CHAPTER 4: CONSIDERATION WHEN IS CONSIDERATION REQUIRED ORIGINS OF THE REQUIREMENT THE ESSENTIAL ELEMENTS * The benefit/detriment requirement * The

bargain requirement CONSIDERATION MUST MOVE FROM THE PROMISEE SUFFICIENCY OF CONSIDERATION * Discretion as to performance * Past consideration * The existing legal duty rule THE PURPOSE OF CONSIDERATION * Criticism of the doctrine of consideration * The function of consideration PROMISES UNDER SEAL WHEN IS CONSIDERATION REQUIRED? The second essential element in the formation of a contract is consideration. Th e doctrine of consideration requires that something must be given in return for a promise in order to make it binding. Consideration is present in most agreemen ts and is usually taken for granted - that is because most cases that come befor e the court involves exchanges. Consideration may take the form of: * an immediate exchange of things, such as an exchange of money for goods * an exchange of a thing for a promise o such as A s immediate payment of a $1000 to B in return for B s promise to build a fence for A * an exchange promises, o such as A s promise to pay $1000 to B in return for B s promise to build a fence f or A The issue of consideration assume central importance when an agreement is entire ly one-sided and a promise remains underperformed. In that case, consideration m ust be identified when A has made a promise to B, which B wishes to enforce, and there is some doubt as to whether B has given anything in return. Consideration is a requirement of the enforceability of promises. * If we need to know whether A s promise to B can be enforced by B, we must ask wh ether B (the promisee) has given consideration for that promise. When a contract is made by an exchange of promises, each party's promise provide s consideration to support the promise made by the other. And agreement that is not supported by consideration on both sides is sometimes said to be nudum pactu m (a naked agreement) and this label carries with it the idea that the agreement is unenforceable. ORIGINS OF THE REQUIREMENT See page 92 for the early history of consideration not important. In this v Kenyon obligation & El 438 Eastwoodcase moral(1840) 11 Adconception of consideration was firmly rejected. During this period the concept of bargain came to dominate the law of contract bei ng shaped by textbook writers and judges. Under the influence of the bargain concept, consideration came to be seen as som ething of legal value given in exchange for a promise, which could be seen as a price of the promise. An all-embracing formula for consideration was developed, which united the historical recognition of benefit and detriment with the idea of an exchange adopted by consensus between the parties. THE ESSENTIAL ELEMENTS Consideration is something the law regards as a valuable, which is given in retu rn for a promise and can be seen as the agreed price of the promise. There are t wo aspects that definition: 1. The promisee must incur a detriment or confer a benefit on the promisor (the benefit/detriment requirement), AND 2. That benefit or detriment must be given in return for the promise (the bargai n requirement)

The courts do not expressly set up a two-stage test covering these requirements; rather, some cases focus on the benefit/detriment aspect, while other cases foc us on the bargain requirement. {Consideration is payment for promise} The benefit/detriment requirement The benefit/detriment requirement is the first aspect of valuable consideration - it must consist of a detriment to the promisee or a benefit to the promisor. T he classic definition of consideration was given in the following case: A valuable consideration, Ex 153 Currie v Misa (1875) LR 10in the sense of the law, may consist of some right, in terest, profit, or benefit accruing to the one party, or some forbearance, detri ment, loss, or responsibility, given, suffered, or undertaken by the other This means that the person to whom the promises made must either conferr a benef it on the promisor, or must incur a legal detriment, in the sense of giving some thing up or undertaking an obligation. In most cases the consideration given in return for a promise will constitute both a benefit to the promisor and a detrim ent to the promisee. For example, assume that B wishes to enforce A s promise to pay B $1000. The consi deration given by B in the following examples constitutes both a detriment to B and a benefit to A: * the transfer of property (such as B s car), * the performance of services (such as building a fence for A) or, * more commonly, the making of a promise to transfer property or perform service s in the future. * B may make a promise not to do something, such as a promise not to sue A in re spect of a tort or breach of contract committed by A, or * B may make a promise not to trade in competition with A Mutual promises will provide good consideration for each other. If B makes a pro mise in return for A s promise, this will confer a benefit on A (because A will ha ve an enforceable legal right to have