NationMaster - Encyclopedia: Consideration under English law

Consideration under English law is anything of value (an item or service), which each party to a legally-binding contract must agree to exchange if the contract is to be valid. If only one party offers consideration then the agreement is not a contract. Image File history File links Please see the file description page for further information. ... This page deals with consideration under American law, a English focused article is available here. ... Image File history File links Please see the file description page for further information. ... This article needs more context around or a better explanation of technical details to make it more accessible to general readers and technical readers outside the specialty, without removing technical details. ... Image File history File links Scale_of_justice. ... A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. ... This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ... A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. ... Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. ... The mailbox rule or the postal acceptance rule is a term of common law contracts which determines the timing of acceptance of an offer when mail is contemplated as the medium of acceptance. ... In the law of contracts, the mirror image rule states that an offer must be accepted exactly without modifications. ... In contract law, an invitation to treat (invitation to bargain in the US) is an action by one party which may appear to be a contractual offer but which is actually inviting others to make an offer of their own. ... A firm offer is an offer defined by UCC 2-205 of the Uniform Commercial Code of the United States. ... Consideration is something that is done or promised in return for a contractual promise. ... The capacity of both natural and artificial persons determines whether they may make binding amendments to their rights, duties and obligations, such as getting married or merging, entering into contracts, making gifts, or writing a valid will. ... Duress in the context of contract law is a common law defence, and if you are successful in proving that the contract is vitiated by duress, you can rescind the contract, since it is then voidable. ... Undue influence (as a term in jurisprudence) is an equitable doctrine that involves one person taking advantage of a position of power over another person. ... In contract law, an illusory promise is one that courts will not enforce. ... The statute of frauds refers to a requirement in many common law jurisdictions that certain kinds of contracts, typically contractual obligations, be done in writing. ... This article or section does not cite its references or sources. ... This article or section does not cite its references or sources. ... A standard form contract (sometimes referred to as an adhesion contract or boilerplate contract) is a contract between two parties that does not allow for negotiation, i. ... An integration clause, in the contract law, is a term in the language of the contract that declares it to be the complete and final agreement between the parties. ... Contra preferendum or contra preferentem is the rule in contract law that is applied when interpreting a clause, especially an exclusion clause, in an action that says that, where ambiguity as to a terms meaning exists, it should be read against the party who wrote it. ... In contract law a mistake is incorrect understanding by one or more parties to a contract and may be used as grounds to invalidate the agreement. ... In contract law, a misrepresentation is a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. ... Frustration of purpose is a term used in the law of contracts to describe a defense to an action for non-performance based on the occurance of an unforseen event which makes performance impossible or commercially impracticable. ... Impossible redirects here. ... This article or section does not cite its references or sources. ... This article or section does not cite its references or sources. ... An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. ... Accord and satisfaction is the purchase of the release from a debt obligation. ... The doctrine of privity in contract law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it. ... An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. ... Delegation is a term used in the law of contracts to describe the act of giving another person the responsibility of carrying out the performance agreed to in a contract. ... Novation is a term used in contract law and business law to describe the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party. ... A third party beneficiary, in the law of contracts, is a person who may have the right to sue on a contract, despite not having originally been a party to the contract. ... Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other partys performance. ... Anticipatory repudiation (or anticipatory breach) is a term in the law of contracts that describes a declaration by one party (the promissing party) to a contract that they do not intend to live up to their obligations under the contract. ... Cover is a term used in the law of contracts to describe a remedy available to a merchant buyer who has received an anticipatory repudiation of a contract for the receipt of goods. ... An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract. ... Efficient breach refers to a breach of contract that the breaching party considers desirable even when the legal and economic ramifications of such a breach are considered. ... Fundamental breach, sometimes known as a repudiatory breach, is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages. ... Definition of Specific performance In the law of remedies, a specific performance is a demand of a party to perform a specific act. ... Liquidated damages is a term used in the law of contracts to describe a contractual term which establishes damages to be paid to one party if the other party should breach the contract. ... Penal damages are best seen as quantitatively excessive liquidated damages and are invalid under the common law. ... In contract law, rescission (to rescind or set aside a contract) refers to the cancellation of the contract between the parties. ... Estoppel is a concept that prevents a party from acting in a certain way because it is not equitable to do so. ... Quantum meruit is a Latin phrase meaning as much as he has deserved. In the context of contract law, it means something along the lines of reasonable value of services. Situations The concept of quantum meruit applies to the following situations: I. When a person employs (impliedly or expressly) another... International private law, private international law or conflict of laws is the branch of private law which regulates lawsuits involving foreign laws or jurisdictions. ... Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. ... In the common law, a tort is a civil wrong for which the law provides a remedy. ... This article or section does not cite any references or sources. ... This article needs additional references or sources for verification. ... The law of trusts and estates is generally considered the body of law which governs the management of personal affairs and the disposition of property of an individual in anticipation and the event of such persons incapacity or death, also known as the law of successions in civil law. ... Criminal law (also known as penal law) is the body of statutory and common law that deals with crime and the legal punishment of criminal offenses. ... The law of evidence governs the use of testimony (e. ... This page deals with consideration under American law, a English focused article is available here. ...

