UNIVERSITY OF THE WEST INDIES

FACULTY OF LAW

LAW 1410 CONTRACT LAW I

SEMESTER II (2020)
Worksheet 4

CONSIDERATION

A. REQUIRED READNG

1. Gilbert and Maria Kodilinye, Commonwealth Caribbean Contract Law,

Routledge (latest edition)
2. Cheshire Fifoot Furmston, Law of Contract, Oxford Publishing (latest edition)
Electronic Location:
http://catdir.loc.gov/catdir/toc/fy13pdf01/2012941006.html
3. J Smith and J Thomas, Casebook on Contract, Sweet and Maxwell (latest
edition)
3. Jill Poole, Casebook on Contract Law, Oxford Publishing (latest edition)
4. Jill Poole, Textbook on Contract Law, Oxford Publishing (latest edition)

B. CASES

Alliance Bank v Broom (1864) 2 Dr & Sm 289

Bainbridge v Firmstone (1838) 8 A & E 743
Carlill v Carbolic Smoke Ball Co [1893] QB 256
Central London Property Trusts Ltd v High Trees House Ltd [1947] 1 KJ 130
Chappell & Co v Nestle Co Ltd [1960] AC 87
Collins v Air Jamaica Ltd CL 1995/C-‐203
Collins v Godefroy (1831) 1 B & Ad 950
Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CR
460 Currie v Misa (1875) LR 10 Ex 153
D & C Builders v Rees [1965] 2 QB 617
Foakes v Beer (1884) 9 App Cas 605
Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270
Haigh v Brooks (1839) 10 Ad & E 309
Hartley v Ponsonby (1857) 7 E & B 872 Hirachand
Punamchand v Temple [1911] 2 KB 330 Hughes v
Metropolitan Railway (1877) 2 App Cas 439
Manhertz & Manhertz v Island Life Insurance Co Ltd SCCA 24/2006
New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, The Eurymedon [1975]
AC 154
Pao On v Lau Yiu Long [1980] AC 614
Pinnel’s Case (1602) 5 Co Rep 117a
Re Casey’s Patents (1892) 1 Ch 104
Re McArdle (1951) Ch 669
 Re Selectmove [1995] 2 All ER 532
Roscorla v Thomas (1842) 3 QB 234
Stilk v Myrick (1809) 2 Camp 317
Thomas v Thomas (1842) 2 QB 851
Ward v Byham [1956] 1 WLR 496
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 512

C. CONSIDERATION

The doctrine of consideration requires something of value in the eyes of the law
to move from the promisee to the promisor in order to make the promise
enforceable : Thomas v Thomas (1842) 2 QB 851.

It may in some instances be referred to as ‘something of value’ or ‘something in

return’ and may be in the form of a benefit to the promisor or a detriment to the
promisee. While the promisee might confer a benefit on the promisor, e.g. by
paying a sum of money for the promisor’s promise sell his car, consideration is
also present where the promisee suffers a detriment at the request of the
promisor, e.g. the promisee agrees to let the promisor use his machine in
exchange for the promisor returning it in good condition.

Currie v Misa (1875) LR 10 Ex 153:

“[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. (…) It is enough that something is promised, done, forborne, or
suffered by the party to whom the promise is made as consideration for the
promise made to him.”

Generally we refer to consideration as one of two types, either executory or

executed. In the first instance bilateral contracts are usually executory for
example parties Alpha and Omega have made promises to each other and a
contract has been formed. However, as they have not yet executed their
promises, the consideration is called executory, meaning that the parties are
supposed to perform their obligations in the future. Secondly, in the case of
unilateral contracts, the offeree may accept an offer by complying with whatever
the offeror has stipulated. In such cases, consideration is called executed as it has
already been performed. The classic example of this type of situation is found in
Carlill v Carbolic Smoke Ball Co [1893] QB 256.
 Detriment - Bainbridge v Firmstone (1838):

“The consideration is, that [the plaintiff], at [the defendant’s] request

consented to allow [the defendant] to weigh the boilers. I suppose [the
defendant] thought he had some benefit; at any rate, there is a detriment
to [the plaintiff] from his parting with the possession for even so short a
time.”

