Consideration
Methods of demonstrating the enforceability of a contract
Consideration
Promissory estoppel – operates in very specific circumstances particularly in
relation to variation of contracts and part payments of debts.
Deed – way of making sure contracts are enforceable.
What is a Deed?
Deeds are generally enforceable despite any lack of consideration.
3 requirements of a deed
o Signed by the covenant
o Signature is witnessed by a 3rd party
o The document is activated by ‘delivery’ (usually physical transfer to
covenantee.
Elements b and c distinguish a deed from an ordinary contract.
What is consideration
Essentially it refers to what one party to an agreement is giving or promising, in exchange for
what is being given or promised from the other side.
Consideration at its simplest recognizes the necessity of a bargaining element in making an
agreement enforceable in that each party to a contract must provide something to the other.
Definitions from case law
Currie v Misa (1875)
‘A valuable consideration, in the sense of the law, may consist
either in some right, interest, profit or benefit accruing to one party,
or some forbearance, detriment, loss or responsibility given,
suffered, or undertaken by the other’ per Lush J
All about looking for benefit and detriment.
, Dunlop v Selfridge [1915]
‘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 Dunedin LJ
A promise itself as opposed to acts only can be consideration.
Consideration need not be adequate, but it must be sufficient
Adequacy
Does what is being provided by way of consideration correspond in value for what it
is being given for?
Freedom of contract approach – parties can make any (bad) bargain they wish
Law isn’t concerned with how adequate a contract is.
Sufficiency
Is what is being offered as consideration capable of amounting to consideration?
Consideration must be something of value in the eye of the law.
Thomas v Thomas (1842)
Mrs Thomas allowed to live in husbands house through peppercorn rent
after he died.
By agreeing to pay the £1 rent in return for being allowed to stay in the property,
Mrs Thomas had provided consideration, even though it was not economically
adequate or anything like a commercial rent for the building, it was sufficient.
Chappell & Co. v Nestle Co.Ltd [1960]
‘They (the chocolate wrappers) are, in my view, in law part of the
consideration. It is said that when received the wrappers are of no
value to Nestle. This I would have thought irrelevant. A contracting
party can stipulate for what consideration he chooses. A peppercorn
does not cease to be good consideration if it is established that the
promise does not like pepper and will throw away the corn. As the
whole object of selling the record was to increase sales of chocolate
it seems to me wrong not to treat the stipulated evidence of such
sales as part of the consideration’ lord Somervell
Consideration must be sufficient
White v Bluett (1853)
no consideration
2
Methods of demonstrating the enforceability of a contract
Consideration
Promissory estoppel – operates in very specific circumstances particularly in
relation to variation of contracts and part payments of debts.
Deed – way of making sure contracts are enforceable.
What is a Deed?
Deeds are generally enforceable despite any lack of consideration.
3 requirements of a deed
o Signed by the covenant
o Signature is witnessed by a 3rd party
o The document is activated by ‘delivery’ (usually physical transfer to
covenantee.
Elements b and c distinguish a deed from an ordinary contract.
What is consideration
Essentially it refers to what one party to an agreement is giving or promising, in exchange for
what is being given or promised from the other side.
Consideration at its simplest recognizes the necessity of a bargaining element in making an
agreement enforceable in that each party to a contract must provide something to the other.
Definitions from case law
Currie v Misa (1875)
‘A valuable consideration, in the sense of the law, may consist
either in some right, interest, profit or benefit accruing to one party,
or some forbearance, detriment, loss or responsibility given,
suffered, or undertaken by the other’ per Lush J
All about looking for benefit and detriment.
, Dunlop v Selfridge [1915]
‘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 Dunedin LJ
A promise itself as opposed to acts only can be consideration.
Consideration need not be adequate, but it must be sufficient
Adequacy
Does what is being provided by way of consideration correspond in value for what it
is being given for?
Freedom of contract approach – parties can make any (bad) bargain they wish
Law isn’t concerned with how adequate a contract is.
Sufficiency
Is what is being offered as consideration capable of amounting to consideration?
Consideration must be something of value in the eye of the law.
Thomas v Thomas (1842)
Mrs Thomas allowed to live in husbands house through peppercorn rent
after he died.
By agreeing to pay the £1 rent in return for being allowed to stay in the property,
Mrs Thomas had provided consideration, even though it was not economically
adequate or anything like a commercial rent for the building, it was sufficient.
Chappell & Co. v Nestle Co.Ltd [1960]
‘They (the chocolate wrappers) are, in my view, in law part of the
consideration. It is said that when received the wrappers are of no
value to Nestle. This I would have thought irrelevant. A contracting
party can stipulate for what consideration he chooses. A peppercorn
does not cease to be good consideration if it is established that the
promise does not like pepper and will throw away the corn. As the
whole object of selling the record was to increase sales of chocolate
it seems to me wrong not to treat the stipulated evidence of such
sales as part of the consideration’ lord Somervell
Consideration must be sufficient
White v Bluett (1853)
no consideration
2
