Consideration – in the existence of a contract

To establish the existence of a contract we have firstly seen that we need to find an agreement, this has been explained in terms of Offer and Acceptance. For the courts to enforce such an agreement however there are other elements that need to be found, the one we will deal with next is consideration, the final element is an intention to create legal relations, which will be dealt with subsequently. So what is consideration?

In its simplest form consideration can be viewed as the price of the contract. If I offer to sell you a PS2 for 75 and you accept, then it is possible to see that both parties are giving something for the contract, I will transfer legal ownership of the PS2 and you will give me 75. There are various ways that the courts have described this situation and not always aiding clarity one of the more common definitions comes from the case Currie v Misa (1875) LR 10 Ex 153.

In that case Lush J defined consideration thus "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. " Consideration is then the exchange element of the contract and it is important to appreciate that it has to be exchanged, if there is no consideration given by one party then under English and Welsh law they cannot enforce the contract.

Indeed if I give you the PS2 but you give nothing in exchange then a week later I can ask for it back and you will be unable to prevent me claiming it back under contract law. To circumvent this problem the law has created a means for making the granting of a gift legally enforceable through the use of a deed to see what happens if no such deed is created look at Re Hudson (1885) 54 LJ Ch 811. What can amount to consideration?

The most obvious form of consideration is the exchange of goods for money, at this point there is little to create confusion, but the courts are rather open to persuasion as to what consideration can be with few rules existing to restrict this. Indeed consideration can be found in a promise, if I promise to sell you the PS2 on Friday and you promise to pay me the i?? 75 in exchange then there is a contract with consideration at that point. If it becomes clear that I will not sell you the PS2 on Friday then you would be able to take legal action.

Consideration doesn't have to be physical therefore. One point which can create problems is that the courts do not look at the value of consideration only for its existence, this is usually presented in the phrase consideration need not be adequate. In Thomas v Thomas (1842) 2 QB 851 the court found that 1 paid each year was consideration for living in a house, even though the commercial value for the annual rent would have been considerably higher.

This is an example of the courts supporting freedom of contract and refusing to intervene with what is a bad bargain but still remains legally at least a good contract. There is case law which suggests that although the consideration need not be adequate it does have to have some economic value, for instance in White v Bluett (1853) 23 LJ Ex 36 the court found that a promise made by a son to his father to stop complaining about his father's treatment of him was not good consideration in return for his father not enforcing a promissory note against the son.

The courts have though found some rather remarkable things to amount to good consideration, ensuring a child was happy (Ward v Byham [1956]), or empty chocolate wrappers (Chappell v Nestle [1960]). Indeed in contrast perhaps to White v Bluett, an American case of Hamer v Sidway (1891) did find that a promise to not drink or gamble was good consideration. Those cases tend to show that the courts do take a rather pragmatic approach to this issue and so long as some consideration can be found its exact form is less important.

Past Consideration There is one major point where consideration is often not considered acceptable and that is where it is what the courts call past. To return to my PS2, lets suggest that instead of asking 75 for it I take pity on you because you are badly strapped for cash and accept only 20, the following day after successfully picking 4 balls on the lottery you say you will pay me an extra 75 once you've claimed the money. When you try to claim the money you discover that you've only won 50 can I claim the extra 75?

The courts would say no; I have not given any consideration for the 75, the consideration is past. To show this in action in the courts look at the case of Eastwood v Kenyon (1840) 11 A & E 438. In that case a man had become the legal Guardian of a girl who stood to inherit a considerable sum in the future. He spent considerable money of his own on her estate and education. When she came of age she promised to pay him back the money he had spent, she shortly after married and her new husband again reiterated the promise.

This promise was never kept but his attempt to force the payment failed because he had provided no consideration for such a payment. His original actions were entirely gratuitous and not done in the expectation of payment. For a more recent case that reached a similar conclusion see Re McArdle [1951] Ch 669. In the above cases is there not a moral obligation to pay? Do you think the courts should perhaps be rather more understanding? The courts have in many other areas of contract law had to perhaps re-evaluate a traditional doctrine slightly in the face of modern commercial practices and this is one such area.

Although in its strictest principle the doctrine is still perfectly good law the courts have shown some tendencies to find that what at first might appear to be past consideration is in fact good consideration. The leading explanation of this comes from a Privy Council case Pau On v Lau Yiu Long [1979] 3 All ER 65 where Lord Scarman provides this summary. "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. " Lord Scarman was not creating new law as such with that statement but was perhaps instead placing some already accepted points into a better framework. This can be seen by looking at the three points raised in succession.