Contract Law - Consideration

Consideration is one of the key elements of any contract alongside offer, acceptance and intention to create legal relations.

Consideration is generally thought of as some form of benefit or detriment. However in the case of Dunlop v Selfridge [1915] the court adopted a definition from the academic Pollock who suggested that consideration is the price paid for a promise.

The two forms of consideration are executory and executed. Executory consideration is an exchange of promises whereas executed consideration is a promise made in return for the performance of an act.

It is important that executed consideration is differentiated from past consideration as past consideration is not good consideration; Re McArdle [1951]. Generally for executed consideration it will be clear that the parties always intended some sort of bargain between them as per the traditional rule from Lampleigh v Braithwait (1615).

The person involved in the contract must be the one who pays the consideration; Price v Easton (1833). This is very similar to the idea of privity of contract although it is important to note that this has since been affected by the Contracts (Rights of Third Parties) Act 1999.

Consideration must be of some value and therefore be sufficient but does not need to be adequate (Thomas v Thomas (1842); Chappell & Co Ltd v Nestle Co Ltd [1960]).

Consideration will generally be something concrete like money or land rather than something abstract like ‘love’ or ‘affection’. However surrendering a legal claim can constitute consideration; Horton v Horton (No. 2) [1961].

Consideration will not be sufficient if it constitutes something that is already a legal duty (Collins v Godefroy (1831)) but will be sufficient if it goes beyond a legal duty (Harris v Sheffield United Football Club [1988]). Similarly consideration will not be sufficient if it constitutes something that is already a contractual duty (Stilk v Myrick (1809)) but will be sufficient if it goes beyond the contractual duty (Hartley v Ponsonby (1857)) or confers some other contractual advantage (Pinnel’s Case (1602)).

The idea in Pinnel’s Case was affirmed in Foakes v Beer (1884) but was somewhat challenged by Denning J in Central London Property Trust Ltd v High Trees House Ltd [1947]. This is known as promissory estoppel and requires:
1) an unequivocal promise by words or conduct
2) a change in position of the promisee
3) inequity if the promisor goes back on their word

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