Consideration (OCR A-Level Law): Revision Notes
Consideration
Consideration is often described as one of the most misunderstood concepts in contract law. However, once properly explained, it becomes a logical and essential element of contract formation.
Understanding consideration is crucial for determining whether a contract is legally enforceable. Without valid consideration, even a properly accepted offer cannot be enforced in court.
What is consideration?
In simple terms, consideration is the price that an offeree pays for the goods or services being offered. It represents what each party gives or promises to give in exchange for the other party's promise.
Worked Example: Simple Sale Agreement
If X offers to sell Y her car for £3,000 and Y accepts, the £3,000 is the consideration for X's offer. Y is essentially saying: "I will pay you the asking price of £3,000."
Consideration serves as a backing or securing of an offer. Without it, even a validly accepted offer remains unenforceable. This is why consideration is such a crucial element in contract formation.
Benefit and detriment
The concept of consideration is sometimes referred to as benefit and detriment, a principle defined in Currie v Misra (1875). This means that both parties must receive a benefit and suffer a detriment from the agreement.
In the car sale example above, X gains the benefit of £3,000 but suffers the detriment of losing ownership of the car. Similarly, Y gains the benefit of owning the car but suffers the detriment of paying £3,000.
Legal definition
The classic legal definition of consideration comes from Dunlop v Selfridge (1915):
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.
Historically, consideration was developed to provide evidence that the parties to an agreement genuinely intended to create a legally binding contract. By requiring each party to contribute something in return for the other's promise, the law ensures that agreements are taken seriously.
Non-monetary consideration
It is important to understand that consideration does not always involve cash. Contracts can be formed without any money changing hands, as consideration can take various forms.
Worked Example: Non-Monetary Consideration
X might offer to give her car to Y if Y promises to mow her lawn every week during the summer months for three years. Here, Y's lawn-mowing services constitute valid consideration for X's promise to transfer the car.
In essence, consideration is the proof that a genuine agreement exists between the parties.
Rules of consideration
Over time, judges have developed several important rules governing consideration. These rules help determine whether valid consideration exists in any given situation.
Rule 1: Consideration need not be adequate
The courts generally do not concern themselves with whether parties have struck a good or bad bargain. Instead, they prioritize freedom of contract – the principle that parties should be free to make their own agreements.
This means that if the price for goods or services does not reflect their true market value, the courts will still enforce the agreement, provided there is no duress or undue influence.
Worked Example: Thomas v Thomas (1842)
Facts: A widow was permitted to remain in the matrimonial home for a rent of just £1 per year.
Decision: The court held that this nominal sum was sufficient consideration for the agreement, even though it was far below the property's actual rental value.
Key Principle: The law does not require consideration to be adequate (fair), only that it exists.
Rule 2: Consideration must be sufficient
While consideration need not be adequate (fair in value), it must be sufficient in legal terms. This means it must be real, tangible, and possess some inherent value that the law recognizes.
Worked Example: 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 he refused to pay, the mother sued.
Decision: The court held that although the mother had a legal duty to care for the child, she was under no legal obligation to keep the child "happy". This additional promise constituted sufficient consideration for the £1 weekly payment.
Key Principle: Consideration must be something recognized by law as having value, even if that value is small.
Rule 3: Past consideration is not valid consideration
The general rule is that past consideration cannot support a new promise. If someone voluntarily performs an act without any expectation of payment, a later promise to pay for that act is unenforceable.
Worked Example: Roscorla v Thomas (1842)
Facts: Thomas sold a horse to Roscorla for £30. After the sale was complete, Thomas promised that the horse was "free from vice". Unfortunately, the horse turned out to be violent.
Decision: When Roscorla sued for breach of contract, the court held there was no enforceable promise. The only consideration (the £30 payment) related to the original sale and was therefore "in the past". It could not support the later promise about the horse's temperament.
Exception: The rule in Lampleigh v Braithwaite (1615)
There is an important exception to the past consideration rule. If a party requests a service in circumstances where there is a reasonable implication that payment will be made (even if not stated at the time), a later promise to pay can be enforceable.
Worked Example: Lampleigh v Braithwaite (1615)
Facts: Braithwaite asked Lampleigh to obtain a King's pardon after Braithwaite had been accused of killing someone. Lampleigh did so at his own expense. Braithwaite later promised to pay Lampleigh £100 but failed to do so.
Decision: The court held that it was implicit at the time of the original request that payment would be made, and therefore Lampleigh was entitled to the £100.
Key Principle: This exception recognizes that in certain circumstances, particularly involving professional services, payment is understood to be part of the arrangement even if not expressly stated at the outset.
Rule 4: Performance of pre-existing duties
If a party is already under an existing obligation to perform an act, they generally cannot use that same obligation as consideration for a new agreement.
Worked Example: Stilk v Myrick (1809)
Facts: When two crew members deserted a ship, the captain promised the remaining sailors a share of the deserters' wages if they successfully sailed the ship home. Once they arrived, the captain refused to pay the extra wages.
