In a case for example where a promise to pay £1 for a business does constitute the provision of sufficient consideration. Such consideration is often described as ‘nominal consideration’. As Professor Atiyah has observed, ‘a promise for nominal consideration is just about the clearest possible indication that the promisor intended his promise seriously and intended to give the promisee a legally enforceable right’4. However, if the promise to sell the business for such a small amount of money has been extracted by pressure that amounts in law to duress then the promise may not be enforceable but, in the absence of such a vitiating factor, the promise is enforceable 5.
It’s a different issue when the alleged consideration takes a form other than a promise to pay a sum of money. The question is whether it is for the courts or the parties to determine what constitutes sufficient consideration. The courts have generally adopted a liberal approach to the identification of consideration and cases can be found in which trifling or apparently insignificant acts have been held to constitute consideration. One example of this is in the case of Chappell and Co Ltd v The Nestle Co Ltd 6. The plaintiffs were the owners of the copyright in a music work entitled ‘Rocking’ Shoes’. The defendants offered to supply gramophone records which included Rockin’ Shoes to anyone sending in a postal order for 1s 6d together with three wrappers from bars of Nestlé milk chocolate. The issue was whether the supply of the chocolate wrappers was a condition that had to be satisfied in order to obtain the record but was not part of the consideration or whether it was part of the consideration itself. The decision of their Lordships, were as such, that a contract to sell a record in return for chocolate bar wrappers is a contract that is supported by consideration. The reason for this is that Nestle has good commercial reasons for asking for the supply of chocolate bar wrappers. On the other hand, it can be argued that it is for the parties to decide what is to constitute good consideration.
Nevertheless it would appear that the courts do reserve to themselves the right to decide that a particular act alleged to amount to consideration does not in fact do so. In Thomas v Thomas 7, Patterson J stated that ‘consideration means something which is of some value in the eyes of the law’. However, Lord Somervell in Chappell stated that ‘a contracting party can stipulate for what consideration he chooses’ 8.
Consideration for a promise depends on the nature of the pre-existing obligation. The cases can divided in to three categories (i) performance of a contractual duty owed to a third party, (ii) performance of a contractual duty owed to the promisor, and (iii) performance of a duty imposed by law. For example assume that ‘A’ is promised a sum of money by ‘B’ if he, ‘A’, promises to perform an act that he is already obliged to perform. If the pre-existing obligation is a contractual duty owed to a third party, then ‘A’ will have provided consideration for ‘B’s promise. If, on the other hand, ‘A’s obligation is a contractual duty owed to ‘B’, then the answer is uncertain. The old case of Stilk v Myrick 9 suggests that ‘A’ does not provide consideration by promising to perform a contractual duty owed by ‘B’ but the modern case of William v Roffey Bros and Nicholls Ltd 10 suggests that ‘A’ does in fact provide consideration in such a case.
Performance of a pre-existing contractual duty owed to a third party does constitute consideration for a promise given by another party 11. This position is supported by a number of cases; an old case is Shadwell v Shadwell 12.
The traditional rule is that performance of a duty imposed by law, or the promise to perform such a duty, does not, in law amount to the provision of consideration 13. In Collins v Godefroy 14 an attorney was subpoenaed to give evidence as a witness. He brought a claim for payment, alleging that he had been promised a guinea a day for his attendance. His claim however failed. Lord Tenterden CJ stated that; ‘If it be a duty imposed by law upon a part regularly subpoenaed, to attend from time to time to give evidence, then a promise to give him any remuneration for loss of time in such attendance is a promise without consideration’ 14.
The question whether or not performance of a pre-existing contractual duty owed to the promisor is good consideration for an additional promise of payment made by the promisor has proved to be a vexed one in English law. For example A enters in to a contract with B under which B agrees to build a house for A at a price of £100,000. B finds out that he cannot perform the contract for the agreed sum unless A pays him an extra £10,000. A promises to pay the additional sum, after the works are completed A refuses to honour his promise. Unfortunately, B cannot recover the additional £10,000, on the grounds that he did not provide and consideration and he simply preformed his existing contractual duty 15. Authority for such an example is to be found in Stilk v Myrick 9 and in Foakes v Beer 16. This view however has been challenged by the decision of the Court of Appeal in William v Roffey Bros 10, where, on the facts which resemble the example above; the court held that a promise to perform an existing contractual duty did amount to consideration for a promise of additional payment by the party in the position of A in the example. The conclusion was that A received a practical benefit as a result of the performance by B of his existing contractual duty and, in the absence of duress, there were no public policy objections to give effect to A’s promise to pay B more money for the performance of B’s existing contractual obligations 17.
The final aspect of the pre-existing duty rule is the general rule that part payment of a debt is not good consideration for a promise to discharge the entire debt. The leading case on this general rule is Foakes v Beer 16.
Lastly, consideration must move from the promisee and not from a third party, basically the promisee must provide the consideration. The rule does not require that the consideration move to the promisor, but moves from the promisee. Thus the rule is satisfied in the case where the promisee agrees to confer a benefit on a third party at the request of the promisor, such as the case of Bolton v Madden 18. this it the rule of the common law but it must now be read in the light of the Contracts (Right of Third Parties) Act 1999.
In conclusion, it would be clear to state that a promise is enforceable once consideration has been provided as consideration it many elements combined together. There are four main machanisams which make up consideration; firstly a promise must have some economic value, secondly, consideration need not to be adequate but must be sufficient, thirdly, consideration must move from the promisee and lastly consideration must not be past.
Bibliography
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Ewan Mckendrick, Contract Law, Text, Cases, And Materials, Second Edition, Oxford, page 161 (2005)
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Ibid. p164
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Ibid. p164
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Professor Atiyah, ‘consideration: a Restatement’ in Essays on Contract, Oxford University Press (1986)
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Ibid. p165
- Chappell and Co Ltd v. The Nestle Co Ltd (1960) AC 87, House of Lords.
- Thomas v Thomas (1842)2 QB 851,
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Ibid. p168
- Stilk v Myrick (1829) 6 Esp 129, 2 Camp 317
- William v Roffey Bros and Nicholls Ltd (1991) 1 QB 1
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Ibid. p176
- Shadwell v Shadwell (1860) 9 CB (NS) 159.
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Ibid. p177
- Ibid
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Ibid. p183
- Foakes v Beer (1884) 9 App Cas 605, House of Lords
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Ibid. p184
- Bolton v Madden (1873) LR 9 QB 55