the promise performed) and will also be a detriment to B (because B will come under an obligation to perform the promise). Mutual promises involves a paradox which has vexed writers on contract law. If A and B exchange promises, its promise will consider the legal benefit on the pro misee and a legal detriment on the promisor only if it is legally enforceable. I ts promise to be legally enforceable or leave consideration has been provided in return. But the written promise will constitute good consideration only if it i s enforceable. Thus, neither promise to be binding unless consideration has been provided, but, strictly speaking, neither promise should constitute considerati on unless it is binding. Since there is no doubt that the courts do recognise mu tual promises as good consideration for one another, this paradox is only of aca demic interest. The second aspect of the doctrine of consideration is that the benefits conferre d on the promisor or the detriment suffered by the promisee must be given in ret urn for the promise. The act relied on as consideration must be performed as the agreed price of the promise. The notion of consideration was adopted by the High Court in Australia Woollen M ills Pty Ltd v Commonwealth (1954) 92 CLR 424: The decision in this case illustrates the proposition that: consideration, offer Australia Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 and acceptance are an indivisible trinity, facets of one identical notion which is that of bargain . AWM attempted to enforce a series of promises made by the Commonwealth to pay su bsidies on the wool purchased by Australia manufacturers. AWM claimed that, by purchasing will, it provided consideration for the Commonwealth's promises to pa y subsidies. The acts of purchasing will satisfy the test outlined in Currie v Misa because t he constituted both a legal detriment to AWM and a benefit to the Commonwealth. The high court held, however, that there must be a relation of quid pro quo (thi s for that) between the Commonwealth's promise and the acts relied on as conside

ration for that promise. The acts must be performed in return for the promise. T his bargain aspect of consideration will be satisfied if the acts which are set to amount to consideration has been performed at the request or implied request of the person making the promise. In this case, the statements made by the Commonw ealth way in the nature of policy announcements and no request to purchase wool could be implied. In the absence of such a request, it was irrelevant that AWM m ay have acted to be a detriment in reliance on the Commonwealth promise. On appeal, the Privy Council upheld the decision of the High Court on the basis that letters sent by the Commonwealth contained statements of policy, rather tha n offers. The Privy Council indicated, however, that the High Court had all emph asise the importance of a request. The privy council took the view that the pres ence of a request will not necessarily establish a contract. Although in some ca ses the absence of a request will negate the existence of a contract, the presen ce of a request to perform an act will not necessary establish a relation of qui d pro quo between the act and a promise made by the allege offeror. It is possible for an act to satisfy the bargain aspect of consideration, but no t the benefit/detriment requirement. Ballantyne v Phillott illustrates this poin t. Phillott had commenced proceedings against Ballantyne v Phillott (1961) 105 CLR 379 Ballantyne, his former mistress, to r ecover substantial sum of money he had lent her. There was some evidence that Ba llantyne had asserted that she had lent money to Phillott and had claimed she co uld sue him for defamation, although it seems doubtful that she had, or even bel ieve she had, an enforceable claim against him on either ground. At the instigat ion of a third party, Ballantyne and Phillott signed a written document in which Phillott agreed to discontinue or the proceedings and to release all claims he may have had against her. Ballantyne relied on a statement in the signed docume nt that she had no right or claim against Phillott in respect of the action for the debt or otherwise. The High Court held, by a majority of 2-1, that Ballantyne had not given conside ration for Phillott s promises. Menzies J held that Ballantyne did not promise to give up a claim against Phillo tt and no promise could be implied in the circumstances. Ballantyne had done no more than to admit that she had no claim against Phillott and this does not amo unt to consideration. On this view, even if Ballantyne s admission could be regard ed as the price of Phillott s promise, the making of the admission did not constit ute a detriment to Ballantyne or a benefit to Phillott. Windyer J accepted that such an admission could be the price of a promise, but f ound that it had not shown to be so in this case. Dixon CJ dissented on the basis that, slight as a consideration was in a legal p oint of view of, it was something it should be regarded as sufficient. Bargains