Contracts Consideration Topic

Consideration The promise, price, detriment or forbearance given by the promisee as value for the promisor's promise In other words, consideration is the mutual exchange of promises E.g. John promised to do renovation on Neil's house. Neil must give John $10,000 as consideration to make the promise binding on John Required for simple contracts ( no simple contract w/o consideration) as it makes a promise enforceable Not required for formal contracts e.g. a deed Essential elements of consideration Australian Woollen Mills v Commonwealth After WW2, the government offered a subsidy for manufacturers purchasing wool for use in local manufacture The government subsequently stopped the subsidies, and AWM argued that there was a contract to pay the subsidy The court held that there was no consideration as buying wool was merely a necessary condition for the entitlement of a subsidy & Subsidies (& proposals included) not are promises, they are instruments of policy Sufficiency of consideration (not adequacy) Woolworths v Kelly There is consideration given in this case The court is not concerned with the adequacy of the consideration, but the sufficiency of consideration This because value is subjective and it is not for the courts to judge what price things are worth (except in situations concerning undue influence or unconscionable conduct) Sufficient consideration is consideration deemed by law to be of sufficient value to support a contract/transaction between 2 parties. Chappell v Nestle The wrappers held considerable value for Nestle, or else Nestle might not have asked for it Therefore the court ruled that the wrappers were good consideration even if they were nominal in value A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn" Illusory consideration ( non-existent) Dunton v Dunton The court ruled that Mrs Dutton's promise to conduct her in a specified orderly manner was good consideration for Mr Dunton's promise
It was not an illusory consideration, as she gave up her right to behave in disorderly conduct (something she was legally able, but not obligated to ) Public duties & consideration Glasbrook Bros v Glamorgan County Council This case considered whether or not performance of an existing duty could constitute good consideration Glasbrook sought police protection from Glamorgan county during a strike by its coal miners Glamorgan requested payment for additional service of the garrison, but Glasbrook refused to pay, arguing that the police were merely performing a public duty( therefore they, as the offeree in this case, did not provide consideration) But the court held that Glamorgan provided good consideration as provision of the garrison was additional protection above & beyond the public duty that the police were obligated to provide Thus, performance of public duty is not good consideration But performance of more than required by a public duty is good consideration Past consideration / Spent consideration In order for consideration to be valid, it must be co-extensive with the promise of the other party Something you have done before in the past, prior to entering the contract, cannot be offered as good consideration for a promise Roscorla v Thomas Roscorla bought a horse from Thomas for 30 pounds After the purchase, Thomas promised Roscorla that the horse was "sound & free from vice" In reality, the horse had a very bad temper & was vicious Roscorla then sued Thomas for a breach of contract The court held that there is no breach of contract, because the promise regarding the horse's state was not supported by consideration from Roscorla's part The consideration ( 30 pounds) was paid before the warranty of the horse. It was spent on the initial contract for the purchase, and thus, no longer available for the subsequent warranty Therefore the warranty was not legally binding. *For this case, Roscorla should have made the state of the horse as a term of the contract. Stewart v Casey Pre-existing contractual duty
Stilk v Myrick Hartley v Ponsonby The extra effort to complete the voyage was considered good consideration since many crew had abandoned Promise to perform an existing contractual duty is not good consideration Part payment of a debt Pinnel's Case Existing legal duty Foakes v Beer Dr Foakes owed Mrs Beer a judgment debt. Mrs Beer promised she would not take any proceedings on the judgment debt if Foakes paid 500 pounds immediately & the remainder in half-yearly payments But she later reneged on the agreement & claimed statutory interest due on the debt The court held that she was entitled to the interest, as Foakes had not given her anything extra as consideration for the promise This was based on the doctrine of Pinnel that the payment of a lesser sum on the day cannot be satisfaction for the whole sum, therefore payment of a lesser sum is not good consideration for a promise by the creditor not to claim the rest of the money due. Practical benefit / obviate (remove a detriment) Williams v Roffey Bros Roffey promised Williams an additional 10,300 pounds to complete the work Roffey later declined to pay on the basis that Williams did not provide current consideration (Williams doing the work was past consideration The court disagreed and stated that there was consideration as there was a practical benefit to the promisor (Roffey) It would have cost Roffey more time & money to get someone else to complete the work & Roffey itself recognised that the originally quoted price was less than reasonable Musumeci v Winadell The court held that there was an agreement for rent reduction, and it was supported by valid consideration Winadell agreeing to the rent reduction meant that it remained viable for Musumeci to remain in occupancy, which allowed Winadell to avoid the prospect of a vacancy (obviate a detriment) As avoiding a detriment is a benefit, Winadell received a practical benefit with the occupancy of Musumeci
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