⇒ Consideration is needed for an agreement to be legally enforceable

⇒ Consideration has developed from the idea that there must be a mutual exchange of something of value between the parties

⇒ Stewart Smith LJ referred to the “elephant test”: Consideration is difficult to define, but you know it when you see it

⇒ Lush LJ in Currie v Misa (1874-75): “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”

• So a benefit or detriment must be suffered by one party

⇒ Thus consideration means that before you can enforce any agreement you must prove that you have promised something of economic value in return

⇒ Sometimes it is difficult to find a benefit/detriment when there has only been an exchange of promises

⇒ Sir Frederick Pollock defined consideration as “the price of the promise”

• This definition shows there is a need for an exchange of promises where both parties provide something of legal value
• It also recognises that a promise can amount to consideration

⇒ The main alternative to consideration is ‘reasonable reliance’ → it is the actions, and reliance on those actions, that creates obligations, rather than an exchange of promises (see promissory estoppel below)

⇒ With consideration there must be benefit to the promiser or detriment to the promisee!

⇒ What does detriment mean?

• Detriment to the promisee or benefit to the promisor but not necessarily both benefit and detriment e.g. Tanner v Tanner [1975]

⇒ Promising to act can amount to consideration

⇒ Dunlop Pneumonic Tyre v Selfridge (Per Lord Dunedin): “An act of 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”

⇒ 1) Consideration must be sufficient, but need not be adequate

⇒ 2) Consideration must have some economic value

⇒ 3) Consideration must move from the promisee but not necessarily to the promisor

⇒ Promising £1 or a peppercorn is sufficient consideration, even if that seems inadequate/unfair

⇒ So sufficient consideration can be offering anything of ANY economic value e.g. chocolate bar wrappers in Chappell v Nestle [1960] deemed to be sufficient

• See the case of Thomas v Thomas (1842)

⇒ Forbearance (where you refrain from taking someone to court) is seen to be sufficient consideration in some circumstances:

• See the case of Alliance Bank v Broom (1864), for example
• To rely on forbearance the promisor must have requested the promissee not to sue/take them to court

⇒ See the case of White v Bluett (1853), for example → if there is no economic value to the consideration the contract will likely not be enforced

⇒ The economic value of the consideration can, however, be minimal e.g. Chappell and Co Ltd v Nestle Co Ltd [1960]

⇒ As the promisee enforces the promise they must be the ones that provide the consideration

⇒ This is related to privity of contract i.e. only a party to the contract can enforce it

⇒ The case of Bolton v Madden (1873) shows that consideration can be given to a third party at the promisor’s request

⇒ Consideration must be made at time the contract is made, never before

⇒ Past consideration is where one party provides a promise or acts before the other party’s promise is given

• See, for example, Roscorla v Thomas (1842)

⇒ Exception to the 'past consideration' rule:

• Lord Scarman said in Pao On v Lau Yiu Long [1980] that “an act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise”. In the case he made a 3 stage test when deciding if there is an exception:
• 1) If the act had been done at promisor’s request that is valid (Lampleigh) i.e. the "requested performance" rule
• 2) Parties know that the performance of the act will be returned with a payment/benefit (Re Casey’s Patents)
• 3) Payment/benefit would be enforceable if promised in advance

⇒ 1) "Requested Performance"

• Consideration exists where an act is done at the request of the promisor where the parties know payment will be made
• See, for example, Lampleigh v Braithwaite (1615) and Re Casey’s Patents [1892]

⇒ This is because no extra detriment is suffered or benefit conferred

⇒ So if you already have a duty to do something under a contract you are not providing extra consideration for doing that duty

⇒ Performance of an existing public duty:

• Performing a duty stated by the law is not valid consideration e.g. Collins v Godefroy (1831)
• Exception: if you go beyond the duty required by the existing public duty, that may amount to valid consideration e.g. Ward v Byham [1956]

⇒ Performance of an existing contractual duty owed to the same promisor:

• If two parties are already bound by a contract, the performance of an existing duty arising from that contract cannot amount to consideration in a new contract between those parties e.g. Stilk v Myrick (1809)
• Exception: if you go beyond the duty required by the existing contractual duty, that may amount to valid consideration e.g. Hartley v Ponsonby [1857] had similar facts to Stilk v Myrick (1809), but the court said the seamen had exceed their existing contractual duty due to the added danger of having less crew
• The Decision in Williams v Roffey [1991] → an existing contractual duty can be valid consideration if there’s a “practical benefit” to other party
• Williams v Roffey has been limited by Re Selectmove Ltd [1995] i.e. Williams v Roffey won’t be applied to debt part-payment

