consideration

consideration

[kuhn-sid-uh-rey-shuhn]
consideration, in law: see contract.
Consideration is a central concept in the common law of contracts and contract theory: it is value paid for a promise. Consideration is needed for a valid contract. An example; If you sign a contract with a man, agreeing to buy his car for an amount of money, his consideration is the car, which he promises to give to you. Your consideration is the money that you pay for the car. However, a contract saying that he would give you his car for nothing would not be valid per se, because you aren't giving him any consideration. In basic terms, the offeree (that is the person being offered something) must give something back to the offeror in return for his promise. There are several issues arising from, what appears to be, a quite simple doctrine. The main issues are outlined below:

  • Of what value must the consideration be?
  • Can performing an existing legal or contractual duty constitute consideration?
  • Can a past-performance (also called past-consideration) be valid consideration?
  • Williams v Roffey + Nicholls Ltd (1991) 1 QB 1 - a new dimension?

Of What Value Must the Consideration Be?

Consideration must be sufficient but need not be adequate. The offeree has shown consideration even if he gives something completely useless and of no value to the offerrer. This is because it acts as a token. An example of this is illustrated in the case of Chappell and Co v Nestle (1960) where it was held by the Court of Appeal that 6 chocolate bar wrappers in return for a gramophone the Nestle chocolate company was offering as part of a promotion, was valid consideration for Nestle's offer. In the case of Batsakis v. Demotsis, 226 S.W.2d 673 (1949), the Texas Court of Appeals found that the "[m]ere inadequacy of consideration will not void a contract" deciding that while courts generally review the legal sufficiency of the consideration they don't have to inquire into whether there was a generally fair or equivalent exchange.

A case discussed later in this article, Williams v Roffey and Nicholls Bros (1991), appears to even allow consideration to be something which is of any kind of benefit to the offerer, in this case the offerer not having to find new contractors to carry out work on the building site he was employed. Many commentators have argued over what constitutes valid consideration. Some such as Trietel argue the consideration must have some sort of economic value but other academics such as Atiyah argue that all consideration is doing is providing a reason for the offerer to put forwards his offer or promise. See Williams v Roffey below for further elaboration on this area.

Intangible Returns -

It has been held affection or lack of annoyance do not constitute consideration. In White v Bluett (1853) 23 LJ Ex 36, it was held that a son had not showed consideration for his father's promise to write-off debts owed to him by the son, if the son was to stop complaining about how the father had distributed his estate in his will.

If a person (claimant) had promised not to enforce a claim against the offerer and that claim is valid in law, then this can be valid consideration. If they promise not to assert a claim that is not valid in law then this is not to be held valid consideration except if the original offerer believes it to be good and so too does the claimant. Cook v Wright (1861) sheds some light and clarity on this. The Claimants genuinely believed the defendant was under an obligation to reimburse them. The defendant eventually paid them the disputed sum but later realized he was under no obligation to and so argued the claimant had showed no valid consideration. The court held that because the claimant genuinely believed they were disregarding a valid claim in law they had shown consideration and moreover the defendant had obtained the benefit of becoming debt-free. This supports the view that there must be some sort of benefit to the offerer.

Can Performing an Existing Legal or Contractual Duty Be Valid Consideration?

Quite simply the answer to both of these question is no. If A says to B, I will give you £100 if you do not kill me and B does not kill A, B has shown no consideration to A for the £100 because he is already under a legal duty to not act in this way. Similarly, in Ward v Bytham (1956) WLR 496, a mother and father had terminated their relationship. The father promised to pay the mother a certain amount of money if she kept their child happy and healthy. It was held by her doing this, she showed no consideration for the father's promise because she was already under a legal duty to act in the way stipulated by the father. Lord Denning however, expressed his concern at the courts decision and came to the conclusion it would be quite possible that the mother had gone beyond her legal duty.

The same situation arises when B performs in a way he is already legally obliged to do so. An example of this is the case of Stilk v Myrick (1809) 2 Camp 317. This case has two law reports and has since been accepted as a case of duress not consideration since doubt was cast upon the case by Williams v Roffey. In Stilk, it was held a crew member of a ship was not entitled to the extra wages the Ship's captain offered him for manning the ship back to its home port after 2 crew members abandoned the ship in the Caribbean. The rationale of the court was that the crew member was already under an existing contractual duty.

It is important to look at the situation of this principle since Williams v Roffey in 1991. It is clear this case is acting as a case that casts doubt on many established principles in the area of consideration. Williams v Roffey will be discussed further below.

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