Forbearance - Alliance Bank v Broom (1864)

Collins v Air Jamaica Ltd CL 1995

Measurable

While the amounts involved are irrelevant, the consideration must nevertheless
be something of economic value or that is measurable in monetary terms.
Therefore, intangible benefits, such as love and affection, or a mere moral
obligation, do not amount to consideration.

“[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 does not like pepper and will throw away the corn.” - Chappell &
Co v Nestle Co Ltd [1960]

Adequacy

While the differentiation between consideration that is measurable and that

which is not can be difficult to pinpoint, there is no dispute about the fact that
consideration need not be adequate. In other words, the courts do not concern
themselves with the question whether the consideration is sufficient in light of
the subject matter of the contract. The main reason for this approach is the
principle of freedom to contract, the fact that a contract is the result of a bargain
between the parties to it. Thus, a party should not be able to avoid fulfilling their
promise on the basis that the consideration that was promised in return is
inadequate.

Haigh v Brooks (1839) :“[b]oth being free and able to judge for themselves,
how can the defendant be justified in breaking his promise, by discovering
afterwards that the thing in consideration of which he gave it did not possess
that value which he supposed to belong to it”.
 While the rule that there need not be adequacy is a general one, there is one
exception in respect of the availability of equitable remedies. Usually, a
claimant for breach of contract would seek monetary compensation in the
form of damages. In all such cases, the only question asked would be whether
there was consideration, rather than whether such consideration was
adequate. However, where a claimant seeks an equitable remedy, he or she
may not be able to sustain their claim if consideration was inadequate. This is
due to the operation of the equitable maxim of ‘equity will not aid a volunteer’,
which renders it unlikely that someone who only provided token
consideration would be able to successfully claim an equitable remedy.
- Thomas v Thomas (1842): The bargain in this case was that the plaintiff
would take possession of a house and, in return, maintain the house and
pay one pound per year for the “ground rent”. The defendant refused to
comply, arguing that there was a lack of consideration. The court held that
the payment of one pound was good consideration.

Past consideration

The general rule is that consideration must not be past. Where there is a promise
to do something in return for something that has already been done, such a
promise is not enforceable - Re McArdle

- An exception may be present where one party has performed a service at the
request of the other party and that other party subsequently promised to pay
for the service;
- Lord Scarman: "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. The act must have been done at the promisors' request: the
parties must have understood that the act was to be remunerated either by
a payment or the conferment of some other benefit: and payment, or the
conferment of a benefit, must have been legally enforceable had it been
promised in advance." (Pao On v Lau Yiu Long [1980] AC 614).

We can therefore derive the test from Pao On v Lau Yiu Long that:
(1) the work or service was rendered at the request of the promisor;
(2) it was understood that the work or service would have to be paid for; and
(3) that the contract would have been legally enforceable if the promise had
been made before the work or service was rendered.

Was it implied that the parties were aware that the benefit must be paid for? If
parties were aware, then any subsequent promise to pay would either provide
recognition of the defendant’s duty to pay or fix the amount of remuneration
which was reasonable for the word or service rendered:
- Re Casey’s Patents (1892)
- Roscorla v Thomas (1842)
Consideration must move from the promisee

A promisee who wishes to enforce the promise of the other party must prove
that consideration moved from him or herself, not from a third party. This rule
reflects the view that a contract consists of an exchange of reciprocal duties and
rights. Thus, a person cannot sue upon a contract unless they provided at least
part of the consideration.

However, problems arise where there are three or more parties involved. If party
A and B have agreed to fix C’s car in return for payment and only party A does
the fixing, party B may not be able to sue for payment as no consideration
“moved” from party B. However, if the agreement between A and B on the one
hand, and C on the other, was made jointly – that means to say that A and B were
joint promisees, the agreement can be enforced by B, even if he or she did not
provide consideration (Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119
CR 460).

