Consideration

• Both sides must provide consideration both for an original agreement and for any variation of the contract to occur.

• Definitions:

  • Currie v Misa (1875) LR 10 Ex

    • Lush J: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other”.

  • C.J. Hamson – originates in the concept of a bargain

  • Thomas v Thomas [1842] – Mr Thomas said he wished for his wife to have the house they lived in for the rest of her life. However, this was not written into his will. After he died, his executors, ‘in consideration of such desire’ agreed the cottage was to be hers. She agreed to pay a rent of 1 per year. Later they tried to dispossess her.

    • Patteson J: “Consideration must be of some value in the eyes of the law”

      • 1 recognised as good consideration. No question of the measure of the benefit.

  • Dunlop v Selfridge (1915) – “an act of forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought”

• Consideration must be sufficient, but it need not be adequate:

  • ‘Value in the eyes of the law’ (Patteson J).

    • Treitel considers that economic value is meant: “It may have such value even though the value cannot be precisely quantified.”

    • That is why in Thomas v Thomas the desire itself was not good consideration.

  • Chappell & Co v Nestle [1960] – Nestle were giving away discounted records two people who sent in three chocolate wrappers. Nestle threw away the wrappers on receipt. The record company claimed their commission should be greater.

    • Held that the wrappers did constitute consideration for the records.

    • Lord Reid: although the wrappers were no direct benefit “there may have been an indirect benefit by way of advertisement”.

    • Lord Somerville: “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 promisee [sic] does not like pepper and will throw away the corn.”

      • Read in context this is a mere rebuttal of the notion that the wrappers cannot be of value to Nestle since they threw them away on receipt.

  • Professor JC Smith argues language of benefit and detriment is useless favours a mere stipulation theory. All that is necessary is that the defendant should, expressly or impliedly, ask for something in return for his promise.

    • Smith is wrong detriment language is still useful.

  • Hamer v Sidway (1891 USA) – Nephew promised to give up drinking, smoking, swearing and gambling in return for money from uncle. Held giving up a legal right was good consideration.

• Giving up a legal claim is sufficient consideration, but promising not to enforce one that you do not have is insufficient:

  • Cook v Wright (1861) – A claim was made against the defendant for a contribution to works carried out under a local property improvement Act. Commissioners assumed D was liable as an owner of houses in the area. D was merely an agent therefore not liable. Promised to settle claim in three instalments, failed to pay the third.

    • Held that he had received consideration; he had been spared the expense and trouble of legal proceedings. Public policy upholding agreements to compromise.

    • McKendrick suggests that the commissioners had sustained a detriment by being induced not to take action against the actual owner of the house.

  • Wade v Simeon (1846) – P claimed two sums totalling 2,000 from D, in exchange P would not pursue a legal action.

    • Court held that giving up a claim brought in bad faith was not good consideration.

  • McKendrick finds it curious that the law attributes such importance to the state of mind of the claimant: “the law has adopted an uneasy compromise that rests on the knowledge of the claimant.”

    • Giving up a worthless claim can be good consideration (Cook) or not (Wade).

    • C.f snapping up, a bargain flawed by bad faith is not going to be upheld by a court, whether or not it is supported by consideration.

  • Callisher v Bischoffsheim (1870) – C alledged Honduras government owed him money. In exchange for not persuing this in court D agreed to deliver C Honduran Railway Loan Bonds. Failed to deliver, argued original suit was valueless.

    • Held: Compromise of a disputed claim made bona fide is a good consideration for a promise, even if it ultimately appears that the claim was wholly unfounded.

• Consideration in bilateral contracts (not in unilateral ones) must be requested of the promisee:

  • Combe v Combe [1951] – husband promised wife maintenance payments after the divorce, did not pay. Wife had right to apply to court for these did not as her income was larger than his. Sued for arrears of payment.

    • Argued she had given consideration for her husband’s promise to pay by promising not to apply to the court for a maintenance order.

    • CA held that this was not consideration as her husband had not asked her not to apply to court. Furthermore, had she made such a promise it would have been worthless, since it could not stand against her statutory right to apply.

  • Shadwell v Shadwell (1860) – plaintiff was engaged, beginning career as barrister. Uncle writes letter: “I am glad to hear of your intended marriage…as I promised to assist you at starting, I am happy to tell you that I will pay to you [150p/a until your income is 600 guineas p/a]”

    • Uncle ceases payments after just 12. P sues. Court held by a majority that the nephew had provided consideration by marrying.

    • Byle J dissenting, the uncle’s letter contained no request to his nephew to marry.

    • Majority judgement of Erle CJ is flawed: Argues that marriage is a detriment incurred by the plaintiff. The trigger is a breach of the promise which the consideration is to support.

      • If qualifying detriment can be found in a breach of contract, then every promise comes accompanied by automatic consideration simply in so far as...

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