In everyday life, we areconstantly agreeing to contract without even realizing it. “A contract is alegally binding promise (written or oral) by one party to fulfil an obligationto another party in return for consideration.”1″In Currie v Misa it was stated that avaluable consideration, in the sense of the law, may consist either of someright, interest, profit or benefit accruing to the one party, or someforbearance, detriment loss or responsibility, given, suffered or undertaken bythe other”. 2 Consideration is an essential part of theprocess for which a contract becomes binding and thus when answering thequestion “to what extent, if at all, do the courts still require contracts tobe supported by consideration?” in light of Denning J’s view that “The doctrine (of consideration) is too firmly fixed to beoverthrown by a side wind…it still remains a cardinal necessity of theformation of a contract…” one must first give a comprehensive definition ofwhat the term ‘consideration’ means and all that it entails. 3 All contracts begin with a promise.
Inorder for this promise to be enforceable by law it must be given for considerationor be present in a deed. The form which that exchange of promises takes doesnot matter as long as there is clear intention to contract. The idea of considerationis well outlined in JC Smith’s ‘The Law of Contract’.
“The general idea is thata promise to make a gift is not binding but a bargain is binding.4A promise is given for consideration when the promisor asks for something inreturn for his promise and gets what he asks for.5The promise is binding because the promisee has ‘bought’ it by giving ‘theprice’ asked.6 ‘Ipromise that I will give you my car’ is a promise which may be seriously intendedand may impose a moral obligation on the promisor but it is not capable ofbecoming a contractual promise as the promisor has asked for nothing in return.7A prompt ‘acceptance’ by the promisee makes no difference.8’I promise that I will give you my car for your motorbike’, on the other hand,is an offer capable of becoming a contract.
9The promisor has specified what he wants in return for his promise and, whenthe promisee accepts the offer by giving it to him, a contract is made.10An offer to make a contract is a promise with a price tag.” 11In conclusion, we understand that promises only make a contract binding if theyare followed by a request and if both parties have a detriment or gain fromsuch requests. According to Chris Knight in his article ‘A plea for (re)consideration'”There must be some kind of exchange between the parties. Withoutconsideration, there is only a gratuitous promise and gratuitous promises areunenforceable in contract law (without a deed).” 12 The concept of consideration isgoverned by six main rules.
These rules are essential to understanding to whatextent courts enforce consideration as to every rule there are cases that illustratehow the judgement was held. The first rule is that past consideration is no consideration.This means that consideration to pay for a service that has already been performed,is not considered a valid consideration as it applies to the past. This is notthe same as executed consideration found in unilateral contracts where performancecomes from a request of the promisor. An example of past consideration can befound in the case of Re McArdle. In this case Mrs.
McArdle performed fixes andrepairs to a bungalow that was owned by her father in law who was deceased. Theproperty was to be inherited by her husband and his siblings. Following thecompletion of the repairs the siblings agreed to sign a document that statedthat one hundred and eighty pounds from the proceeds of the sale would be givento Mrs. McArdle, however the payment was never received.
The court held thatbecause the consideration came after the completion of the services, it was notvalid thus making the contract not valid. In contrast in Lampleigh v Brathwaitwhere person A asked person B to get pardon from the king and after the facthad happened promised to pay him one hundred pounds, the courts found that inthis case the contract was binding. This is because there was an impliedpromise to pay. Because there was an implied promise to pay before the serviceswere completed, the case of Lampleigh v Brathwait is not considered an exceptionto the rule. That was solidified in the case of Re Casey’s Patents whereLampleigh v Brathwait was used to determine that the agreement was enforceable.There is however an exception found within statute. In the Bills of ExchangeAct 1882 Section 27(1) it says, “Valuable consideration for a bill may be constitutedby … (b) An antecedent debt of liability.
” The second rule of consideration statesthat consideration must be sufficient but need not be adequate.13It is not the courts duty to determine whether the contract was a good deal ornot. For example, if person A decided to sell his car for ten pounds and personB decides to pay the ten pounds than that is considered good consideration evenif the values are absurd. The classic case to illustrate this rule is Chappel vNestle. Nestle held a promotion where one could send three chocolate wrappersin the mail and in return get a discount for recordings of music.
Under thecopyright Act 1956 Nestle could sell the records as long as the payed the royalty.The claimants argued that the wrappers were not a form of consideration thusthis could not be considered a sale. Despite the wrappers having no monetaryvalue they were considered to be part of consideration as the goal was toincrease sales therefore it retained some form of value. ‘Consideration mustmove from the promisee’ is the third governing rule of consideration. This ruleaims at restricting third parties into entering contracts they provided no considerationto. This is illustrated by the case of Tweddle v Atkinson. In the case thefather of the groom and father of the bride made an agreement upon marriage oftheir children that they would each pay a sum of money to the newlyweds.
Thefather of the bride then died before being able to pay his sum of money and thefather of the groom passed away before he could sue. The groom then attemptedto enforce the contract upon the executer of his father in laws will. Thegrooms claim failed as he was not part of the contract, and thus provided noconsideration at the time the agreement was made. The forth rule ofconsideration is that of existing public duty. Where one has a public duty toact, it cannot be used as valid consideration. The prime example of this is thecase of Collins v Godefrey. In this case Collins had been subpoenaed to attenda court case involving the defendant Godefrey.
Despite not being called up onstand, Collins was required to stay on standby for six days. Collins requiredGodefrey to pay him for his time and sued. The court held that Godefrey wasunder no obligation to pay since there was a preexisting public duty forCollins to be present and thus this could not be used as consideration. Thefifth rule of consideration regards to a preexisting contractual duty. The rulestates that an existing contractual duty does not count as valid consideration.In the case Stilk v Myrrick twelve men were working on a ship when two of themen deserted. The captain promised to split the other men’s wages within thecrew for their extra work however he never made payment. The court held thatsince the claimant was under contractual duty to work on the ship the captainwas not obliged to make the payment as the sailors were already expectedperform such actions anyways.