Consideration in its traditional form in English law usually is expressed as the requirement that for parties to be able to enforce a promise, they must have given some quid pro quo for it: something must be given or promised in exchange or return for the promise. Quid pro quo (Latin for something for something [1]) indicates a more-or-less equal exchange or substitution of goods or services. ...

At English law, a contract must be "met with" or "supported by" consideration to be enforceable; also, only a person who has provided consideration can enforce a contract. In other words, if a contract contains promises (called "gratuitous promises") that are unsupported by consideration, then the contract is void ab initio. Students new to the study of contract law sometimes find the doctrine of consideration baffling. Ab Initio Software Corporation was founded in the mid 1990s by the former CEO, Sheryl Handler, and several other former employees of Thinking Machines Corporation, after the bankruptcy of that company. ...

In Australia, the bargain theory of consideration prevails, where the act or forebearance of one party or promise thereof, is the price for which a promise is bought.

Existence of consideration

Consideration for a particular promise exists where some right, interest, profit or benefit accrues (or will accrue) to the promisor as a direct result of some forbearance, detriment, loss or responsibility that has been given, suffered or undertaken by the promisee (see Currie v Misa).

The consideration must be executory or executed, but not past. Consideration is executory when a promise to do something in the future is given in exchange for another promise to be done in the future. Consideration is executed when a promise is actually executed, in exchange for another promise to be executed in the future. Consideration is past when a promise has been given or executed before and independently to the other promise.

Exceptions to the requirement of consideration

No consideration is needed in case of modification of the contract (Williams v Roffey Bros [1991] 1 QB 1; [1990] 1 All ER 512). The estoppel may replace an unexisting consideration. It has been suggested that this article or section be merged with Estoppel (English law). ...

Rules of consideration

There are a number of complicated rules governing consideration, all of which have exceptions. Each rule, and its exception is dealt with below:

Consideration must be given

A promise is enforceable if it is supported by consideration, that is, where consideration has moved from the promisee. For example, in the case of Tweddle v Atkinson, John Tweddle promised William Guy that he would pay a sum of money to the child of William Guy, and likewise William Guy promised John Tweddle that he would pay a sum of money to the child of John Tweddle, upon the marriage of the two children to each other.

However, William Guy failed to pay the son of John Tweddle, who then sued his executors for the amount promised to his father. It was held that the son could not enforce his wife’s father’s promise, as he himself had not actually given consideration for it - it was his father who had done so instead. This particular rule of consideration forms the basis of the doctrine of privity of a contract, that is, only a party to a contract is permitted to sue upon that contract's terms. (Note that the doctrine of privity has been somewhat altered in the Contracts (Right of Third Parties) Act 1999.) The doctrine of Privity in English law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it. ...

