Jamie Koronkiewicz (i7936267) First Year LLB Law Bournemouth University Seminar Group G Subject Tutor: Sue Warnock

Contract Law Assignment

1402 Words

It is apparent that the courts have evolved a series of rules in an attempt to define the concept of consideration

Discuss this statement and where relevant use appropriate case law to support your answer.

In the early case of Currie v Misa 1 Lush J defined consideration as consisting either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other. In modern times however, our legal system doesnt follow the system of benefit/detriment, preferring to follow the definition given by Sir Fredrick Pollock stating that consideration is constituted when an act of forbearance of one party, or the promise thereof, being the price for which the promise of the other is bought2; a definition approved by Lord Dunedin in 1915 3. These early definitions have proved themselves to be the building blocks for legal consideration today and set a precedent for the courts providing definitions and rules in this area. This essay will focus on how the courts have evolved rules in order to define the concept of consideration, and will also look at any other influences upon the law of consideration.

While the Pollock definition did largely remove the concept of benefit/ detriment, it is still possible to detect aspects of this maxim within the law today. This occurs because there are aspects of the doctrine of consideration which exist as a result of the benefit/detriment analogy. The courts have devised numerous rules and distinctions in order to define consideration. One example of this is the bilateral/unilateral distinction.

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(1874-75) L.R. 10 Ex. 153 Pollocks Principles of Contract, Sir Percy Winfeild (ed.), 13th edn (Stevens, 1950), p.133 Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd [1915] AC 847

Consideration is provided by the exchange of promises in a bilateral contract. In a unilateral contract, however, an exchange of a promise for an act occurs. This was apparent in R v Clarke 4 whereby Clarke gave information leading to the arrest of criminals and sued in order to recover the reward. The promise of money was followed be the act (the giving of information).

A further example of the courts evolving rules can be found by looking into the maxim that consideration must be sufficient but neednt be adequate. Lord Denman C.J. stated in the case of Thomas v Thomas that the courts do not measure the adequacy of consideration nor the reasons for a bargain providing there is a bargain between parties. So the widow who in return for being promised the house had promised to pay 1 each year as rent and to keep the house in a good state of repair would find that her returning promise is of actual value and is thus sufficient consideration. This ruling is used frequently with regards to peppercorn (nominal/very low) rents The Unfair Terms in Consumer Contracts Regulations 1999 provide judicial authority to overturn contract terms which are unfair. However, the jurisdiction doesnt reach to areas regarding adequacy of price or compensation for services or goods supplied or sold, providing the terms are of intelligible and understandable language. This means cases following the Thomas v Thomas principle remain mostly unaffected.

4(927)

40 CLR 227

In a situation where the act is followed by a promise, the rule of past consideration applies. The case of Roscorla v Thomas5 is used to illustrate this rule. In this case the plaintiff had agreed to purchase a horse from the defendant. Once the agreement had been reached the plaintiff was assured that the horse was sound, this wasnt the case. It was held that as the express warranty was given after the contract was made there couldnt have been consideration to support it as the warranty wasnt given in exchange for that promise. Re McArdle 6 later affirmed Roscorla as the work done on the house was executed before any promises were made so amounted to past consideration. Lampleigh v Braighwait7 established the previous-request device used to sidestep past consideration. In this case promise of payment occurred after the service was performed. The court said that as the service was requested, the promise (Lampleighs performance) was supported by consideration. The previous-request device is a way of reinterpreting the facts to sidestep the past consideration rule rather than an exception. However, its existence demotes certainty within the law on consideration.

The courts have also developed rules in order to deal with alteration promises to pay more and to accept less for services/goods.

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(1842) 3QB 1234 [1951] Ch 669 (1615) Hob 105

Stilk v Myrick 8 gives authority to the rule that a promise to pay more needs to be supported by new consideration in order to be enforceable, it was later ruled in North Ocean Shipping Co. Ltd v Hyundai Construction Co. Ltd, The Atlantic Baron 9 and Williams v Roffey Bros10 that there are two ways to do this. The first is to show that the promisee has exceeded the original contractual duty by providing an additional benefit/detriment (as in the Hyundai Construction case). The second way to find consideration comes from the actual alteration promise and neednt move from the promisee (Roffrey Bros case) - this consideration may result in a benefit to the promisor in a practical sense without incurring the promisor legal detriment. Penny v Cole11 (Pinnels Case) held a promise to accept less and to not sue for the balance is unenforceable unless the promisor is given new consideration. This rule was later confirmed by the House of Lords in Foakes v Beer 12.

The courts have distinguished consideration from conditions imposed upon the recipients of gifts.