and conditional gifts Australia Woollen Mills Pty Ltd v Commonwealth illustrates the distinction betwe en a contract and a conditional gift. A promise to pay someone $100 if they perform a certain act is a conditional gif t, whereas a promise to pay $100 in return for performance of the act is capable of giving rise to a contract. The court used the example of a promise by A to p ay B (will is in Melbourne) $1000 upon B s arrival in Sydney. No contract arises u pon B s arrival in Sydney because A is simply announcing his intention to make a g ift to B. The necessary relationship between the promise and the act does not ex ist. If, on the other hand, A had an urgent need for B s presence in Sydney and B expressed concern about the cost of travel, B s act may be regarded as considerati on for A s promise. That is because it would then be possible to infer a request b y A which establishes the necessary connection between A s promise and B s act. Bargains and reliance It is important to distinguish between an act performed as the agreed price of a

promise and an act performed in reliance of a promise. An act performed in reli ance of a promise will not constitute good consideration, but may give rise to a n estoppel. This paltry between contract an estoppel was delineated by the New S outh Wales Court of Appeal in Beaton v McDivitt. This case concerned an unusual arrangement. The McDivitts expected the land to b Beaton v McDivitt (1987) 13 NSWLR 162 e rezoned in a way that will increase the rates payable to the local council. Th e decided to minimise the rates by subdividing their lending to 4 lots. One of t he lots was given to Beaton provided he was prepared to cultivate the land using permaculture methods and it was agreed that Beaton would occupy the land in que stion and work it rent-free until rezoning and subdivision took place where upon the land would be transferred to Beaton. Beaton to possession of the land, bui lt a house and a road giving access to the block then farmed the block for sever al years. Neither the rezoning nor the subdivision eventuated. The dispute subse quently was between the parties were tai chi class held in Beaton s house and the McDivitts ordered Beaton off their land. Beaton claimed that there was a contra ct between the parties which entitled him to a transfer of the land in question. At first instance, Young J held that the requirement of bargain for consideratio n laid down in Australia Woollen Mills Pty Ltd v Commonwealth was not satisfied, but there was a line of cases which represented an exception to the modern requ irement that a contract should be a bargain supported by consideration in the na ture of a quid pro quo. He held that the plaintiff reliance on the defendant's p romise onto to a consideration and give rise to a contract. On appeal, the New South Wales Court of Appeal refused to extend the bargain to be of consideration laid down by the High Court in Australia Woollen Mills Pty L td v Commonwealth. Kirby P and McHugh JA made it clear that there was no exception to the bargain c oncept of consideration. They said that in the Dillwyn v Llewelyn line of cases involved enforcement of promises by way of estoppel and not by way of contract. Kirby P found that the bargain requirement was not satisfied on the facts, sinc e Beaton made no promise which could be regarded as quid pro quo for a promise t o transfer the land. McHugh and Mahoney JJA found that Beaton had provided consideration by working t he land at the NcDivitts request. Beaton s performance on the requested acts there fore gave rise to a unilateral contract. Beaton was ultimately unsuccessful, ho wever, because Nahoney JA found that the contract had been brought to an end by frustration. He therefore joined Kirby P in finding against Beaton. The decision in Beaton v McDivitt draws a clear line between contract an estoppe l. Acts performed in reliance on a promise will not constitute consideration for that promise unless those acts can be regarded as having been performed in retu rn for the promise. A person who relies on a promise which has not been bargaine d for must seek a remedy in estoppel rather than in contract. In the subsequent decision of the High Court in the estoppel case Waltons Store (Interstate) Ltd v Maher (1988) 164 CLR 387, Mason CJ and Wilson J appeared to g ive the approval to a strict interpretation of the Australia Woollen Mills decis ion when they suggested that it may be doubted whether our conception of conside ration is substantially broader than the bargain theory developed in the United States. The bargain requirement is sometimes overlooked in the analysis of consideration . An example of a case where this occurred is as follows: Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs & Mgrs apt)(in liq) not s provided a series of annual letters of support confirming that it would eek to recover debts owed by Newtronics to the detriment of other creditors, and confirmed that it would provide sufficient funds to Newtronics to enable it to meet its trading debts. Atco s support was needed for Newtronics to remain solvent and to continue to trade, and the provision of the letters allowed Newtronics t o be presented in its audited accounts as a solvent and going concern. When Newt