Although consideration must move from the promisee, it does not necessarily have to move to the promisor. The promisee may provide consideration to a third party, if this is agreed at the time the parties contracted (see Bolton v Madden).

Consideration must be referable to the promise

There must be some kind of connection between a promise and the consideration offered to support the promise. It is no consideration to "refrain from a course of conduct which it was never intended to pursue" (Arrale v. Costain Civil Engineering Ltd [1976] 1 Lloyd's Rep 98). The consideration must have been at least an inducement to enter into the promise.

This requirement also imposes a restriction on conditional gifts. This test is an objective test - whether a reasonable person in the position of the offeree would perceive it as a gift as opposed to an offer. For example, the payment of $10,000 for the switching of a television channel is not met with consideration.

Consideration must be sufficient

For consideration to be good consideration, it must be sufficient. Consideration is sufficient where it amounts to something that is capable of expression in economic terms (see White v Bluett). In that case, Bluett, when sued by his father’s executors for an outstanding debt to his father, claimed that his father had promised to discharge him from it in return for him stopping complaining about property distribution. The Court held that the cessation of complaints was of no economic value; thus, Bluett’s father had received no real consideration for the promise, and the debt was unenforceable at law.

There is no requirement that to be sufficient, consideration must be adequate, in the sense of being commensurate in economic terms to the original promise (see Chappell & Co v Nestle Co Ltd).

Consideration must move from the offeree

The offeree must provide consideration, although the consideration does not have to flow to the offeror. For example, it is good consideration for person A to pay person C in return for services rendered by person B. If there are joint promisees, then consideration need only to move from one of the promisees. (see Price v Easton)

Past consideration is not good consideration

A promise cannot be based upon consideration that was provided before the promise was made. For example, if X promises to reward Y for an act that Y had already performed, the performance of that act, while good consideration for the promise to be rewarded for it, is past consideration and therefore not good consideration.

In Eastwood v Kenyon, the guardian of a young girl raised a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the loan. It was held that the guardian could not enforce the promise as taking out the loan to raise and educate the girl was past consideration, because it was completed before the husband promised to repay it.

Furthermore, where a contract exists between two parties and one party, subsequent to formation, promises to confer an additional benefit on the other party to the contract, that promise is not binding because the promisee's consideration, which is his entry into the original contract, had already been completed (or "used") at the time the next promise is made.

In Roscorla v Thomas, Roscorla and Thomas contracted to buy a horse for £30. After the sale, Thomas promised Roscorla that the horse was sound; the horse turned out to be vicious. It was held that Roscorla could not enforce the promise, as the consideration given for entering into the contract to buy the horse had been completed by the time the promise was made; in a sense, the consideration was "used up".

The rule that past consideration is not good consideration is subject to the exception discussed by the Privy Council in Pau On v Lau Yiu Long. In that case, their Lordships held that past consideration can be good consideration where: A privy council is a body that advises the head of state of a nation, especially in a monarchy. ...

Performance of an existing contractual duty is not consideration

The performance of an existing contractual duty owed to the promisor is not good consideration for a fresh promise given by the promisor.

For example, in Stilk v Myrick, Stilk, a seaman, agreed with Myrick to sail his boat to the Baltic Sea and back for £5 per month. During the voyage, two men deserted. Myrick promised he would increase Stilk's wages if Stilk agreed to honour his contract in light of the desertions. Stilk agreed and on return to port, Myrick refused to pay him the extra wages. It was held that Myrick's fresh promise was not enforceable as the consideration Stilk had provided for it, the performance of a duty he already owed to Myrick under contract, was not good consideration for Myrick's promise to increase his wages. The Baltic Sea is located in Northern Europe, from 53Â°N to 66Â°N latitude and from 20Â°E to 26Â°E longitude. ...

