Principle of Consideration - Article Example

Enforceability of promise once consideration has been provided is too simplistic as a of the principle of consideration Abstract The doctrine of consideration is some benefit or detriment which the promisee undertakes to perform to the promisor. Therefore if there is no consideration in a contract, it is not a valid one. But there are several qualifications to consideration principle such as that consideration need not be adequate, past consideration is no consideration, it should executory or executed, and there can be no consideration between transactions out of love and affection. Situations like these render requirement of consideration in a contract a very essential one for determination of its validity. Enforceability of promise once consideration has been provided is too simplistic as a description of the principle of consideration Introduction One of the ingredients of a contact is consideration. Generally promise is enforceable when consideration is present for only then are parties to the contract are understood have intended to create legal relationship amongst themselves. But why it is too simplistic to assume if there is consideration present a promise is enforceable by examining different facets of consideration within the above context. Definition Sir Frederick Pollock defined 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, and the promise thus given for value is enforceable."1 This definition was rightly adopted by Lord Dunedin in Dunlop v Selfridge Ltd (1915) 2 Dunlop had sold tyres to Dew Ltd on condition that their (latter's) agents should not sell below the listed price of Dunlop. But Selfridge Ltd who had purchased tyres from Dew Ltd sold below the listed price. In this case of suing of Selfridge by Dunlop decided by House Lords in appeal, it was held that privity of contract was essential. And what determined privity in this case was consideration. As there was no consideration moved between the said parties, there was no contract between them and therefore Selfridge was not liable to Dunlop Even earlier to Dunlop case, principle of consideration was established in Currie v Misa (1875)3 wherein Misa issued cheque to Lizardi or bearer. As the cheque was dishonoured, the bearer Currie brought action on Lisa. It was held the bearer Currie even as a holder for value is not entitled to sue Misa as there was no consideration between them. The following are the rules of consideration. a) Consideration must be present in a promise and must have moved from the the promisee. In Tweedle v Atkinson (1861)4, it was held that the person entitled to sue is he who gives consideration. It follows also that gift is not a contract. b) Consideration must have some value. Hence natural love and affection or performance of a moral duty will not be used to enforce a promise. This was decided in White v Bluett(1853)5 wherein it was held that a son's promise not to complain to his father as to how his properties are distributed among his children in return for the father's promise not sue his son for the debts owed to him, can not be good consideration. "Judge Pollock held that the son had not provided good consideration as he had no legal right to complain. Thus, in promising not to complain, the son did not forbear or give up anything of value in exchange for his father's promise." (Barbara Lisa)6 c) Consideration need not be adequate. In Chappel and Co v Nestle7, it was decided that consideration of 1s 6 d with three wrappers of chocolates Nestle had offered was a sufficient consideration for the gramophone records offered in return. d) Consideration may be executory or executed but past consideration can not enforce a promise. A consideration already provided before promise was made is past consideration and therefore not good consideration. For example if A promises to reward B for the latter's act already performed, it is a case of past consideration. In Eastwood v Kenyon 8 guardian borrowed for the girl's education while young which later her husband promised to meet. In default, it was held the consideration for the husband's promise being a past one, it can not be enforced. Past consideration is no consideration. The only exception to this rule is Bill of Exchange. The two more are exceptions are no more valid having been superceded by new Acts. The first of the two is promise to pay a statute-barred debt since superceded by Limitation Act and second one is promise to carry out a promise previously given for a consideration during infancy since reversed by the Infants Reliefs Act 1874. In the view of Atiyah 9, three more such situations can be conceived of. One is a promise given employer to an employee in respect of past services if the employee gives some undertaking in respect of future conduct such as he will not compete with or damage his employer's interests. But orthodox definition of consideration would not consider this a case of past consideration as there is a counter promise by the promisee. Same is the case with golden handshakes in recognition of past services. Second, suretyship to pay some existing debt subject to the promisee rendering some future performance. Here again orthodoxy consideration is treated with lip service. Third, rule relating to enforcement of compromises or forbearance to sue as enforceable. In Pao On v Lau Yiu (1980).10 Privy Council held a promisor's promise enforceable even though the promisee had actually received a consideration for his own performance from a third party. There is another case of similar nature Horton v. Horton wherein a husband promised in a separation suit that he would pay his wife maintenance a specified sum and again signed an agreement to pay it tax free. This was held enforceable though there was no fresh consideration. The court paid some lip service to orthodoxy by holding that there was some doubt as to what parties originally intended. " Doubtless this sort of reasoning will continue so long as there are laws and layers, but it is exceedingly artificial" ( Atiyah)11 e) Part payment of a debt is not good consideration. If a creditor promises to discharge a debt in return for a fraction of payment, it can not be a consideration as it is merely part performance of a contractual duty already in existence. 12 "There are several well defined exceptions to Pinnel's Case, most notably being settlement in litigation where the parties agree to compromise by a payment a lesser sum without admitting that the greater sum was due. Payment of a lesser sum will also be sufficient were the currency changes, where the time of payment is brought forward, or where the place or manner of payment is changed (applying the long established rule that the court will not look into the adequacy of the consideration; that is, if a creditor is foolish enough to take 50 pence in the pound to get his money a week earlier, he is entitled to do so). The rule will also not undermine an agreement to accept a lesser sum when the original agreement is novated, or where the agreement to accept a lesser sum is made by way of a deed, or speciality contract."13 Gratuitous Promises Unless the gratuitous promise is under seal, it will not be enforced by the courts. Gratuitous promise is one that is given without consideration. A promise to make a gift can not be enforced as it is not supported by consideration. Promissory estoppel The following fact-situations may be considered as given Prof Attiyah.14 The promisor does not state any act which is to be performed by the promisee but promisee does act in reliance on the promise in a way which was natural and foreseeable result of the promise. This promise is not enforceable as a contract but enforceable to the limited extent recognized by promissory estoppel. The promisor states the act to be performed by the promisee, and the promisee performs some other act which is a necessary step towards the performance of the act as stated by the promisor but he does not perform the act stated. The promisee can not enforce the principal promise but in some circumstances be able to enforce an implied subsidiary promise. The promisor does not state any act which is to be performed by the promisee, but the promisee acts in reliance on the promise in a way in which the promisor had no reason to anticipate. The promisor does not act on the promise at all. According to Attiyah crucial cases are in the above paragraphs under promissory estoppel.Few would think case the last one is enforceable in the present state of law either as a case of contract or as a promissory estoppel. Case in 1st para under promissory estoppel, is actually the promissory estoppel.but it can be enforced as a case of consideration. Conclusion From the above it would be clear there is more to consideration principle than meets the eye and therefore enforceability of promise once consideration has been provided is too simplistic as a description of the principle of consideration Read More