Consideration

In order to form a valid contract, apart from offer, acceptance and intention to create legal
relationship, there must be some sort of consideration. This is based upon the idea of
‘reciprocity’; that means a promisee should not be able to enforce a promise unless he has given
or promised to give something in exchange for the promise. The classic definition of
consideration was expressed in 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 the one party, or some forbearance, detriment,
loss or responsibility given, suffered or undertaken by the other.”
The modern definition of consideration is the one approved by Sir Frederick Pollock and
provided by the House of Lords in 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, and the promise thus given for value is
enforceable.”
The rules of consideration: There are mainly three rules that govern the doctrine of
consideration:
1. Consideration must be sufficient but need not be adequate
2. Past consideration is not a good consideration and
3. Consideration must move from the promisee.

Consideration must be sufficient but need not be adequate: The courts will not enforce a
promise unless something of value is given in return for the promise. This is what is meant by
saying that consideration must be ‘sufficient’. On the other hand, the courts do not ask whether
adequate value has been given in return for the promise. This is what is meant by saying that
consideration need not be ‘adequate’. So, if a house worth £250,000 is sold for just £1, that is
sufficient consideration even though it is obviously inadequate.
A contracting party can stipulate what consideration he chooses (Midland Bank v Green). Thus,
very trivial acts may constitute consideration (Chappell v Nestle).
Consideration must have some economic value (White v Bluett). In this case, a son’s promise not
to bore his father with complaints was held not to be good consideration for the fathers promise
not to sue his son for a debt owed by the son to his father.
Some examples of valuable consideration:
Forbearance to sue may constitute a sufficient consideration (Pitt v PHH Asset Management).
By restricting his own lawful freedom of action, promisee may give sufficient consideration
(Hamer v Sidway). In this case, refraining from drinking liquor was held to constitute a valid
consideration.
Past consideration is not a good consideration: Where a party makes a promise subsequent to
some actions carried out by the other party, that promise may constitute a past consideration
(Roscorla v Thomas). By past consideration, it is meant that the consideration was already
completed before the promise was made. So, the promisee has not given anything new in return
for the promise.
Exceptions: Where the act of the promisee was performed at the request of the promisor and,
subsequent to the performance of the act by the promisee, the promisor promises to pay for it,
then such a promise may be enforceable (Lampleigh v Brathwait).
A promise made after the acts constituting the consideration will be enforceable if the act has
been done at the promisor’s request and the parties must have understood that the work was to
be paid for in either by money or some other benefit (Pao On v Lau Yiu Long)
Three conditions must be satisfied by a promisee who wishes to invoke the doctrine of implied
assumpsit (Pao On v Lau Yiu Long):
1. The promisee must have performed the original act at the request of
the promisor.
2. It must have been clearly understood or implied between the parties
when the act was originally requested that the promisee would be
rewarded for doing the act.
3. The contents of the promise must have been legally enforceable had
it been promised in advance.

Consideration must move from the promisee: A person to whom the promise is made can only
enforce the promise if he himself provides consideration for that promise. However, there is no
requirement that it must move to the promisor. Thus, the promisee can provide consideration
by conferring a benefit on a third party at the request of the promisor (Bolton v Madden).
Performance of an existing duty imposed by law: Performance of an existing duty imposed by
law is not a good consideration (Collins v Godefroy).
Exception: If the public officials do more than their stipulated job on the request of the
promisor, their performance may be treated as a good consideration (Glasbrook Bros v
Glamorgan County Council).
Performance of a contractual duty owed to the promisor: Performance of a contractual duty
owed to the promisor is not sufficient consideration (Stilk v Myrick).
Exception: Where new situations entitled the employees to refuse to carry out the contract and
the employer promises some extra payment, the employees may be entitled to enforce the
employers promise for continuing the contract (Hartley v Ponsonby).
Moreover, where the promisee has done, on the request of promisor, more than he was obliged
to do under his contract, then he can enforce the promise (Hanson v Royden).
If the performance of an existing contractual duty confers a practical benefit on the other party,
this can constitute a valid consideration (Williams v Roffey Bros).
Part payment of debt: A promise to accept part payment of debt in discharge of the entire debt
is not supported by consideration (Pinnel’s Case).
Exceptions: There are several exceptions of the part payment of debt rule:
1. The creditor will be bound by such a promise if the debtor has given consideration in the
form of gift/something that has economic value.
2. If the part payment was made at the request of the creditor at an earlier date or other
place than is contractually required, this can provide a valid consideration to discharge
the whole debt.
3. If a group of creditors make an arrangement with the debtor whereby each agrees to
accept a stated percentage of his debt in full satisfaction (Wood v Robarts).
4. Part payment of debt by cheque is not a good consideration even if it is made at the
request of the creditor (D & C Builders v Rees).

The doctrine of Promissory estoppel: Relying on a promise made by the landlord, if the tenant
did not pay the full rent during a particular period and afterwards the landlord tries to recover
the part of the rent which had not been paid during the period, that claim would be failed. The
doctrine of promissory estoppel will come into force and the landlord will be estopped by the
court (Central London Property Trust Ltd v High Trees).
However, the promissory estoppel is a suspensory doctrine. So, the creditor may resume his
strict rights by giving notice that he wishes to be paid the full amount and then allowing a
reasonable time for the debtor to comply (Tool Metal Manufacturing Co. v Tungsten Electricity
Co. Ltd.)
Conditions for promissory estoppel:
The promisee must fulfill some conditions in order to rely upon the doctrine of promissory
estoppel:
1. Contractual/legal relationship: There must be a contractual or legal relationship between the
parties before the promise was made.
2. Promise: There must be a clear and unambiguous promise, either by words or by conduct
(Woodhouse v Nigerian Produce Marketing Co)
3. Reliance: The promise must have been relied upon by the promisee to his detriment (Ajayi v
Briscoe)
4. Inequitable: It must be inequitable for the promisor to go back to his promise.
5. Works as shield not sword: The doctrine may only be raised as a defence. So, it will work as a
shield not as a sword (Combe v Combe).
Performance of a contractual duty owed to third party: There are two contrasting views on this
point. The most accepted view is that the performance of a contractual duty owed to a third
party can constitute a good consideration (Shadwell v Shadwell). Another view is that a promise
to perform a contractual duty owed to a third party does not constitute consideration ( Jones v
Waite)