The seminal case of Williams v Roffey Brothers & Nicholls (Contractors) Ltd added another exception to the rule. In this case, it was held that performance of an existing contractual obligation will be good consideration if:

The following, as per the Court of Appeal in Williams v Roffey, is highly likely to constitute a practical benefit:

Some commentators argue that practical benefit can amount to anything capable of expression in economic terms. This, however, remains to be seen. ^[vague] The law reports contain only one case in which Williams v Roffey was applied. In Simon Container Machinery Ltd v Emba Machinery AB, the practical benefit was held to be the avoiding of a breach of contract, which was clearly not an extension of the principle.

Part payment of a debt is not good consideration

At common law, the general rule is that if a creditor promises to discharge a debt in return for a fraction of payment, in paying the agreed fraction, the promisee is not providing consideration for the promise, as this is merely part performance of a contractual duty already owed (see Pinnel's Case; confirmed by Foakes v Beer). Consequently, the debtor is still liable for the whole amount, as he cannot force the promisor to accept less. Pinnels Case (1602) 5 Co Rep 117a (otherwise known as Penny v Cole) is an important case in English contract law, on the doctrine of part performance. ... Foakes v. ...

This is true unless the debtor provided fresh consideration for the promise. The following, mentioned in Pinnel's Case itself and confirmed by Sibree v Tripp, may amount to fresh consideration:

Another exception is that part payment of the debt by a third party as consideration for a promise to discharge the creditor from the full sum, prevents the creditor then suing the debtor for full payment (see Welby v Drake). D & C Builders Ltd. ...

The Court of Appeal, in Re Selectmove Ltd stated that the practical benefit doctrine arising from Williams v Roffey cannot be used as an additional exception to the rule. In that case, it was held that the doctrine only applies where the original promise was a promise to pay extra and not to pay less. It should be noted, however, that the Court of Appeal in Re Selectmove were unable to distinguish Foakes v Beer (a House of Lords decision), in order to apply Williams v Roffey (Court of Appeal). It therefore remains to be seen whether the House of Lords would decide this point differently. In any event, the equitable principle of promissory estoppel may provide the debtor with relief. The House of Lords is the upper house of the Parliament of the United Kingdom and is also commonly referred to as the Lords. The Sovereign, the House of Commons (which is the lower house of Parliament and referred to as the Commons), and the Lords together comprise the Parliament. ... The Court of Chancery, London, early 19th century This article is about the concept of equity in the jurisprudence of common law countries. ... Estoppel is a concept that prevents a party from acting in a certain way because it is not equitable to do so. ...

Performance of a public law duty is not good consideration

If the promisee provides what he was required by public law to do in any event in return for a promise, this is not good consideration. In Collins v Godfrey, Godfrey promised to pay Collins for his giving of evidence. It was held that Collins could not enforce the promise as he was under a statutory duty to give evidence in any event.

However, if the promisee provides more than what public duty imposes on him, then this is good consideration (see Ward v Byham). In this case, a mother was under a statutory duty to look after her child. The ex-husband promised to pay her £1 a week if she ensured that the child was well looked after and happy. It was held that notwithstanding the statutory duty imposed on the mother, she could enforce the promise since the act of keeping the baby 'happy' provided additional consideration.

It remains to be seen whether Williams v Roffey has any application to this rule. For example, if X promises to pay Y to perform precisely, what would be required from him under statute? Thus following Collins v Godfrey, Y's performance does not amount to consideration, but X receives a practical benefit from Y actually performing that duty.

Third party obligation is good consideration

Consideration for a promise can be the performance of a contractual duty owed to someone other than the promisor (see Shadwell v Shadwell; confirmed by The Eurymedon). In Shadwell, Shadwell was under a contractual duty with a third party to marry. Shadwell’s uncle promised to pay him £150 per year after he was married. It was held that Shadwell marrying was good consideration, notwithstanding that he was obliged by a contract with a third party to marry in any event.

A promise to perform a pre-existing contractual duty owed to a third party (as opposed to the performance of that duty) may also amount to consideration (Pau On v Lau Yiu Long).

External links

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