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(1809) 2 Camp 317, 170 ER 1168 [1979] QB 705 [1991] 1 QB 1 (1602) 5 Co Rep 117a (1884) 9 App Cas 605

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Peel13

argued that in Carlil v Carbolic Smoke Ball Co. Ltd 14, Carlils

consideration was using the smoke ball as the manufacturer recommended and the need to catch influenza was just a condition to allow her to enforce the promise. This is because Carlil had no direct control in catching influenza, thus she wasnt providing anything of value. This is not unlike Thomas v Thomas15 where a condition (to remain a widow) entitled her to enforce the promise but was held not to be sufficient consideration for the testator to leave the widow his house. The aforementioned cases contrast with the more recent Chappel & Co. Ltd v Nestl Co. Ltd 16 where the then House of Lords (now Supreme Court) stated that the chocolate bar wrappers used as part-payment for records were valid consideration for the supply of the records. Lord Reid stated that as the wrappers were supplied at the request of the defendants and were of benefit (as a promotional tool). On the basis of the Chappell v Nestl approach both staying a widow and contracting influenza (Carlil, Misa) would be considered part of the requested exchange so valid consideration would be found.

Case law provides us with extremely detailed rules through judgements. However the amount of contrasting opinions and rulings can create confusion as illustrated by the Chappell v Nestl approach.

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Treitel!s The Law of Contract, 12th edn (Sweet and Maxwell, 2007) pp. 79-80 [1893] 1 QB 256 (1842) 2 QB 851 [1960] AC 87

It is important to note that precedent isnt the only source for progression within the law on consideration.

Statutes also add to the doctrine of consideration. It is traditionally the case that consideration would only exist where a promise moved from the promisee. This meant that a third party may not be able to enforce a promise. As a result of this, the Contracts (Rights of Third Parties) Act 1999 in some circumstances allows third-party enforcement of promises. The Law Commission also influence the development of law (even though it cant itself create law), for example its report Privity of Contract: Contracts for the benefit of third parties 17 support the aforementioned act and illustrate that now consideration neednt be provided by a claimant if consideration to support a promise is provided (usually from the promisee). The Law Revision Committee have recommended 18 amendments to the

doctrine of consideration. These have become a persuasive precedent. Some of the recommendations have been adopted by the courts, for example the rule that promisors in a unilateral contract mustnt revoke after a promisee has started to perform.

In conclusion it is hard to disagree with the stimulus statement. It is clear that through case law the courts have evolved rules and made distinctions in order to define the concept of consideration. The vast majority of rules on the doctrine of

17 18

CM. 3329 (1996), Part VI

Law Revision Committee, (Statute of frauds and the doctrine of consideration, H.M.S.O., London, 1937)

consideration come from the courts, such as the bilateral/unilateral distinction, the distinction between consideration and conditions imposed upon gifts, alteration promises and past consideration. Furthermore, numerous precise and articulate definition have arisen as a result of the judgements in these cases. While not all law in the area comes from precedent, as evident by the Contracts (Rights of Third Parties) Act 1999, the sparse use of statutes within this area shouldnt mitigate the extent to which the courts have had to evolve the law.

Bibliography
Cases
Carlil v Carbolic Smoke Ball Co. Ltd [1893] 1 QB 256 Chappel & Co. Ltd v Nestl Co. Ltd [1960] AC 87 Currie v Misa (1874-75) L.R. 10 Ex. 153 Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd [1915] AC 847 Foakes v Beer (1884) 9 App Cas 605 Lampleigh v Braighwait (1615) Hob 105 North Ocean Shipping Co. Ltd v Hyundai Construction Co. Ltd, The Atlantic Baron [1979] QB 705 Penny v Cole (1602) 5 Co Rep 117a Re McArdle [1951] Ch 669 Roscorla v Thomas (1842) 3QB 1234 R v Clarke (927) 40 CLR 227 Stilk v Myrick (1809) 2 Camp 317, 170 ER 1168 Thomas v Thomas (1842) 2 QB 851 Williams v Roffey Bros [1991] 1 QB 1

List of Statutes
Contracts (Rights of Third Parties) Act 1999

List of Statutory Instruments

Unfair Terms in Consumer Contracts Regulations 1999 S.I. 1993/2661

Secondary Sources
Websites !LexisNexis" <http://www.lexisnexis.com/> 1st, 3rd and 4th December 2010 'OpenLibrary' <http://openlibrary.org/books/OL14365073M/Sixth_interim_report> 3rd December 2010 !Westlaw" <http://login.westlaw.co.uk/maf/wluk/app/homepage> 1st, 3rd and 4th December 2010 Books
POOLE, J., Casebook on Contract, Blackstone POOLE, J. Textbook on Contract Law (10th edn, Oxford University Press, Oxford 2010 Treitel. Treitel!s The Law of Contract (12th edn Sweet and Maxwell, 2007) WINFEILD, P. Pollock!s Principles of Contract, (13th edn, Cambridge University Press, Cambridge 1943)

Law Reports
Law Commmission Report "Privity of parties (1996) CM. 3329 , Part VI

Contract: Contracts for the benefit of third

Law Revision Committee, (Statute of frauds and the doctrine of consideration, H.M.S.O., London, 1937)