Past consideration is consideration constituted by an act that has already been performed prior to the relevant promise so that there is no value to support the promise e.g. Bob builds a wall. Tom then promises to pay Bob £10 in consideration of building the wall Eastwood v Kenyon.
Past consideration is therefore distinguishable from:
* executory consideration e.g. B promises to pay A £10 if A will build a wall , here both the promise and the act remain executory ( i.e. outstanding )
* executed consideration e.g. B promises to pay A £10 if A will build a wall and A subsequently builds it , here A has performed ( executed ) his consideration and can therefore enforce B's outstanding obligation to pay.
Whether consideration is past or not depends on the factual sequence of events and not the wording of the agreement between the parties Re McArdle.
A contract previously made between the parties will generally be past consideration in relation to a subsequent promise in respect of the same subject matter Roscorla v Thomas.
Estoppel is defined as the principle intended to protect a party from the detriment which would flow from that party's change of position if the assumption or expectation that led to it were to be rendered groundless by another.
The principle of estoppel is that a written or oral contract can be altered by the actions of the parties. In other words, if the parties had agreed that one of them do 'x', but then both parties act as if doing 'y' instead was fine, then the written contract is effectively amended in that fashion.
To put the use of estoppel into everyday use, it would be best described in the example found in Appendix A.
Advice for Mary
Having now clearly defined what each important factor facing Mary and Tim, under Contract Law it will be easy to identify what services Mary will have to pay for.
Regardless of future agreements, the initial contract made between Tim and Mary will have to be adhered to, as an Offer and Acceptance was made. This is an example of executed consideration as Tim has executed his part of the agreement, and is waiting for Mary to do the same. Therefore, £100 is owed to Tim at the minimum.
But complications arise, when Mary took her bike to Tim. Mary requested Tim to check over the bicycle to ensure its safety. Either party made no mention of payment for this, though Mary is asking for the original contract to now be changed.
It could be argued that the use of estoppel could come into use here. As we know the principle of estoppel is that a written or oral contract can be altered by the actions of the parties. Therefore, if Mary and Tim had agreed that Tim do the repair, but then both parties act as if doing a safety check in addition to this was fine, then the previous contract is effectively amended in that fashion. According to the case of John Burrows Ltd. v. Subsurface Surveys Ltd. (1968), being nice is not estoppel. Therefore in one sense, by Tim doing the safety check out of the kindness of his heart, is now his problem, and the law cant be used to claim any money for it afterwards. To reiterate the fact, past consideration does not work here.
However, it could be argued that this was Mary altering the agreements of the contract, thereby making a counter-offer. A counter-offer closes the original offer. But, further to this, Tim will be in continued confusion as he then carried out the service and safety check when the original offer has been closed. Tim cannot then ask for money for his past deeds, as again, past consideration is not valid under contract law.
Yet, if this argument is still taken, then the opposition could disagree, by using the case of Dawson v Helicopter Exploration Co. (1955). This case illustrates how acceptance can be made by conduct, and not necessarily by stating ones acceptance of an offer. Therefore by doing the safety check on the bike, it could be argued that Tim was showing his acceptance of the new offer made by Mary, to include the safety check in the original contract for £100. With this argument Mary will only be liable to pay Tim £100 at the most, as his kindness is taken as a gift.
Tim cannot claim for the £10 for the safety check, as that action was completed in the past, and as we are aware, past consideration is not legitimate. The cases of Roscorla v Thomas and Re McCardle restate this point.
It should be noted however that the courts have attempted to mitigate the sometimes harsh effect of the of past consideration rule by way of the implied assumpsit doctrine. This doctrine was formed in order to alleviate the operation of the rule against past consideration where the act done by the promisee was at the request of the promisor and the promisor only promises to pay the promisee after the latter has completed the act requested - . Therefore Tim could try and use this in his defence to claim more money from Mary.
The next part of the scenario whereby Tim changed the wheel bearings to test out his design could work against him, as he risked Mary losing the competition, as these were new wheel bearing, previously not tested before. Thereby, Tim did not successfully complete the contract, which he offered, to make the bike safe.
Though Mary agreed with Tim after winning the race, she still has the right to take back her agreement even though she promised him 30% of her £1000 prize money. This is because past consideration does not work, and for Tim to receive 30% of the £1000 prize money, it would have been necessary for him to arrange that before hand, before doing the repairs and safety checks. As this was done first, and then Tim tried to claim money for it, a valid contract has not been made; thereby Mary does not have to stay by her word.
It could be further argued that there is also no evidence to suggest that it was Tim’s wheel bearings that helped Mary to win the race. Her victory could have been due to a number of other reasons and not as Tim has suggested. Therefore, Tim is again, less entitled to the 30% of her prize money.
Conclusion
Mary and Tim had one legal and binding contract together. There was an offer made by Tim, and an acceptance clearly shown by Mary. Tim conducted his part of the agreement, i.e. by repairing the bike, and therefore Mary is indebted to Tim to pay him the agreed £100.
The safety check however causes problems, as neither person mentioned a payment for this service. It would have been Tim’s responsibility in one sense to mention it to Mary before carrying it out, as he had done it before. As no contract was made Mary is not liable to pay £10 as Tim requested. This is because when Tim asked for the payment, the act had already been completed, making it in the past. This would classify this as past consideration and is therefore not valid as part of a legal contract. Also, Mary could use the use of estoppel to further clarify her point. She may have though Tim was being nice in doing the safety check for her free, or she could have believed that they have now changed the original contract for it to include a safety check in it as well for £100. As no clear offer and acceptance was made on this, it would work in Mary’s favour more.