Decision: The court rejected the crew's claim, holding that they were simply performing duties they were already contractually obliged to perform. No additional consideration had been provided for the captain's new promise.
This rule also applies to public duties.
In Collins v Godefroy (1831), a police officer claimed he was entitled to payment promised by a defendant if he gave evidence in a court case. The court rejected this claim because the officer was under a legal duty to attend court. Since he provided no consideration beyond his existing legal obligation, the promise to pay was unenforceable.
Exception: Going beyond existing duties
An important exception exists when a party does something extra beyond what was required under the original agreement. This additional act can constitute new consideration.
Worked Example: Hartley v Ponsonby (1857)
Facts: When 17 crew members deserted a ship, only 19 remained (of whom only four were able seamen). The voyage had become extremely dangerous. The captain promised extra wages if the remaining crew agreed to sail. When the captain later refused to pay, the court held that by agreeing to continue in such perilous circumstances, the crew had provided additional consideration that went beyond their original contractual duties.
Key Principle: The promise was therefore enforceable. The distinction between Stilk v Myrick and Hartley v Ponsonby shows that courts will recognize new consideration when a party undertakes significantly greater risk or responsibility than originally agreed.
Key cases summarized
Definition cases
Dunlop v Selfridge (1915)
- Facts: Dunlop sold tyres to a dealer, who resold them to Selfridge (a retailer) at below the agreed price.
- Principle: Provided the classic legal definition of consideration.
Currie v Misra (1875)
- Principle: Established the "benefit and detriment" concept of consideration.
Adequacy
Thomas v Thomas (1842)
- Facts: A widow was allowed to remain in the matrimonial home for £1 per year rent.
- Principle: Consideration need not be adequate (fair in value). The £1 was sufficient consideration even though far below market value.
Sufficiency
Ward v Byham (1956)
- Facts: A father promised to pay the mother £1 per week to keep their illegitimate child "well looked after and happy". He later refused to pay.
- Principle: Consideration must be sufficient (recognized by law as having value). Keeping the child "happy" went beyond the mother's legal obligations and was therefore sufficient consideration.
Past consideration
Roscorla v Thomas (1842)
- Facts: After selling a horse for £30, the seller promised it was "free from vice". The horse was actually violent.
- Principle: Past consideration is not valid. The £30 payment was in the past and could not support the later promise about the horse's temperament.
Lampleigh v Braithwaite (1615)
- Facts: Braithwaite asked Lampleigh to obtain a King's pardon. Lampleigh did so at his own expense. Braithwaite later promised £100 but failed to pay.
- Principle: Exception to past consideration rule. Where a service is requested with reasonable implication of payment, a later promise to pay is enforceable.
Pre-existing duties
Tweddle v Atkinson (1861)
- Facts: A father and prospective father-in-law agreed to pay money to the claimant. The father-in-law died before paying. The claimant sued his estate.
- Principle: Consideration must move from the claimant. Since the claimant provided no consideration for the original agreement, he could not enforce it.
Stilk v Myrick (1809)
- Facts: When two sailors deserted, the captain promised the remaining crew extra wages if they sailed the ship home. The captain later refused to pay.
- Principle: Performing an existing contractual duty is not valid consideration for a new promise.
Collins v Godefroy (1831)
- Facts: A police officer claimed payment for giving evidence in court as promised by a defendant.
- Principle: Performing an existing public/legal duty cannot constitute valid consideration.
Hartley v Ponsonby (1857)
- Facts: When 17 crew members deserted leaving only 19 (four able seamen), the voyage became dangerous. The captain promised extra wages. He later refused to pay.
- Principle: Exception to pre-existing duty rule. Undertaking significantly greater risk beyond original obligations constitutes new consideration.
Exam guidance
Essential Tips for Exam Success:
When answering questions on consideration:
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Always define consideration using either the Dunlop v Selfridge definition or the benefit and detriment concept.
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Identify the consideration in any scenario – don't assume it must be money. Look for any act, forbearance, or promise given in exchange.
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Apply the relevant rules systematically: Is it adequate? Is it sufficient? Is it past consideration? Is it merely performance of an existing duty?
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Use cases to support your reasoning – don't just cite them. Explain why the judge decided as they did and how this applies to your scenario.
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Look for exceptions – particularly the Lampleigh v Braithwaite exception and the Hartley v Ponsonby exception.
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Consider both parties' perspectives – remember that consideration must move from both sides (benefit and detriment for each party).
Remember!
Key Points to Remember:
- Consideration is the price paid for a promise, making it enforceable
- Both parties must provide consideration – each must receive a benefit and suffer a detriment
- Consideration need not be adequate (fair), but it must be sufficient (legally recognized as having value)
- Past consideration is generally invalid – the exception is when a service is requested with reasonable implication of payment
- Performing an existing duty is not valid consideration – unless you go significantly beyond what was originally required
- Key cases to remember: Dunlop v Selfridge (definition), Thomas v Thomas (adequacy), Ward v Byham (sufficiency), Roscorla v Thomas (past consideration), Lampleigh v Braithwaite (exception), Stilk v Myrick (existing duties), Hartley v Ponsonby (exception)