CONSIDERATION

Topic of the day 

- What is consideration

- The concept and significance of consideration

- The types or classes of consideration

- What is past consideration

WHAT IS CONSIDERATION

Consideration refers to something of value exchanged between the parties to a contract. It can be a promise, an act, a refrain (not to do something), or a benefit passed between parties in exchange for something else.

Factors to consider under consideration are;

1. Mutuality: this is where both parties must provide consideration and show mutual exchange or bargaining.

2. Value: This is where the consideration must have value in the eyes of the law, although the value may not necessarily be the same between the parties.

3. Bargain exchange: this is where the consideration must be part of the negotiation and induce both parties to enter into a contract.

Examples of cases that talked about considerations are;

1. Hamer v. Sidway (1891): This case demonstrates that withholding or failing to act can be a valid consideration when a nephew refrains from drinking, smoking, and gambling until he reaches a certain age in exchange for the uncle's financial benefit and due to the nephew's forbearance, the court upheld the contract.

2. Eastwood v Kenyon (1840): this is the case where a guardian looked after a girl and incurred a debt for her education and the girl promised to repay these debts when she came of age. The courts held that past consideration which can be (actions or services performed before the promise was made) is not valid consideration. Therefore, the promise cannot be enforced.

3. Thomas v. Thomas (1842): In this case, the widow of a man living in a house promised to pay £1 per year to continue living there. The court held that this nominal amount was valid consideration, even though it was below market value, but because it represented an acknowledgment of the legal right to occupy the premises.

4. Steele v. Myrick (1809): this is a case where sailors abandoned a ship and the captain promised the remaining crew extra pay to complete the journey. The court held that the promise was unenforceable because the sailors were already obligated to perform their duties and in doing so did not provide new consideration.

THE CONCEPT AND SIGNIFICANCE OF CONSIDERATION

Consideration is the backbone of a contract and involves the exchange of value or benefit between the parties. It can be a promise, an act, a refrain, or something of value that forms the basis of a contractual agreement. The significances are;

1. Enforceability: Consideration is critical to the enforceability of a contract. Without it, a promise or agreement may lack legal force.

2. Mutuality and Bargain Exchange: to ensure fairness and equity in a contract through mutual exchange between parties. Both parties must give or promise something of value to establish a bargained exchange.

Cases examples of significance:

1. Currie v Misa (1875): This case emphasized that consideration is a defining element of a contract. Courts define consideration as either to the advantage of one party or to the detriment of another and emphasize its necessity for a valid contract.

2. Chappell & Co Ltd v. Nestle Co Ltd (1960): In this case, the court recognized that even the purchase of a chocolate bar could be valid consideration where Nestlé offers a music record in exchange for their chocolate wrappers. These packages are considered valuable considerations establishing the enforceability of the offer.

3. Ward v. Byham (1956): This is a case where the father of a child promised the mother that she would be paid if the child was healthy and happy. The court held that the mother's duty to keep her child happy constituted a valid consideration, even though this was something she already had a duty to do as a parent.

4. Williams v. Roffey Bros & Nicholls (Contractors) Ltd (1991): The court held that a promise to pay additional costs for the performance of an existing contractual obligation can constitute valid consideration if the promisor will obtain an actual benefit or avoid actual harm.

THE TYPES OR CLASSES OF CONSIDERATION

Consideration in contract law can be divided into various types according to its nature and characteristics. We have;

1. Implemented and implemented considerations: under this type of consideration, we have;

a Performed consideration: refers to the consideration that has been performed before the contract is established.

b. Executable consideration: Occurs when a contract is signed with a promise to perform the consideration in the future.

2. Past considerations: Refers to actions or services performed before a commitment or agreement is made. Generally speaking, past consideration is invalid and cannot support a contract. (Illustrated in the case of Eastwood v Kenyon - where action taken before promise is not seen as valid consideration)

3. Current considerations: this is the type of considerations given when entering into a contract. This is the most common and generally accepted type of consideration.

4. Future considerations: this is a promise or action that is agreed to be performed in the future. It can be valid as long as it involves a bargained exchange and not just a free promise.

Case examples illustrating the types of considerations:

1. Roscorla v. Thomas (1842): this case emphasized the difference between executed and executed consideration. In this case, the court emphasized that past consideration (executed) did not support a contract because the promise was made after the act had been performed.

2. Re McArdle (1951): the case demonstrates the principles regarding past considerations. The court ruled that a promise made after the work (in this case, a house renovation) was completed was not enforceable because the parties did not bargain before the work was completed.

3. Tweddle v. Atkinson (1861): this case illustrates the importance of taking into account considerations from the promisee. In this case, the groom's father was unable to enforce the promise to pay made by the bride's father because the groom had not provided consideration; he was not a party to the original agreement.

WHAT IS PAST CONSIDERATION

Past consideration refers to an action, service, or thing of value performed before the commitment or agreement was made. Generally, past consideration is not considered in contract law to be valid support for a current contract.

Past considerations relate to actions, services or benefits that have been provided before any agreement or commitment was made between the parties. It lacks the elements of bargained exchange normally required for a valid contract.

What constitutes past consideration 

1. Timing: It involves actions or interests that precede the promise or agreement.

2. Lack of Bargaining: Since the action is completed before any commitment is made, there is a lack of elements of mutual exchange or bargaining that are critical to contractual considerations.

3. Unenforceability: Generally speaking, past consideration is not valid consideration in support of a contract. Courts will generally not enforce contracts based solely on past conduct or services.

Cases that further explained past consideration are;

 

1. Roscorla v. Thomas (1842): in this case the court held that past consideration (acts already performed) could not support a contract. In this case, the promise made after the sale of the horse was unenforceable because the promise was made after the sale had concluded.

2. Re McArdle (1951): The court held that improvements made to property prior to any promise to pay did not constitute valid consideration. Promises made after the work is completed lack the bargaining element.

3. Lampleigh v Brathwait (1615): In this historic case, the court made an exception for the enforcement of promises made after completion of services. The promise is made for services that have been performed at the request of the promisor, implying an understanding or expectation of payment.