Introduction

The aim of this essay is to examine the
role of consideration in contract law. As well as mention the elements of
consideration and the analysis of consideration rules. Along with the types of
consideration it will discuss that consideration doesn’t necessarily involve an
advantage to a particular party but in a factual sense it focuses on the loss
or detriment of one party and a benefit of the other party1. At the
end of this essay the current reforms and potential reforms that can take place
in the future over time will be discussed.

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This essay will aim to address the above
issues by discussing the reasoning of the cases related to the rules of
consideration. It will not only discuss the advantages and disadvantages of
each rule of consideration. It will it also explain how these rules have
complicated the cases for the jury and the judges overtime, hence making
consideration a confusing element of a contract.

Consideration “is an essential element in
the formation of a simple contract”2. Much like
a barter system, the only difference it involves is in exchange for a good or
act there has to be something of “not adequate but sufficient value”3.
Consideration “evolves overtime no more but certainly no less”4. As
consideration was initially started as being regarded as a price for a promise
or an act for a promise made. But with time and the changes in technology and
living standards of people, consideration had no less evolved. As a creditor
can accept anything that satisfies his debt but will never accept any amount of
money or payment which is lesser than expected by the creditor5.

 

Types of Consideration

There are two types of consideration in a
contract. Executory and executed consideration. These determine if a contract
is binding in the present or will be binding in the future.

Firstly, executory consideration involves
consideration in a bilateral contract and will be performed in the future. A
recent example of executory consideration was found in the case of Grenda
Investments Limited v Philip Barton6. A
contract will not be formed until the promisor and the promisee decide and pay
for the deal or contract. This is usually witnessed in business dealings, as
one party or the promisee agrees to carry out an act for which the other or the
promisor agrees and decide to keep each of their sides of bargain when the deal
or contract is concluded with the expected outcome.

Secondly, executed consideration involves
consideration in a unilateral contract A recent example of executed
consideration was found in HSM Offshore BV v Aker Offshore Partner Ltd7. A
unilateral contract involves offer being made to the world at large commonly
discussed in the case of Carlill v Carbolic Smoke Ball Co8. An
executed consideration involves an act done that moment and that results in the
act by the promisee being completed, as to fulfill their bargain of the
contract. An executed consideration can be most commonly seen in sports events
or tournaments. These involve marathons, Olympics or team game in a competition
etc. The winner of these events is given a reward in the form of a trophy or a
promised sum of money given to the winning team.

 

Analysis of the Rules of Consideration

Consideration must not be past. Most
commonly found in the case of Re McArdle9. This
involves consideration to be paid before an act is performed. As incase an act
is already performed it will not be entitled to any type of consideration being
given.  A promisee should not be doing
any work or act unless it is specified and made clear by the promisor about the
reward or act that will be given or done to complete his side of the bargain.

Re McArdle gives the advantage to the
promisee, as the promisee is assured by law that he/she will receive the reward
in exchange for the work done.

However, the disadvantage involves
consideration not being complete in a situation which is linked to the
completion of a contract. As there can be a circumstance where a promisee needs
to complete his side of the bargain to ensure that the promisor is legally
bound to complete his side of the bargain. As seen in the case of Lampleigh v
Braithwaite10
which involves the exception of the performance that is requested11. This
case made past consideration a valid consideration as the contract, service and
payment were part of the same transaction. Therefore, making consideration a
confusing element of a contract.

 

Consideration must move from the promisee.
Most commonly found in the case of Tweddle v Atkinson12. For a
contract to be enforced, the consideration or act should be enacted or
performed from the person or the individual who had made the contract. If due
to any circumstance i.e. death, the promisee is unable to perform his/her side
of the bargain, the consideration will not be valid.

The advantage involves that no person can
unlawfully inherit the belongings of the original owner. As there can be a case
where a person doesn’t promise anything but by law another person can become
the rightful owner if the original owner dies through a natural or unnatural
cause. As seen in the case of Re Sigsworth13 where the
golden rule had been applied.

A disadvantage of consideration must move
from the promisee involves the doctrine of Privity of Contract. This can
involve a circumstance where a person being supported by the promisee, is not
entitled to a benefit which was entitled to the promisee and will therefore be
left with no support which was initially received through the work or act done
by the promisee. The case relating to this is of Green V Russel14.
Therefore, this further complicates the element of consideration if incase a
promisee doesn’t mention the rewards being transferred to his family or
companions in case of his/her(promisee) death.

 

Consideration need not be adequate but must
be sufficient. Most commonly found in the case Thomas V Thomas15.
Consideration doesn’t necessarily need to be of the exact value of the act
promised but must involve an economic value. It can be said that a promisor
doesn’t need to worry about giving or paying the exact amount for which the
promisee performs the act. As long as the amount offered has some value in the
eyes of the law.

The advantage involves a promisor not to
pay an exact amount initially for the completion of his/her side of the
consideration. As at a later stage the promisor can complete his side of the
bargain. This is most commonly found in contracts offered by electronic
retailers i.e. mobile phone companies offering their phones based on
installments. This makes it easier to convince the promisee or the customer to
buy the product. As well as aids the promisee to pay for the product.

