half and would be stopped
from going back on their promise on which the defendants had relied.
5. Estoppel only suspends the rights of the claimant, not finish them forever.
This can be better explained through Tool Metal Manufacturing Co Ltd v Tungsten Electric Co
Ltd (1955). In this case, the defendants paid royalties for the manufacture and sale of certain
metals in which the claimants had a patent. The defendants had also agreed to pay
compensation if the production of the metals exceeded the limits set by the claimants.
However, due to the Outbreak of World War 2, the claimants agreed to suspend their right to
receive compensation from the defendants if the production of metals exceeded the limits they
had set. Once the war was over, the claimants revoked their suspension and claimed
compensation and it was held that they would only be entitled to receive compensation for the
time after the war and not during it. The party that has suspended their rights like this can
enforce them again after giving reasonable notice of it to the other party.