ronics subsequently became insolvent, it's liquidator claimed that the letters o f support were evidence of a contract between Atco and Newtronics under which At co undertook to provide financial support for Newtronics and not to call up the debt to the detriment of other creditors. Pagone J at first instance found that, by continuing to trade, Newtronics provid ed consideration for Atco s undertakings. The finding was overturned on appeal. The Court of Appeal held that the most that could be said was that Newtronics ha d continued to trade in reliance on Atco s undertakings. For the consideration req uirement to be satisfied, Newtronics would have to show that Atco s undertakings w ere offered as a price or quid pro quo for the action of Newtronics in continuin g to trade. In this case, that required Newtronics to ensure that Atco in effect requested Newtronics to continue to trade in return for the undertaking of cont inued support and that Newtronics was morphed by that request. No such request c ould be implied because Atco for all intents and purposes ran Newtronics and had no need or intention of requesting it to do anything. CONSIDERATION MUST MORE FROM THE PROMISEE Consideration that is given in return for a promise need not move to the promiso r. * A may undertake any contractual obligation to B in return for benefits conferr ed by B on C. o For example, A might agree to pay a reward to any person will finds and return s C s dog. If B finds and returns the dog in reliance on A s promise, B s acts will no t confer a benefit on A, but will constitute a legal detriment to B and will hav e been given in return for A s promise. The consideration need not move to the promisor, it is a fundamental principle t hat consideration must move from the promisee. The argument is that a benefit to the promisor cannot be treated as an alternati ve to detriment to the promisee in the requirement of consideration because, if the consideration moved from the promisee, it must necessary the constitute a le gal detriment to the promisee. This argument appears not to be accepted by the c ourts, which in recent cases have clearly accepted a benefit to the promisor as an alternative to detriment to the promisee in satisfying the requirement of con sideration. Where two or more parties to a contract are regarded as joint promisees, conside ration may be provided by one of them on behalf of both or all of them. This pri nciple was accepted in the case below: Arthur Coulls hadExecutor and Trustee Co Ltd (1967) 119 CLR 460to quarry stones Coulls v Bagot s an agreement whereby a company had the right from his property in return for royalties. Under the agreement, Arthur Coulls au thorised the company to pay the royalties to himself and his wife (Doris Coulls) "as joint tenants". Property held as joint tenants passes to the surviving tena nt when one of them dies. Arthur Coulls died, and a dispute arose as to whether the company was obliged to pay royalties to Doris Coulls or to executor of Arth ur Coulls s estate. Whether Doris Coulls was entitled to receive the royalties depended on two issue s: 1. watch she a party to the agreement and, 2. whether she had given consideration for the company s promise to pay the royalt ies The majority of the court found that she was unable to enforce the agreement bec ause she was not a party to it. Barwick CJ and Windyer J dissenting, held that a promise made to 2 or more joint promisees can be supported by consideration provided by one of the promisee is on behalf of all of them. The consideration is then regarded as morphing from al l of them collectively and a promise can be enforced by action taken by them joi

ntly. Taylor and Owen JJ in the majority agreed that if Doris Coulls had been a party to the contract, it would not have mattered that she personally did not provide consideration. It is important to note that a party to a contract who has not himself provided consideration will be able to enforce a promise only if he can be regarded as a joint promisee with the person who provided consideration. In other words, it is possible to be a party to a contract in which a promises made, but still be a s tranger to the consideration given in return for that promise. Mason CJ and Wilson J observed that: Trident general insurance Co Ltd n McNeice Bros Pty Ltd (1988) 165 CLR 107 If A, B and C are parties to a contract and A promises B and C that he will pay C $1000 if B will erect a gate for him, C cannot compel A to carry or his promise , because, though a party to the contract, C is a stranger to the consideration Whether a person is regarded as a joint promisee, and therefore as a party to co nsideration given by another, involves a question of interpretation. SUFFICIENCY OF CONSIDERATION Consideration must be sufficient, but need not be adequate. Sufficiency means th at consideration must be something the law regards as valuable. Provided it meet s this threshold, the courts will not enquire whether the value of consideration is equal or proportionate to that of the promise it supports. Kirby P explained why (1991) 22 do not generally enquire into the adequacy of c Woolworths Ltd v Kellythe courts NSWLR 189 onsideration. 