Revise Consideration for Cambridge 9084 (3.1.4)

Consideration is the cornerstone of a bargain in English contract law, representing the 'price' for which a promise is bought. The classic definition comes from Lush J in Currie v Misa (1875), stating it may consist of '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 essence, each party must provide something of value to the other, creating a reciprocal exchange. This can be 'executed' (an act performed in return for a promise) or 'executory' (a promise exchanged for another promise). Without this element of bargain, a simple promise is generally unenforceable, as it is considered a gratuitous promise or a gift.

A fundamental rule is that consideration must be sufficient, but it need not be adequate. 'Sufficient' means it must have some value in the eyes of the law, even if it is minimal. 'Adequate' refers to its economic or market value. The courts will not assess the fairness of a bargain, upholding the principle of freedom of contract. In Thomas v Thomas (1842), a promise to pay £1 per year in rent was deemed sufficient consideration for the right to inhabit a house. Similarly, in Chappell & Co v Nestle Co Ltd (1960), used chocolate wrappers were held to be part of the consideration for a record, as they had commercial value to Nestle by promoting sales. This demonstrates that as long as the consideration is tangible and has some legal value, its inadequacy is irrelevant.

The general rule is that any act performed before a promise is made cannot be valid consideration for that subsequent promise. This is known as 'past consideration'. The act was not done in exchange for the promise, so the element of bargain is missing. In Re McArdle (1951), improvements made to a house were completed before the owners promised to pay for them; the promise was unenforceable as the work was past consideration. However, an important exception exists where the act was done at the promisor's request, there was a mutual understanding that the act would be remunerated, and the promise would have been legally enforceable if made in advance. This principle was established in Lampleigh v Brathwait (1615) and affirmed in Pao On v Lau Yiu Long (1980).

A recurring issue is whether performing a duty you are already contractually obliged to perform can be good consideration for a new promise from the other party (usually for more money). The traditional rule, from Stilk v Myrick (1809), is that it cannot. In this case, sailors were promised extra wages to sail a ship back home after two crew members deserted. The court held the promise was unenforceable as the sailors were already contracted to do all they could to bring the ship home safely. However, if a party goes beyond their existing duty, this can be good consideration, as seen in Hartley v Ponsonby (1857), where so many crew had deserted that the remaining journey was exceptionally dangerous. The modern approach, established in Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991), created a significant exception. The court held that if one party's promise to pay more for an existing duty confers a 'practical benefit' on the promisor, this can be valid consideration, provided there was no economic duress. This reflects commercial reality but, as confirmed in Re Selectmove (1995), this 'practical benefit' argument does not apply to cases of part-payment of debt, which are still governed by Foakes v Beer.

The rule in Pinnel's Case (1602), affirmed by the House of Lords in Foakes v Beer (1884), states that part payment of a debt is not valid consideration for a promise to discharge the entire debt. A creditor who accepts a smaller sum in full settlement can still legally sue for the remaining balance. This is because the debtor is merely performing part of an existing duty and has provided no new consideration for the creditor's promise to forgive the rest. However, common law exceptions exist. If, at the creditor's request, the debtor provides something different ('a horse, a hawk or a robe'), pays at a different place, or pays earlier, this provides fresh consideration. The harshness of this rule is a key reason for the development of the equitable doctrine of promissory estoppel.