IntroductionThe aim of this essay is to examine therole of consideration in contract law. As well as mention the elements ofconsideration and the analysis of consideration rules. Along with the types ofconsideration it will discuss that consideration doesn’t necessarily involve anadvantage to a particular party but in a factual sense it focuses on the lossor detriment of one party and a benefit of the other party1. At theend of this essay the current reforms and potential reforms that can take placein the future over time will be discussed.This essay will aim to address the aboveissues by discussing the reasoning of the cases related to the rules ofconsideration.
It will not only discuss the advantages and disadvantages ofeach rule of consideration. It will it also explain how these rules havecomplicated the cases for the jury and the judges overtime, hence makingconsideration a confusing element of a contract. Consideration “is an essential element inthe formation of a simple contract”2.
Much likea barter system, the only difference it involves is in exchange for a good oract there has to be something of “not adequate but sufficient value”3.Consideration “evolves overtime no more but certainly no less”4. Asconsideration was initially started as being regarded as a price for a promiseor an act for a promise made. But with time and the changes in technology andliving standards of people, consideration had no less evolved. As a creditorcan accept anything that satisfies his debt but will never accept any amount ofmoney or payment which is lesser than expected by the creditor5. Types of ConsiderationThere are two types of consideration in acontract.
Executory and executed consideration. These determine if a contractis binding in the present or will be binding in the future. Firstly, executory consideration involvesconsideration in a bilateral contract and will be performed in the future. Arecent example of executory consideration was found in the case of GrendaInvestments Limited v Philip Barton6. Acontract will not be formed until the promisor and the promisee decide and payfor the deal or contract. This is usually witnessed in business dealings, asone party or the promisee agrees to carry out an act for which the other or thepromisor agrees and decide to keep each of their sides of bargain when the dealor contract is concluded with the expected outcome. Secondly, executed consideration involvesconsideration in a unilateral contract A recent example of executedconsideration was found in HSM Offshore BV v Aker Offshore Partner Ltd7.
Aunilateral contract involves offer being made to the world at large commonlydiscussed in the case of Carlill v Carbolic Smoke Ball Co8. Anexecuted consideration involves an act done that moment and that results in theact by the promisee being completed, as to fulfill their bargain of thecontract. An executed consideration can be most commonly seen in sports eventsor tournaments. These involve marathons, Olympics or team game in a competitionetc. The winner of these events is given a reward in the form of a trophy or apromised sum of money given to the winning team. Analysis of the Rules of ConsiderationConsideration must not be past. Mostcommonly found in the case of Re McArdle9. Thisinvolves consideration to be paid before an act is performed.
As incase an actis already performed it will not be entitled to any type of consideration beinggiven. A promisee should not be doingany work or act unless it is specified and made clear by the promisor about thereward or act that will be given or done to complete his side of the bargain. Re McArdle gives the advantage to thepromisee, as the promisee is assured by law that he/she will receive the rewardin exchange for the work done. However, the disadvantage involvesconsideration not being complete in a situation which is linked to thecompletion of a contract. As there can be a circumstance where a promisee needsto complete his side of the bargain to ensure that the promisor is legallybound to complete his side of the bargain. As seen in the case of Lampleigh vBraithwaite10which involves the exception of the performance that is requested11.
Thiscase made past consideration a valid consideration as the contract, service andpayment were part of the same transaction. Therefore, making consideration aconfusing element of a contract. Consideration must move from the promisee.
Most commonly found in the case of Tweddle v Atkinson12. For acontract to be enforced, the consideration or act should be enacted orperformed from the person or the individual who had made the contract. If dueto any circumstance i.e. death, the promisee is unable to perform his/her sideof the bargain, the consideration will not be valid.The advantage involves that no person canunlawfully inherit the belongings of the original owner. As there can be a casewhere a person doesn’t promise anything but by law another person can becomethe rightful owner if the original owner dies through a natural or unnaturalcause.
As seen in the case of Re Sigsworth13 where thegolden rule had been applied.A disadvantage of consideration must movefrom the promisee involves the doctrine of Privity of Contract. This caninvolve a circumstance where a person being supported by the promisee, is notentitled to a benefit which was entitled to the promisee and will therefore beleft with no support which was initially received through the work or act doneby the promisee. The case relating to this is of Green V Russel14.Therefore, this further complicates the element of consideration if incase apromisee doesn’t mention the rewards being transferred to his family orcompanions in case of his/her(promisee) death. Consideration need not be adequate but mustbe sufficient. Most commonly found in the case Thomas V Thomas15.
Consideration doesn’t necessarily need to be of the exact value of the actpromised but must involve an economic value. It can be said that a promisordoesn’t need to worry about giving or paying the exact amount for which thepromisee performs the act. As long as the amount offered has some value in theeyes of the law.
The advantage involves a promisor not topay an exact amount initially for the completion of his/her side of theconsideration. As at a later stage the promisor can complete his side of thebargain. This is most commonly found in contracts offered by electronicretailers i.e. mobile phone companies offering their phones based oninstallments.
This makes it easier to convince the promisee or the customer tobuy the product. As well as aids the promisee to pay for the product.This disadvantage involves the bad bargainsby one party. As a peppercorn rent is valid consideration. However, it givesthe promisor a bad bargain and the law cannot interfere as well in suchsituations. As there can be situationswhere a party uses unworthy items to increase sales or promote their good.These unworthy items can involve chocolate wrappers. As seen in the case of Chappelv Nestle16as this involves trivial but sufficient consideration17.