1. The courts have no way of assessing the value a particular person places on t he consideration he has contracted to receive 2. any requirement of adequacy of consideration would render the enforceability of contract uncertain 3. the courts stance protects economic freedom, even though liberty extract a pr ice in social terms. The role of the courts, therefore, is simply to ensure that a bargain has been s truck and exchange made. Economists agree that the courts stance is justified b ecause economic efficiency is best pursued by voluntary exchanges. A promise to give a ppercorn is good consideration for a promise to pay $1M. th is means that parties can effectively avoid the requirement of consideration thr ough the use of nominal consideration. One party may, for example, undertake an onerous obligation in return for another s to pay $1. A woman promise to 2 $1 towards the ground rent and to keep the house in good Thomas vsThomas(1842)payQB 851 repair was held to be good consideration for a promise by her husband s executors to give her the right to occupy the house for life. Inadequacy of consideration will not invalidate a contract, but it may be taken into account as evidence of procedural unfairness in the formation of a contract . Where a party under a special disability has received inadequate consideratio n, for example, this will provide evidence that the other party has unconsciousl y taken advantage of that disability. Discretion to perform A promise will not constitute good consideration if the promisor retains unfette red discretion as to performance. If the promisor is not bound to perform, then the promise will constitute an illusory consideration. In this agreement Ltd v Commonwealth (1969) pay a 353 Placer Developmentthe Commonwealth promise to121 CLRsubsidy of an amount or at a rate determined by the Commonwealth from time to time . The High Court, by a majority of 3-2, held that the agreement imposed no obligat ion on the Commonwealth to pay any subsidy. Accordingly, the Commonwealth s promi se was an illusory consideration. Kitto J expressed the applicable principle as follow: The general principle is that wherever words which by themselves constitute a prom ise are accompanied by words showing that the promisor is to have discretion or option as to whether he will carry out that which purports to be the promise, th

e result is that there is no contract on which an action can be brought at all. The minority of judges found that the Commonwealth was under an obligation to de termine what the subsidy was and to pay it. Concept of illusory consideration overlaps with the concept of an illusory promi se, which may render a contract uncertain. Past Consideration The general rule Past consideration is not considered sufficient consideration. This means that, subject to one exception, something given before a promise made cannot constitut e good consideration for the promise. The thing may have been given gratuitously , such as where A gives B a dog and B subsequently promises to pay A $50 for it. A cannot rely on the giving of the dork as consideration for B s promise because it is past consideration. More commonly, the past consideration rule will be inv oked where, after contractual transaction has been completed, one of the parties makes a promise which the other seeks to enforce. The defendant sold the plaintiff Roscorla v Thomas (1842) 3 QB 234a horse for $30. Later, at the plaintiffs reque st, the defendant promise that the horse was sound and free from vice. The plain tiffs sought damages for breach of contract where the horse to not to be very vi cious, restive, ungovernable and ferocious. Lord Denman CJ held that the promise was not enforceable because the plaintiff h ad given no consideration. Payment of the purchase price was past consideration which did not support the later promise. It is important to distinguish between past consideration and executed considera tion. * Executed consideration is something given as part of the same transaction as t he promise. In the case of a unilateral contract, for example, the consideration given by th e offeree has been provided or executed by the time the contract is made. * Assume, for example, that A offers $50 to whoever finds and returns a lost dog , and B finds and returns the dog. The contract is made when B returns the dog. At that time, B s considerations executed, but A s promise remains executory. Promise to pay for past services An exception to the past consideration rule is made in the case of a promise to pay for past services. Where services performed at the request of the promisor, in circumstances that raise an implication that they are to be paid for, then pe rformance