But, if Tim has a good lawyer, they could use the case of Lampleigh v Braithwait (1615) Hob. 105 to show the use of the Implied Assumpsit Doctrine. Here the court rejected the argument of past consideration not being valid and stated that where the act of the promisee had been done in response to an appeal by the promisor, following to which the promise to pay had been made then it was possible to unite the request and the promise and treat them as part of the same transaction. So to use this for our scenario Mary requested Tim to do a safety check over the bike, as it was essential for her race. Tim did this, and then asked for £10. Mary agreed at the time, but is now trying to withdraw the offer. It would be up to the judge(s) to decide upon this fate. But it would be recommended to settle this out of court, as it is over £10!
Mary is not liable to give away her 30% of her prize money, as neither was this arranged beforehand nor was there a need for this to be given. Tim was trying to use past consideration in claiming his wheel bearings helped Mary to win the race. Again, there is no evidence to suggest this is right, and if so it should have been arranged in a contract before and not used afterwards.
In conclusion, it would be recommended that Mary pay Tim £110 for both the initial contract made for repair the bike and for the safety check. But, Tim should not expect Mary to give him 30% of her winnings, as past consideration is not valid in many situations and this situation is the same. But as mentioned earlier, depending on the court, the final decision and payment owed to Tim can be changed.
Appendix A
Example of Use of Estoppel:
Jennifer has a written lease on an apartment that requires payment by the 1st of every month, but Mary Jennifer is always late, paying on the 3rd or 4th of each month. Jennifer 's landlord accepts her late payments for many months without complaint.
Suddenly, 10 months into the tenancy, Jennifer tries to pay on the 3rd but her landlord refuses to accept the payment and terminates her lease. Jennifer could argue that the concept of estoppel applies and that the written term of the lease requiring payment on the 1st of each month was amended by the conduct of the parties to be the 3rd or the 4th.
In order for Jennifer’s landlord to again insist on the terms of the lease and payment on the 1st, the landlord would have to give Jennifer reasonable written notice of her intention to enforce the strict terms of the contract.
Appendix B:
The Implied Assumpsit Doctrine
This doctrine originated in order to mitigate the operation of the rule against past consideration where the act done by the promisee was at the request of the promisor and the promisor only promises to pay the promisee after the latter has completed the act requested: .
Lord Scarman in Pao On v Lui Yu authoritatively stated the modern ambit of the rule. For a promise given after an act was done, to be legally enforceable three elements must be present:
1) The act of the promisee must be done at the promisor's request.
2) The parties must have understood that the act was to be remunerated by a payment or the conferment of some other benefit, and
3) The payment, or the conferment of benefit must have been legally enforceable had it been made in advance (i.e. the other elements necessary to make a binding contract must all be met).
Lampleigh v Braithwait (1615) Hob. 105.
Thomas Braithwait had killed Patrick Mahume. In desperation he asked Anthony Lampleigh to do all that he could to get a pardon for him from the King. Lampleigh acted upon this request riding between London and Newmarket at his own expense. Afterwards Braithwait promised Lampleigh £100 for his trouble. He failed to pay it. Lampleigh sued. One of the arguments used by Braithwait was that Lampleigh's consideration was past - the act was complete before the promise to pay £100 had been made.
The Court rejected this argument - stating that where the act of the promisee had been done in response to a request by the promisor, subsequent to which the promise to pay had been made then it was possible to unite the request and the promise and treat them as part of the same transaction.
Bibliography:
Textbooks/Books used:
UNDERSTANDING CONTRACT LAW (3RD EDITION 2000) SWEET AND MAXWELL PUBLISHERS Adams, J and Brownsword, R
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THE LAW OF CONTRACT (3RD EDITION, 1998) BUTTERWORTHS PUBLISHERS Collins, H
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TEXTBOOK ON CONTRACT LAW (5TH EDITION, 1999) BLACKSTONE PRESS PUBLISHERS Downes, T A
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CONTRACT LAW (4TH EDITION, 2000) MACMILLAN PUBLISHERS Mc Kendrick, E
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SMITH AND THOMAS: A CASE BOOK ON CONTRACT (11TH EDITION, 2000) SWEET AND MAXWELL PUBLISHERS Smith, J
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THE LAW OF CONTRACT (10TH EDITION, 2000) SWEET AND MAXWELL PUBLISHERS Treitel, G
Cases used:
- Eastwood v Kenyon (1840) 11 A & E 438; 113 ER 482
- Shadwell v Shadwell (1860) 9 CB (NS) 159; 142 ER 62
- Carlill v Carbolic Smoke Ball Co
- Dawson v Helicopter Exploration Co. (1955)
- Roscorla v Thomas (1842) 3 QB 234
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(1615)
- John Burrows Ltd. v. Subsurface Surveys Ltd. (1968)
- Re McArdle [1951] Ch. 669
- Currie v. Misa, 1875
- Re McArdle, 1951
- Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co, 1915
- Foakes v. Beer, 1884
- Central London Property Trust Ltd. v. High Trees House Ltd, 1947
- D & C Builders Limited v, Rees, 1966
Websites:
Search Engines:
Definition according to Acme Grain Co. v. Wenaus (1917)
Definition according to Currie v. Misa (1875)
Eastwood v Kenyon (1840) 11 A & E 438; 113 ER 482
Roscorla v Thomas (1842) 3 QB 234 and Re McCardle [1951] Ch. 669