Performance of an existing contractual obligation

Sometimes, the issue of valid consideration arises where two parties are already
bound by a contractual agreement but, for whatever reason, one party makes an
additional promise to the other party, over and above what has already been
agreed. The general rule is that if someone promises to do something which they
are already bound to do by contract, agreeing to do that something is not
supported by valid consideration. This general rule was established in Stilk v
Myrick (1809) and was later refined in Hartley v Ponsonby (1857) to the effect
that if performance of the existing contractual obligation has been affected by an
intervening event, a promise for additional payment may be seen as being
supported by consideration.

The present state of the law with respect to existing contractual obligations was
espoused in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990], where it
was held that if the promisor gains a “practical benefit” from the promisee’s
work or services then there may be valid consideration even though the work or
services may already be subject to an existing contract.

With respect to situations involving third parties, where there is an existing

contractual duty owed to a third party, an agreement between A and B to
perform that duty may nevertheless be enforceable. In other words, performing
an existing contractual duty towards another party is deemed to be valid
consideration. The rationale is that since the promisor obtains direct benefit
from the contract with the promisee, in the form of an independent right to
enforce the promise, it cannot be said that the promisee has not provided
consideration (New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, The
Eurymedon [1975].

Similarly, where there was an existing legal duty to do something, the

performance of that duty may nevertheless constitute good consideration. Thus,
in a case where a father promised a mother a reward for looking after their child,
looking after the child was deemed to be good consideration irrespective of the
fact that the mother was already under a legal duty to look a after her child. The
court drew a distinction between just looking after the child and ensuring that
the child was well looked after and happy. The fact of going beyond the legal
duty, no matter how minimally, is what renders the consideration valid (Ward v
Byham [1956] 1 WLR 496).

Discharge of a public duty

Where party A is under a duty to perform a particular job or task, then A cannot
promise to perform that task for the benefit of B in return for payment from B
(Collins v Godefroy (1831) 1 B & Ad 950). However, there is an exception to this
rule where the public servant provides an additional service over and above
what lies within the scope of his or her public duty (Glasbrook Bros Ltd v
Glamorgan County Council [1925] AC 270).

Part payment of a debt

If party A owes money to party B and promises to pay part of the debt in return
for a promise not to be sued for the balance, there is a lack of good consideration.
Thus, if A owes $1000 to B and repays $500 on the due date and B accepts ‘in full
satisfaction of the entire debt’, there is nothing to prevent B from suing for the
balance. The problem, of course, is rooted in the fact that A did not provide B
with any consideration for accepting the lesser amount. One reason for this rule
is to protect creditors from any economic duress that may be applied by debtors.
In other words, an unscrupulous debtor should not be able to abuse his or her
position by pressuring the creditor, who might be concerned that if they do not
accept, they may get nothing at all. This rule was first established in Pinnel’s Case
(1602) 5 Co Rep 117a.

Pinnel’s Case: The plaintiff Pinnel was owed a sum of money by the
defendant Cole. The payment was due in November. At the plaintiff’s
request, the defendant paid part of the debt on an earlier date, in
October, in full settlement of the debt. The claimant subsequently
changed his mind and sued for the outstanding balance. The court held
that while part-‐payment does not amount to consideration, in this case
it did as part -‐payment had been made at the request of the plaintiff and
on an earlier date. Consideration may also be provided by part-‐payment
if it consists of goods in lieu of money or if part-‐ payment is made in a
different place than originally specified.

Thus, where there is a variation of a contractual obligation, for instance, where A

owes B $100 but only pays $80 and B accepts and agrees not to sue for the
balance, B can nevertheless change his or her mind and sue A for the balance
due. The rationale is that B did not provide consideration for A’s promise to bear
the loss. However, if A promised to pay $80 before the date when the $100 was
due and this was of benefit to B, then B cannot change his or her mind,
irrespective of how small the benefit might have been. The benefit to B is
deemed to be consideration for the promise not to sue A for the balance.

