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