Consideration must not consist of a dutyalready owed or performance of existing duties. This type of consideration isdivided into three parts. Firstly, Consideration for performance of a dutyimposed by law; Secondly, Consideration for performance of an existingcontractual duty owed to a third party; Thirdly, Consideration for performanceof an existing contractual duty owed to the promisor. Firstly, consideration for performance of aduty imposed by law. This involves any obligation by a person that is part oftheir job e.
g. asking a fire extinguishing officer during their duty hours toput out fire in a farm and in return offering an amount of money or askingprotection by an area on duty police officer. As such types of payments willnot be considered as consideration as they promisor doesn’t need to provideconsideration for an act which is already part of the contract or a duty of aperson.
The advantage involves a person to keeptheir belief and faith in law that they will always be protected by law. Aperson does not need to pay for their rights as the law does not permit anyperson to pay or suffer from a loss in order to get their fundamental rights.As seen in the case of Collins v Godefrey18.The disadvantage involves the circumstanceswhere a person or an officer on duty to go above and beyond their duty toprovide protection to an individual. This can involve protection wanted by aperson suffering from sleep disorder and asking an area officer to be with themwhich may result in the distraction of the officer and can end up causing acrime to take place. Most commonly found in the case of Glasbrook Bros vGlamorgan County Council19.
Hencemaking consideration a confusing element of a contract. Secondly, Consideration as a promise forperformance of an existing contractual duty owed to a third party. This is mostcommonly found in the case of Scotson v Pegg20.
Thisusually involves three parties. As party (A) owes a pre-existing duty to (B)but uses (C) as consideration to support a promise21. Forexample, A knows B is looking for a particular type good/goods which are onlysold by C, then (A) will first promise to supply the goods to (B) and to honourthe contract, (A) will contact (C) to supply the goods to B. However, if (B)decides to only pay (C) for the contract and not (A) then (A) will be able totake legal action against (B) according to the doctrine of consideration. As(A) had performed his/her part of the promise by involving (C) to completehis/her promise owed to (B). The advantage involves, a third party whoare not part of the initial contract but constitute valid consideration in atransportation contract cannot be sued by relying on a Himalaya clause.
As seenin the case of New Zealand Shipping v Satterthwaite22.The disadvantage involves marriage beingobject of interest. Most commonly found in the case of Shadwell v Shadwell23. Thecourts finding a family agreement to conflict with the initial nature of acontract. As a couple can decide only to marry to get money, as according tothe doctrine of consideration it will satisfy the promise from the promisee.However, the intentions might only be to get money. Thirdly, consideration for performance ofan existing contractual duty owed to the promisor. This is most commonly foundin the case of Stilk v Myrick24.
Acontract will not entitle the promisor to pay any more promise for a term thatalready exists in a contract. For example, a passenger will not be entitled topay his/her hired driver any extra wages along with the monthly salary whichwas promised to the driver, even though the driver is promised extra payment todrive faster to reach a particular destination, as it will be merely consideredas motivating or influencing the driver. The advantage involves a practical benefitprovided to the promisor can be treated as a consideration. This will help apromisor to not be at a loss if the promisee is unable to complete their sideof the bargain by themselves. As seen in the case of Williams v Roffey Bros25. Conclusion In conclusion to the essay, the main aim ofthis essay was to discuss consideration and the two types of consideration.Executed consideration and executory consideration.
The other things discussedin this essay were the analysis of the four rules of consideration i.e.Consideration must not be past, Consideration must move from the promisee,Consideration need not be adequate but must be sufficient and Considerationmust not consist of a duty already owed or performance of existing duties. Analyzing the information discussed in thisessay it can be said that the notion of consideration has now become convolutedand has no meaning in the English law of contract. As one of the rule ofconsideration is consideration must not consist of a duty already owed is givena second thought when public interest is considered. As long as there isnothing in transaction which is contrary to the public interest, promisesupported by consideration for existing duty is sufficient26. Theother change involves the payment for special services required by any person27 tocontradict the rule of performance of a duty imposed by law which had initiallybeen made.
Therefore, consideration has no meaning in the English Law ofContract, can be said from one point of view and hence should no longer be anecessary element in a legal contract. 1 Currieand Others v Misa (1875) L.R. 10 Ex. 153, Lush J2 RobertDuxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).593 JillPoole, Textbook On Contract Law (13th edition, 2016).
1274 JohnAlder, Constitutional And Administrative Law (8th edition, PalgraveMacmillan 2011).4605 RobertDuxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).886 2017EWHC 2371 (Comm)7 2017EWHC 2979 8 18931 QB 256 9 (1951)Ch 669 10 1615EWHC KB J17 11 RobertDuxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).6112 1861EWHC QB J57 13 19351 Ch 98 14 19592 QB 226 15 (1842)2 QB 851 16 1960AC 87 17 RobertDuxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).
6518 (1831)1 B & Ad 950 19 1925AC 270 201861 EWHC Exch J221 JillPoole, Textbook On Contract Law (13th edition, 2016). 13522 1975AC 15423 1860EWHC CP J8824 1809EWHC KB J5825 19902 WLR 115326 Williamsv Williams 1957 1 WLR 148, at p.15127Police Act 1996, s25