of the services by the promisee will constitute good consideration for a subsequent promise to pay for them. The performance of the services and a pro mise to pay for them are in effect treated as part of the same transaction. The Software transferred to IpexrespondentServices Pty Ltdavcorporate(2000) VCA 239 Hosking group a computer software business of which he was part-owner on the understanding that he would receive shares in the restructured group. Victorian Court of Appeal held that the transfer constituted good consideration for the subsequent promise to transfer 5% of the equity in the group to the resp ondent. Brathwait asked Lampleigh to do Lampleigh v Brathwait (1616) Hoball he could to secure a pardon from the King fo r a murder Brathwait had committed. Lampleigh was unable to secure the pardon, but expended considerable effort in travelling to see the King. Brathwait later promised to pay Lampleigh $100 for his services and Lamleigh sought to enforce this promise. It was held that, where services are provided at the request of a party, a later promise to pay for those services will be binding because the promise couples i tself with the earlier request. The principle was reformulated in the 19th century to cover only situations in w hich there was an understanding throughout the transaction the the services were

to be paid for. The leading case is as follows: Rehad worked to promote the v s patents and1was subsequently promised a one-third P Casey s Patents; Stewart D Casey (1892) Ch 104 share of the patents. The English Court of Appeal held that the P had provided good consideration for the P s promise. Bowen LJ said: Now, the effect of past service raises an implication that at the time it was re ndered it was to be paid for, and, if it was a service which was to be paid for, when you get in the subsequent document a promise to pay, that promise may be t reated either as an admission which evidences or as positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service wa The existing legal duty s originally rendered. rule The general rule Neither a promise to perform an existing legal duty, not the performance of an e xisting legal duty, is regarded as sufficient consideration to support a contrac t. The existing legal duty rule covers promises to perform existing public dutie s, such as a promise to give evidence in court when the promisee is obliged by a subpoena to do so. There is an obvious public interest in this aspect of the ex isting legal duty rule. It is important that the law of contract does not encour age public officials and those involved in the administration of justice to be i nfluenced by promises of extra rewards for discharging their responsibilities. The existing legal duty rule is most commonly raised in relation to one-sided va riations to contracts where one party either assumes an additional obligation or agrees to release the other party from an obligation. In order to avoid confusi on between the two parties involved in a one-sided contract variation, the perso n will promises to perform an existing legal duty and claims the benefit of the contract or modification will be referred to in this chapter as the beneficiary. The party assuming an additional obligation or releasing the beneficiary from a n obligation will be referred to as the modifying party. The rule is illustrated as follows. Assume that one party, the beneficiary, has agreed to build a garage and fence f or another, the modifying party, for the $30,000 and, after the contract has bee n made, the beneficiary realises that she agreed to perform the work at a loss. She expresses some reluctance to perform, so the beneficiary and the modifying p arty reach an agreement that if the beneficiary builds that the garage, the modi fying party will pay the beneficiary an extra $5000 and will not require the ben eficiary to build a fence. In return for the modifying party s promise, the benefi ciary has simply promised to perform her contract obligations. She has agreed to do nothing she was not already obliged to do. The court will not generally enfo rce a promise made by the modifying party in such a situation, even though it wa s intended to be binding. This principle was illustrated in the following case. Mason J stated: Wigan v Edwards (1973) 1 ALR 497 The general rule is that a promise to perform an existing duty is no considerati on, at least when the promises made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under the contract. The existing legal duty rule is sometimes referred to as the rule in Stilk v Myr ick. In that case, (1809) 2 Camp 317 Stilk v Myricktwo sailors deserted a ship on a voyage to the Baltic. As the capt ain was unable to replace the deserters, he promised the remaining crew that he would divide the deserter s wages among them if they would sail the ship back to L ondon shorthanded. The plaintiff was one of the remaining crew any sued to recov er his share. The cool originally employed on the basis that they would do all that they could under all emergencies of the voyage .