The rule in Pinnel’s Case is a specific application of the more general ‘accord and
satisfaction’ rule, which means that an obligation is discharged by way of
separate agreement (accord), which is supported by separate
consideration (satisfaction). The rule in Pinnel’s Case has been affirmed by:
- Foakes v Beer (1884)
- Re Selectmove [1995]
- Manhertz & Manhertz v Island Life Insurance Co Ltd SCCA 24/2006
- Hirachand Punamchand v Temple [1911] (exception)

Promissory estoppel

The equitable doctrine of promissory estoppel represents an exception to the

rule in Pinnel’s Case:
- Hughes v Metropolitan Railway (1877)
- Central London Property Trusts Ltd v High Trees House Ltd [1947]

Hughes v Metropolitan Railway: “if parties who have entered into definite and
distinct terms involving certain legal results – certain penalties or legal
forfeiture – afterwards by their own act or with their own consent enter upon a
course of negotiation which has the effect of leading one of the parties to suppose
that the strict rights arising under the contract will not be enforced, or will be
kept in suspense, or held in abeyance, the person who otherwise might have
enforced those rights will not be allowed to enforce them where it would be
inequitable having regard to the dealings which have thus taken place between
the parties.”

Application of the doctrine of promissory estoppel means that where a party

promises not to enforce their legal rights under a contract and that promise is
acted upon, that party cannot later change their mind, even when the promise
was not supported by consideration. This principle seems to contradict the rule
in Pinnel’s Case. However, distinctions can be drawn, for instance the fact that a
promissory estoppel merely suspends rights, rather than extinguish them
(Central London Property Trusts Ltd v High Trees House Ltd).

The requirements for application of the doctrine of promissory estoppel include:

- the promise must have been clear, unambiguous and intended to be

binding;( Notwithstanding that it must be clear, the promise can be made by
conduct, as was the case in Hughes v Metropolitan Railway)
- the promisee must have relied on the promise; (Reliance means that the
promise induced the promisee to act differently than he or she otherwise
would have e.g. if a promisee relies on a debtor’s promise that they would
not have to repay the whole debt and buys materials to carry on with their
business, which they otherwise might not have been able to do;
- it must be inequitable for the promisor to go back on their promise (D & C
Builders v Rees [1965] ’s Case
TUTORIAL QUESTIONS

(1) Define the term ‘consideration’.

(2) What is an ‘action of assumpsit’?

(3) What is the difference between executed and executory consideration?

(4) In what circumstances can past consideration amount to good

consideration?

(5) “Consideration must be sufficient but need not be

adequate.” Critically discuss.

(6) What are the rules concerning the fact that consideration must move from
the promisee where there are three parties involved.

(7) “The judgment in Williams v Roffey Bros & Nicholls (Contractors) Ltd
[1990] 1 All ER 512 fundamentally altered the rule in Stilk v Myrick (1809)
2 Camp 317.”
Critically discuss.

(8) Under what circumstances can a person performing a public duty claim to
have provided good consideration?

(9) “No valid contract can arise where A promises to B to perform an existing
contractual duty which A already owes to C.”

Critically discuss.

(10) Explain the rule in Pinnel’s Case. What were the facts of the case? What is
meant by ‘accord and satisfaction’?

(11) Paul made the following promises:

(a) to give $1,000 to Eve, his secretary, for having worked during her
lunch hour during the last two months;

(b) to pay the newspaper delivery man $10 a month, if he delivers the
paper before 8 am;

(c) to give his exercise machine to Thomas if Thomas collects it from

the garage.

(d) To accept part-‐payment of $900 dollars in full settlement of

$1000 debt owed to him by Jenny.

(e) To accept part-‐payment of $900 dollars and one peppercorn in

full settlement of $1000 debt owed to him by Jenny.

(f) To accept part-‐payment of $900 dollars and in full settlement of

$1000 debt which he thinks is owed to him by Jenny. Jenny thinks
the actual amount owed is $900.

(g) To accept $900 from Henry in full settlement of a $1000 debt

which Jenny owed to Paul.

Which promises are enforceable?

(12) What is meant by the term “promissory estoppel”? What relevance does it
have with respect to the operation of the doctrine of consideration?