⇒ Performance of a contractual duty owed to a third party:

• In other words, where one party (a) promises money to a 2nd party (b) to perform a duty that they (b) are already contractually obliged to perform to a 3rd party (c), will that be valid consideration?
• See the case of Shadwell v Shadwell (1860) and Scotson v Pegg (1861)

⇒ A promise to perform a duty to a third party:

• The cases of Shadwell and Scotson show that performance of a contractual duty that is owed to a 3rd party can be good consideration
• The case of Pao On v Lau Yiu Long [1980] shows that the promise to perform a contractual duty that is owed to a 3rd party perform can also be good consideration

⇒ Part payment of debt is not good consideration

• In Pinnel’s Case (1602) it was stated that “payment of a lesser sum on the day in satisfaction of a greater cannot be any satisfaction for the whole, because it appears to the judges that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum" → so this case established that part payment of debt is not good consideration
• The rule was approved in Foakes v Beer [1884]
• In Collier v P and MJ Wright (Holdings) [2008] it was said that part payment, as a general rule, is no consideration, but if you can prove promissory estoppel then there may be an exception

⇒ It can be harsh! E.g. if X owes Y £500 but Y promises that if he receives £250 he will waive the remaining money, by law this promise is not enforceable and Y could change mind and demand the rest of the money

⇒ BUT, this rule may ensure that the creditor is protected from being exploited by the debtor e.g. D&C Builders Ltd v Rees [1966]

⇒ However, sometimes being able to only recover some money may be more useful to the creditor than insisting that all the money to be paid – however, the court has maintained a strict approach to part-payment of debt

⇒ Just to reiterate, the rule in Pinnel's case said that part payment of debt is not good consideration. However, there may be an exception to this rule:

• A new element can be good consideration = "... the gift of a horse, hawk, or robe in satisfaction is good, for it shall be intended that a horse, hawk, or robe, might be more beneficial to the plaintiff than the money, in respect of some circumstances, or otherwise the plaintiff would not have acted it in satisfaction”
• In other words, paying 99% of a £1000 debt is not valid consideration, but £10 plus an ipod (even if the ipod is only worth £100) is valid consideration because to the creditor that ipod may have more value than £990 → consideration need only be sufficient and not adequate

⇒ Pinnel’s case also said that if you pay in a different form or a different time then this could be good consideration:

• E.g. Instead of paying £10 to you in London, I pay you £5 in Edinburgh
• This is because the promise is going beyond the original agreement, which is likely to have more value to the promisor than the full payment of the debt
• See the case of Vanbergen v St Edmunds Properties Ltd [1933]
• Sibree v Tripp (1846): "[A] sum of money payable at a different time is good satisfaction of a larger sum payable at a future day...". In other words, early payment constitutes consideration because it may be more essential to have the money now than later

⇒ If you want to change a contract you need consideration (British-Russian Gazette Ltd v Associated Newspapers Ltd [1933])

⇒ The court call it accord (agreement) and satisfaction (consideration)

• HOWEVER: in Stead v Dawher (1839) it was said that “the same consideration which existed for the old agreement is imported into the new agreement, which is substituted for it”

⇒ Waiver is one way of varying a contract without consideration (a common law alternative to consideration)

⇒ To waive is to promise not to enforce something in a contract

• Motor Oil Hellas v Shipping Corp of India [1990] said waiver is where you suspend your rights under a contract
• In other words, when someone waivers a right they have in the original contract (i.e. suspend a right) they are varying the original contract. However, this variation does not require consideration to be valid

⇒ Interesting cases on waiver include Hartley v Hymans [1920] and Levey & Co. v Goldberg [1922]

⇒ If you did not rely on the promise not to enforce something in a contract then there is NO waiver e.g. Avon County Council v Howlett [1983]

⇒ Waiver is not necessarily forever lasting; the person can regain his right e.g. Charles Rickards v Oppenheim [1950]

• But to resuscitate your rights you waived you must give sufficient notice to the other party → in other words, you can waive a right you have in a contract, but if you want to regain that right you must give the other party sufficient notice that you want that right back (this was clearly stated by Denning in Charles Rickards v Oppenheim [1950])