In contrast, there are cases where if the partygoes beyond their existing contractual duty, new consideration can be formed. Inthe case of Hartley v Ponsonby half of the crew members of a ship deserted,making the voyage significantly more dangerous. During a stop in a port thecaptain offered the crew a bonus if they continued the trip. Due to the factthat there was no emergency at the time which the sailors agreed to continuethe trip, the court held that they went beyond their initial obligations. Therefore,new consideration was formed thus they were entitled to their payment.
Furthermore,contractual duty can become valid consideration if it confers a practicaladvantage to the promisor. This is demonstrated by the case of Williams vPonsonby which will be discussed in detail in the next paragraph. The sixth andfinal rule of consideration is that part payment of a debt is not goodconsideration for a promise to alleviate the entirety of the debt. In Pinnelscase the claimant sued for the entirety of the debt even after part of the debthad been payed. The court held that the claimant was entitled to the full amounteven If there was a retrospective agreement to receive less. In the previous paragraph, variousexamples were given of cases where the courts use consideration to determine whetheror not a contract is valid.
In many cases it can be argued that the courts goto great lengths in order to prove the presence consideration in a contract. Anexample of this is the case of Ward v Byham. After the separation of anunmarried couple, the father sends the child to live with a neighbor in exchangefor one pound per week. The mother finds employment and demands the child liveswith her. The father of the child agrees to continue paying one pound per week giventhat the child is content and well treated.
Eventually the father stops makingpayments claiming that there was no consideration since the mother is underlegal duty to look after her child. The court held that since keeping the child’content’ goes beyond her legal duty, the mother was entitled to the payment.Another case which the court goes to great lengths to find consideration isWilliams v Roffey. In William v Roffery a group of contractors were hired to refurbishsome flats given a time limit.
If they did not deliver the flats on time,penalties would apply. The contractors hired a carpenter, who soon realizedthat the sum of money he had originally asked for was too low. The contractorsagreed to pay extra money given that the carpenter finished the work on time.After six weeks, the contractors stopped delivering the extra sum, and the carpenterstopped working. The contractors claimed that the carpenter was already undercontractual duty to complete the work thus there was no consideration. Thecourt held that because completing the work on time would give the contractorsa practical benefit there was consideration and they were liable to make the extrapayment.
In both instances, one can say that the courts look thoroughly throughclauses in order to prove consideration even if at first there seems to benone. This perhaps proves that the courts, to a great extent, attempt to useconsideration to enforce contracts. Promissory estoppel is the prenominalprinciple that disregards consideration under certain circumstances.14″Promissoryestoppel is a legal principlethat a promise is enforceable by law, even if made without formalconsideration, when a promisor has made a promise to a promisee who then relieson that promise to his subsequent detriment.” Promissory estoppel is an equitable doctrinecreated by Denning J.
In the case of Central London Property Trust v High Treeshouse, CLP agreed to reduce the rent during the war but later tried to go backon that promise. Denning J then created the Promissory estoppel where CLP wasnot allowed to ignore their promises despite it not being supported byconsideration. Promissory estoppel has proven to be present in contract lawthrough the case of Tool Metal Manufacturing v Tungsten Electic Co. Tungstenhad been commercializing products under TMM’s patent rights. TMM asked for 10%royalty in addition to 30% compensation for months which sales were above 50kg.During war years TMM agreed to waive the compensation payments as Tungsten washaving difficulty paying the compensation. Promissory estoppel prevented TMMfrom going back on their promise to waive compensation during war years. Theycould enforce payment once the war was over but not claim the amount lostduring the war as there were pressing circumstances present.
Adam Duthiedescribes some issues raised with regards to promissory estoppel stating “The concern of the courts had long beenthat a more general application of equitable estoppel would make gratuitouspromises enforceable in a manner which would undermine the law of contract. Butthis concern was, in their view, misplaced. It arose from an erroneousconception of equity’s attitude to the enforcement of non-contractual promises.The basic object of the estoppel doctrine was not to make good the expectationsengendered by a promise, but rather to avoid the detriment which the promiseewould suffer as a result of an unconscionable departure by the promisor fromthe terms of the promise.” In other words, promissory estoppel was put intoeffect in order to protect the promisee from suffering substantive damage fromthe retrospective action of the promisor without the need for consideration tobe present. In conclusion, from the examples givenabove we can conclude that to some extent the courts do still for the most partrequire a contract to be supported by consideration in order for it to be enforceable.
In some cases, the courts go to great lengths in order to prove consideration existswhich further exhibits the need of such principle in a contract. Where considerationis not present, promissory estoppel might come into play in order to ensureequity is preserved. English courts are now “confronted with the task ofdetermining the extent to which the concept of unconscionability is adequate tocontrol equitable intervention.” 1 https://uk.
Default)=true=12 David Oughton Davis, Source book on Contract Law(second edition, Cavendish Publishing Limited 2000) 973 Combe v Combe 1951 2 KB 215 at 220)4 Paul S Davies, JC Smith’s TheLaw of Contract (Oxford University Press 2016) 45 ibid6 ibid7 ibid8 ibid9 ibid10 ibid11 ibid12 13 Richard Stone, The Modern Law of Contract (sixthedition, Cadenvish Publishing Limited 2005) 7714 Brian A. Blum, Contracts: Examples and Explanations (Fourth edition, Aspen Publishers 2007)206