Contract - Consideration

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Definition of Consideration

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Consideration is not merely another term for the presence of a moral obligation to carry out promise. In the case of Hawkes v Saunders [1782] Lord Mansfield declared that:

Where a man is under a moral obligation, which no Court of Law or Equity can enforce, and promises, the honesty and rectitude of the thing is consideration ... The ties of conscience upon an upright mind are of a sufficient consideration.

Under this definition, consideration involved equating a moral obligation with a legal duty.

However, this approach was soon rejected in the case of Eastwood v Kenyon [1840], where Lord Denman noted that if the presence of a moral obligation was all that was required for a promise to be enforceable, then surely all promises should be enforceable, since to make a promise is to assume a moral obligation to carry out that promise. Thus, it was held that a mere moral obligation was not, of itself, good consideration.

Consideration is something of tangible value that is given or foreborne in exchange for a promise. In Thomas v Thomas [1842] it was held that:

Consideration means something which is of value in the eyes of the law, moving from the plaintiff, it may be some detriment to the plaintiff or some benefit to the defendant.

An alternative definition was offered in Dunlop v Selfridge [1915], where consideration was defined 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.

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Thomas v Thomas [1842] 2 QB 851

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A widow paid rent of £1 per annum for the occupation of a house. Despite the fact that the market rental value was considerably higher than this nominal sum, the court was of the opinion that it still constituted consideration.

"Consideration means something which is of value in the eyes of the law, moving from the plaintiff, it may be some detriment to the plaintiff or some benefit to the defendant. "

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Chappell & Co. Ltd v Nestle Co Ltd [1960] AC 87

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The purchasers of a Nestle chocolate bar could avail of an offer to buy a record by sending Nestle 1 shilling and 6 pence together with three empty chocolate wrappers. The plaintiffs owned copyright of the record in question and sued Nestle for royalties arising from the promotion. Chappell argued that the monies made by Nestle should not only include the price paid for each record but also the cumulative value of the empty chocolate bar wrappers, which were also part of the promotion. Indeed, they argued that the chocolate wrappers formed part of the consideration to post the record.

The House of Lords agreed with the plaintiffs and held that the wrappers did form part of the consideration as they had some tangible value, however nominal, and thus they were good consideration.

The court concluded that "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".

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Adequacy and Sufficiency of Consideration

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Under Irish law, consideration need not be adequate, but it must be sufficient.

Adequacy of the Consideration

The courts are not concerned with whether or not the consideration is adequate, therefore they will not inquire into the economic value of the transaction.

Sufficiency of Consideration

The consideration provided must be sufficient, i.e. something of value in the eyes of the law. While acknowledging that " ... the Irish courts have not yet ruled conclusively on sufficiency", Clark cites the Northern Ireland Court of Appeal case of O'Neill v Murphy [1936) NI 16 as being instructive in this regard.

There are four specific areas that help clarify what may be regarded by the Courts as sufficient
consideration:

(1) The performance of an already existing public duty will not constitute sufficient consideration.

(2) The performance of an already existing contractual duty will not constitute sufficient
consideration.

(3) Part-payment of an already existing debt will not constitute sufficient consideration.

(4) Whether or not forbearance (giving up something) constitutes sufficient consideration.

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O'Neill v Murphy [1936) NI 16

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In this case a builder carried out work on buildings in a neighbouring parish in return for prayers being said for his intentions. It was alleged that the builder had been unduly influenced into doing the work by his religious advisor. In response to this allegation, the religious advisor claimed that this work was being carried out on the basis of a contract and that the prayers being said were sufficient consideration.

The court held that prayers do not constitute sufficient consideration.

Friel asserts that this case should be treated with care, particularly given that, at the time, members of the judiciary in Northern Ireland may have taken a more secular view of things and, indeed, prayers might be interpreted to constitute good consideration in the Republic of Ireland.

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Collins v Godefroy [1831) I B & Ad 950

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Godefroy promised to pay Collins 6 guineas if Collins would attend court and give evidence for Godefroy. However, Collins had been issued with a subpoena, which meant he was under a legal duty to attend court on that day. Nonetheless, Collins sued for the money Godefroy had promised to him.

The Court rejected his claim on the basis that there was insufficient consideration - Collins
had done nothing over and above what he was already legally bound to do.

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England v Davidson [ 1840] II Ad and El 856

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The defendant offered a reward to anyone who gave information that would lead to the capture of a felon. The plaintiff was a police constable who provided information and claimed the award. The defendant refused to pay on the basis that there was no contract as the police constable was doing nothing over and above what he was already publicly bound to do and had not provided any consideration for this reward. Moreover, he argued that it was void as being against public policy.

The Court rejected both of these arguments. In relation to the issue of consideration, the Court was of the opinion that there are certain services a police officer is not required to render and that these services can indeed amount to sufficient consideration under the proper circumstances. The court also asserted that they were reluctant to find a contract contrary to public policy.

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Glasbrook Bros v Glamorgan County Council [1925] AC 270

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In this case the Welsh police had been requested to maintain a presence around a mine during a workers' strike. The police initially offered to pay the occasional visit to the mine during the course of the strike. However, the mine-owners felt that a permanent police presence would be merited, given the nature of the
strike. They agreed to pay the police £2,200 for this extra service. But when the police sought payment for services rendered, the mine-owners refused to pay on the basis that the police were already obliged to provide this protection. The police subsequently sued for payment.

The House of Lords was of the opinion that in maintaining a permanent police
presence around the mine at the relevant time, the policemen were doing something over and above what they were publicly obliged to do, therefore the provision of this service was deemed to be sufficient consideration and the mine-owners ought to have paid the money.

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Harris v Sheffield United FC [1988] QB 77.

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The Court of Appeal had to consider the possible liability of a professional football
club for the payment of internal and external policing of their stadium. At the time, crowd misbehaviour at soccer matches was quite prevalent and on this basis the football club claimed that the possible risk to property and the public made the provision of police protection an essential requirement.

Nonetheless, the Court of Appeal rejected this argument and was of the opinion that a privately organised football match put a strain on already scarce resources.

Moreover, this meant that if the police were called upon to deliver services over and above what they normally provided, these expenses should be recoverable from the football club.

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McKerring v Minister for Agriculture [1989] lLRM 82

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In this case a dispute arose between the Minister for Agriculture and a farmer in respect of grant payments under the TB Eradication Scheme. The plaintiff had not been paid under the scheme because he had failed to comply with the rules and regulations. In determining whether the scheme as discretionary or in fact one in which payment was made under contract.

O'Hanlon J. proceeded to inquire into whether or not the statutory requirement to comply with the scheme could constitute consideration moving from the plaintiff. The Court found that the plaintiff had provided sufficient consideration through strict compliance with all the conditions " ... even though some of them may be a matter of legal obligation as well".