Lorde Ellenborough CJ found that the desertion of a small part of the crew was s uch an emergency. The remaining crew were bound by the terms of the original con tract to complete the voyage shorthanded. Accordingly, the agreement to sail the boat back to London was simply a promise to perform an existing obligation and did not constitute good consideration for the promise of extra payment. The capt ains promise was therefore unenforceable. In Wigan v Edwards, Mason J noted and that the existing legal duty rule is conce ptually justified by the fact that a promise to perform an existing contractual duty is an illusory consideration. The promisor incurs no new burden and the pro misee receives no benefit he did not already enjoy. From the point of view of policy, the principle is set to discourage parties see king to secure additional benefits by threatening to breach the contract. The En glish courts seemed to regard ship owners as particularly vulnerable to extravag ant demands for extra wages and, since Britain was heavily reliant on shipping, were particularly concerned to protect them. A case which preceded Stilk v Myric k involved similar facts but was decided on the basis of public policy rather th an the absence of consideration. It was these policy considerations that influen ce the development of the existing legal duty rule. The existing legal duty rule is regularly criticise on the basis that it does no t reflect the practices of business people, will routinely make one-sided variat ions to contracts. This is supported by empirical studies which indicate a prepa redness to modify concluded bargains where circumstances have changed. Modificat ions are often accepted on the basis that each business deal must remain viable for both parties, so that the parties can preserve the relationship and their re putation in the business community. The difficulty for lawmakers is that a one-s ided variation may involve the co-operative relocation of unforeseen risk, where the economic environment of the contract has changed, or may simply reflect one party's exploitation of another s dependency and a lack of adequate remedies for breach. It may be doubted whether the requirement of consideration provides any great pr otection against coercive modifications as the courts do not enquire into the ad equacy of consideration. The presence of nominal consideration will render contr act modification enforceable, but is entirely consistent with coercion. As Santo w J said in Musumeci v Winadell: Consideration express in formalistic terms of one dollar can indeed actually clo ak duress rather than expose it. The developing doctrine of economic duress is therefore likely to provide a more useful weapon against coercive modifications. Part payment of a debt A corollary of the existing legal duty rule is the principle that part payment o f a debt does not constitute good consideration for an agreement to discharge th e debt. This is known as the rule in Pinnel s case. The rule in Pinnel s Case If a debtor owes a creditor $100 and the creditor agrees to accept $50 in satisf action of the debt, this agreement will not be binding and the creditor will be entitled to recover the remaining $50. In paying part of the debt, the debtor is simply performing (part of) his legal obligation. The ruling in Pinnel s Case was applied in Foakes v Beer In this Beer a debtor promise to Foakes vcase, (1884) 9 App Cas 605pay a judgement that in six monthly instalment s in return for the creditor's promise not to enforce the judgement. When the de bt had been repaid in full, the creditor successfully claimed interest. The House of Lords held that, even if the creditor's promise could be construed as an agreement forego interest on the debt, such a promise was not supported by consideration under the rule in Pinnel s case. The House of Lords held that, even if the creditor's promise could be construed as an agreement to forgo interest on the debt, such a promise was not supported by consideration under the rule in Pinnel s case. The House of Lords felt that the rule was too well entrenched to b

e overruled, its practical inconvenience was acknowledged by Lord Blackburn: What principally weighs me is my conviction that all men of business, whether mer chants of tradesmen, do everyday recognise and act on the ground that prompt pay ment of a part of their demand may be more beneficial to them than it would be t o insist on their rights and enforce payment on the whole. Even where the debtor is perfect a solvent, and sure to pay at last, this often is so. The rule in Pinnel s case has no application where the debtor pays before the due date or in a different form, where several creditors jointly agreed to forgo par t of each of their debts (known as a composition), where the payment is made to the creditor by a third party or where the debtor gives something other than mon ey: