Consideration (AQA A-Level Law): Revision Notes
Consideration
What is consideration?
Consideration is a fundamental requirement for a valid contract under English law. In simple terms, it is the price that one party pays in exchange for the goods, services, or promise of the other party.
Practical Example: Car Sale
If X offers to sell Y a car for £3,000, and Y accepts this offer, the £3,000 is the consideration for X's promise to sell the car. Consideration acts as proof that a genuine agreement exists between the parties.
Without consideration, even if there is a valid offer and acceptance, the agreement will be unenforceable in law. This is because consideration demonstrates that both parties intended to create a legally binding contract by contributing something of value in return for the other party's promise.
The legal definition of consideration
The Dunlop v Selfridge (1915) Definition
In Dunlop v Selfridge (1915), consideration was defined as:
an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.
This is the authoritative legal definition you should use in exams.
This definition emphasises that consideration can take various forms, including:
- An act (doing something)
- Forbearance (agreeing not to do something)
- A promise to do or not do something in the future
Benefit and detriment
In Currie v Misra (1875), consideration was explained in terms of benefit and detriment. Both parties to a contract must receive a benefit and suffer a detriment.
Example: Benefit and Detriment in Car Sale
Using the car sale example above:
- X gains the benefit of receiving £3,000 but suffers the detriment of losing ownership of the car
- Y gains the benefit of receiving the car but suffers the detriment of paying £3,000
This demonstrates the mutual exchange that characterises valid consideration.
Non-monetary consideration
Consideration does not have to involve money. Contracts can be formed where other forms of value are exchanged.
Example: Non-Monetary Consideration
If X offers to give Y a car in return for Y mowing X's lawn every week for three years, Y's promise to mow the lawn is valid consideration for X's promise to give the car.
This shows that services and promises can constitute valid consideration without any money changing hands.
The role of equity: promissory estoppel
Although the common law requires consideration for a contract to be enforceable, the courts have occasionally recognised contracts where no consideration appears to exist. In such cases, the equitable doctrine of promissory estoppel may apply. This doctrine allows a promise to be enforced in certain circumstances even where consideration is absent, where it would be unfair not to enforce the promise.
Rules of consideration
The courts have developed five key rules that govern what counts as valid consideration. These rules help determine whether a contract is enforceable.
Rule 1: Consideration must be sufficient
Consideration must be sufficient, meaning it must be real, tangible, and have some inherent value that the law recognises. The consideration must be something of legal value.
Case Study: Ward v Byham (1956)
Facts: A father agreed to pay the mother of his illegitimate child £1 per week if she kept the child "well looked after and happy". When the father refused to pay, the mother sued.
Decision: The court held that keeping the child "happy" was sufficient consideration because the mother was under no legal obligation to do so. Going beyond her existing legal duty provided valid consideration for the father's promise to pay.
Principle: Consideration must have some recognisable legal value, however small.
The key point is that consideration must have some recognisable legal value, however small.
Rule 2: Consideration need not be adequate
While consideration must be sufficient, it need not be adequate. This means the courts will not investigate whether the parties made a good or bad bargain. The law respects the freedom of contract principle, allowing parties to agree to whatever terms they wish.
If the price agreed does not reflect the true value of the goods or services (in the absence of duress or undue influence), the courts will still enforce the contract according to its original terms.
Case Study: Thomas v Thomas (1842)
Facts: A widow was allowed to remain in her late husband's home for a very low rent of £1 per year. Although this rent was far below market value, she later sought to enforce this agreement.
Decision: The court held it was sufficient consideration to make the agreement enforceable. The adequacy of the rent did not matter, only that some consideration existed.
Principle: Courts do not assess whether parties have made a good bargain - they only check that consideration exists. This protects contractual freedom and prevents courts from interfering in commercial decisions.
This rule protects contractual freedom and prevents courts from interfering in commercial decisions. The parties are free to agree whatever price they wish, and the courts will respect that agreement.
Rule 3: Consideration must not be past consideration
The general rule is that past consideration is not valid consideration. This means that if a voluntary act is performed, and payment is promised only afterwards, that later promise to pay is unenforceable.
Common Mistake to Avoid
If A gives B a car for free, and B later promises to pay A £100 for it, the £100 is past consideration and cannot be enforced. The act (giving the car) had already been completed before the promise to pay was made.
The key is the timing: consideration must be given in exchange for a promise, not after the act has already been completed.
Case Study: Roscorla v Thomas (1842)
Facts: Thomas sold a horse to Roscorla for £30. After the sale was completed, Thomas stated that the horse was "free from vice". In fact, the horse was violent. When Roscorla sued for breach of contract, he sought to enforce Thomas's later promise.
Decision: The court held that there was no consideration for Thomas's later promise that the horse was sound. The only consideration (the £30) related to the original sale and was therefore in the past. It could not support the later promise.
Principle: Acts completed before a promise is made cannot constitute valid consideration for that promise.
Case Study: Re McArdle (1951)
Facts: After improvements were made to a house, the beneficiaries of an estate promised to reimburse the person who had paid for the improvements.
Decision: The court held this promise was unenforceable because the work had already been completed before the promise was made. The consideration was therefore past.
Principle: Work done before a promise to pay is made constitutes past consideration and cannot support that promise.
Exception: the rule in Lampleigh v Braithwaite (1615)
There is an important exception to the past consideration rule established in Lampleigh v Braithwaite (1615). Where a party has requested a service and there is a reasonable implication that payment will be made (even if not stated at the time), a later promise to pay will be enforceable.
Case Study: Lampleigh v Braithwaite (1615)
Facts: Braithwaite asked Lampleigh to obtain a King's pardon after Braithwaite had been accused of killing a man. Lampleigh succeeded, at his own expense. Braithwaite later agreed to pay Lampleigh £100 but then refused.
Decision: The court held that it was implicit at the time of the request that payment would be made, so the later promise was enforceable. The consideration was not truly "past" because payment had always been anticipated.
Principle: This exception recognises that in commercial contexts, payment is often expected even if not explicitly agreed at the outset. The key requirements are:
- The service was requested by the defendant
- There was an implied understanding that payment would be made
- The later promise merely sets the amount
Rule 4: Consideration must move from the claimant
Only a person who has provided consideration can enforce a contract. This is a matter of common sense: if you have not contributed anything to an agreement, you cannot sue if the other party breaks it.
Third parties to a contract who have provided no consideration cannot normally enforce the contract, even if it was intended to benefit them.
Case Study: Tweddle v Atkinson (1861)
Facts: A father and future father-in-law agreed to pay money to the son (Tweddle). When the father-in-law died before making the payment, the son sued the executors of his estate.
Decision: The court held that because the son had provided no consideration for the original agreement between the two fathers, he could not enforce it.
Principle: Only a person who has provided consideration can sue to enforce a contract. Third parties who have given nothing cannot claim under the agreement.
The Contracts (Rights of Third Parties) Act 1999
Statutory Reform
However, the Contracts (Rights of Third Parties) Act 1999 has modified this rule. Under this Act, a third party who has provided no consideration may now sue to enforce a contract in certain circumstances, specifically:
- Where the contract expressly provides that the third party may enforce it, or
- Where a term of the contract purports to confer a benefit on the third party
This reform addresses the unfairness that could arise under the common law rule where third parties could not claim benefits that were clearly intended for them.
Rule 5: Performance of existing obligations will not amount to valid consideration
The general rule is that if a party is already under an obligation to do something, they cannot use that existing duty as consideration for a new agreement. Simply doing what you are already legally or contractually required to do does not provide fresh consideration.
Case Study: Stilk v Myrick (1809)
Facts: When two crew members deserted a ship, the captain promised the remaining crew a share of the deserters' wages if they sailed the ship home. Once home, the captain refused to pay the extra wages.
Decision: The court held that the crew were not entitled to the additional payment because they were simply performing their existing contractual duty to sail the ship. They had provided no new consideration for the captain's promise of extra wages.
Principle: Merely performing an existing contractual obligation does not constitute fresh consideration for a new promise.
This rule also applies where someone is under a legal obligation to perform an act, such as a public duty.
Case Study: Collins v Godefroy (1831)
Facts: A police officer claimed he was entitled to a payment promised by a defendant in a court case in exchange for giving evidence.
Decision: The court rejected his claim because the officer was already under a legal obligation to attend court and give evidence. No additional consideration existed to support the promise of payment.
Principle: Performing an existing legal duty (such as a public duty) cannot constitute valid consideration for a promise of payment.
Exception: doing something extra
There is an important exception to this rule. If a party does something extra beyond what was required by their existing obligation, this may constitute valid new consideration.
Case Study: Hartley v Ponsonby (1857)
Facts: When 17 out of 36 crew members deserted, leaving only 19 (of whom only four were able seamen), the captain promised extra wages if the remaining crew agreed to sail the ship in these dangerous circumstances.
Decision: The court held that by agreeing to continue in such perilous conditions (which went far beyond their original contractual duty), the crew had provided fresh consideration. The new agreement was therefore enforceable.
Principle: Going significantly beyond an existing duty constitutes new consideration that can support a fresh promise.
Contrast: This case contrasts with Stilk v Myrick because the crew in Hartley v Ponsonby went significantly beyond their original duty, whereas the crew in Stilk v Myrick simply performed what they were already contractually obliged to do.
Summary of key cases
Cases establishing definitions and principles
Dunlop v Selfridge (1915): Provided the authoritative legal definition of consideration as "an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought".
Currie v Misra (1875): Explained consideration in terms of benefit and detriment, with both parties gaining a benefit and suffering a detriment.
Cases on sufficient consideration
Ward v Byham (1956): The mother keeping the child "happy" (beyond her legal duty) was sufficient consideration for the father's promise to pay £1 per week.
Cases on adequate consideration
Thomas v Thomas (1842): A widow paying £1 per year rent was sufficient consideration, even though inadequate in value. Courts do not assess the adequacy of bargains.
Cases on past consideration
Roscorla v Thomas (1842): A promise that a horse was sound, made after the sale, was unenforceable as the consideration (£30) was in the past.
Re McArdle (1951): A promise to pay for improvements already completed was unenforceable as the work was done before the promise was made.
Lampleigh v Braithwaite (1615): Exception to past consideration rule where it was implicit at the time of the request that payment would be made.
Cases on consideration moving from the claimant
Tweddle v Atkinson (1861): A son could not enforce a promise to pay him where he had provided no consideration, establishing the rule that consideration must move from the claimant.
Cases on performance of existing obligations
Stilk v Myrick (1809): Crew performing their existing contractual duty provided no fresh consideration for a promise of extra wages.
Collins v Godefroy (1831): A police officer performing his legal duty to attend court provided no consideration for a promise of payment.
Hartley v Ponsonby (1857): Crew going beyond their original duty by sailing in dangerous circumstances provided fresh consideration for extra wages.
Exam guidance
When answering questions on consideration, you should:
Essential Exam Technique
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Always define consideration using the definition from Dunlop v Selfridge (1915) or explain it in terms of benefit and detriment from Currie v Misra (1875).
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Apply the relevant rules systematically. Identify which rule(s) apply to the facts and explain why.
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Use case law effectively. State the case name, briefly explain the facts, and clearly explain the legal principle it establishes. Then apply that principle to the scenario in the question.
Demonstrating Understanding
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Explain the rationale behind judicial decisions. Don't just state what the court held, but explain why the court reached that decision. This demonstrates deeper understanding.
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Consider exceptions where relevant. For example, if discussing past consideration, consider whether the Lampleigh v Braithwaite exception might apply. If discussing existing obligations, consider whether the party has done something extra (as in Hartley v Ponsonby).
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Structure problem questions clearly. Identify each potential contract, then work through: offer, acceptance, consideration, intention to create legal relations, and any other relevant issues.
This topic will be assessed in Paper 1 of the AQA A-Level Law examination.
Remember!
Key Points to Remember:
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Consideration is the price paid for a promise and is essential for a contract to be enforceable
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The legal definition from Dunlop v Selfridge (1915) is: "an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought"
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Consideration must be sufficient (have legal value) but need not be adequate (courts don't assess whether it's a good bargain)
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Past consideration (acts done before a promise is made) is generally not valid consideration, except under the rule in Lampleigh v Braithwaite where payment was impliedly expected
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Consideration must move from the claimant (only the person providing consideration can sue), though the Contracts (Rights of Third Parties) Act 1999 has created exceptions
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Performing an existing obligation does not provide valid consideration unless the party does something extra beyond their existing duty