This disadvantage involves the bad bargains
by one party. As a peppercorn rent is valid consideration. However, it gives
the promisor a bad bargain and the law cannot interfere as well in such
situations.  As there can be situations
where 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 Chappel
v Nestle16
as this involves trivial but sufficient consideration17.

 

Consideration must not consist of a duty
already owed or performance of existing duties. This type of consideration is
divided into three parts. Firstly, Consideration for performance of a duty
imposed by law; Secondly, Consideration for performance of an existing
contractual duty owed to a third party; Thirdly, Consideration for performance
of an existing contractual duty owed to the promisor.

Firstly, consideration for performance of a
duty imposed by law. This involves any obligation by a person that is part of
their job e.g. asking a fire extinguishing officer during their duty hours to
put out fire in a farm and in return offering an amount of money or asking
protection by an area on duty police officer. As such types of payments will
not be considered as consideration as they promisor doesn’t need to provide
consideration for an act which is already part of the contract or a duty of a
person.  

The advantage involves a person to keep
their belief and faith in law that they will always be protected by law. A
person does not need to pay for their rights as the law does not permit any
person 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 circumstances
where a person or an officer on duty to go above and beyond their duty to
provide protection to an individual. This can involve protection wanted by a
person suffering from sleep disorder and asking an area officer to be with them
which may result in the distraction of the officer and can end up causing a
crime to take place. Most commonly found in the case of Glasbrook Bros v
Glamorgan County Council19. Hence
making consideration a confusing element of a contract.

 

Secondly, Consideration as a promise for
performance of an existing contractual duty owed to a third party. This is most
commonly found in the case of Scotson v Pegg20. This
usually involves three parties. As party (A) owes a pre-existing duty to (B)
but uses (C) as consideration to support a promise21. For
example, A knows B is looking for a particular type good/goods which are only
sold by C, then (A) will first promise to supply the goods to (B) and to honour
the 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 to
take legal action against (B) according to the doctrine of consideration. As
(A) had performed his/her part of the promise by involving (C) to complete
his/her promise owed to (B).

The advantage involves, a third party who
are not part of the initial contract but constitute valid consideration in a
transportation contract cannot be sued by relying on a Himalaya clause. As seen
in the case of New Zealand Shipping v Satterthwaite22.

The disadvantage involves marriage being
object of interest. Most commonly found in the case of Shadwell v Shadwell23. The
courts finding a family agreement to conflict with the initial nature of a
contract. As a couple can decide only to marry to get money, as according to
the doctrine of consideration it will satisfy the promise from the promisee.
However, the intentions might only be to get money.

 

Thirdly, consideration for performance of
an existing contractual duty owed to the promisor. This is most commonly found
in the case of Stilk v Myrick24. A
contract will not entitle the promisor to pay any more promise for a term that
already exists in a contract. For example, a passenger will not be entitled to
pay his/her hired driver any extra wages along with the monthly salary which
was promised to the driver, even though the driver is promised extra payment to
drive faster to reach a particular destination, as it will be merely considered
as motivating or influencing the driver.

The advantage involves a practical benefit
provided to the promisor can be treated as a consideration. This will help a
promisor to not be at a loss if the promisee is unable to complete their side
of the bargain by themselves. As seen in the case of Williams v Roffey Bros25.

 

Conclusion

In conclusion to the essay, the main aim of
this essay was to discuss consideration and the two types of consideration.
Executed consideration and executory consideration. The other things discussed
in 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 Consideration
must not consist of a duty already owed or performance of existing duties.    

Analyzing the information discussed in this
essay it can be said that the notion of consideration has now become convoluted
and has no meaning in the English law of contract. As one of the rule of
consideration is consideration must not consist of a duty already owed is given
a second thought when public interest is considered. As long as there is
nothing in transaction which is contrary to the public interest, promise
supported by consideration for existing duty is sufficient26. The
other change involves the payment for special services required by any person27 to
contradict the rule of performance of a duty imposed by law which had initially
been made. Therefore, consideration has no meaning in the English Law of
Contract, can be said from one point of view and hence should no longer be a
necessary element in a legal contract.   

1 Currie
and Others v Misa (1875) L.R. 10 Ex. 153, Lush J

2 Robert
Duxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).
59

3 Jill
Poole, Textbook On Contract Law (13th edition, 2016). 127

4 John
Alder, Constitutional And Administrative Law (8th edition, Palgrave
Macmillan 2011).460

5 Robert
Duxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).
88

6 2017
EWHC 2371 (Comm)

7 2017
EWHC 2979

8 1893
1 QB 256

9 (1951)
Ch 669

10 1615
EWHC KB J17 

11 Robert
Duxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).
61

12 1861
EWHC QB J57 

13 1935
1 Ch 98 

14 1959
2 QB 226 

15 (1842)
2 QB 851

16 1960
AC 87 

17 Robert
Duxbury, Contract Law (1st edition, Thomson, Sweet & Maxwell 2008).
65

18 (1831)
1 B & Ad 950 

19 1925
AC 270  

20
1861 EWHC Exch J2

21 Jill
Poole, Textbook On Contract Law (13th edition, 2016). 135

22 1975
AC 154

23 1860
EWHC CP J88

24 1809
EWHC KB J58

25 1990
2 WLR 1153

26 Williams
v Williams 1957 1 WLR 148, at p.151

27
Police Act 1996, s25