Consideration

Something the law recognises as valuable, which is given **//in return//** for a promise and can be seen as the agreed price of the promise. Consideration is the price paid for another’s promise: Kirby P in //**__Beaton v McDivitt__**.// Consideration must move from the promisee.


 * (I) About Consideration **
 * (a) What is consideration? **
 * A promise will be enforceable at CL only if it is supported by consideration or is a deed
 * A promise not supported by consideration may be enforceable in equity on the basis of equitable estoppel if it has been relied upon to the detriment of the promisee
 * Each party must provide consideration in return for the obligations undertaken by the other party under the agreement.
 * Each party must **//give something in return for the promise/s//** made by the other party.
 * A valuable consideration, in the sense of law, may consist in some **//right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility, given suffered or undertaken by another//** ...**//__Currie v Misa__//**//__,__// Per Lush J
 * The giving of a benefit or the accruing of a detriment (**//__Carlill__//**)
 * The price of a promise


 * (b) History of Doctrine of Consideration **
 * Consideration was originally concerned with the motivation of making a promise, e.g. examination of **//why//** the promise was made
 * Reason for promise became basis for enforcement, e.g. “motive” was used to distinguish between enforceable and unenforceable promises
 * Enforceable when promise conferred benefit on promisor or promise acted to detriment in reliance on the promise

EG: a sale of land or property/ required in certain circumstances (formalities)
 * (c) When is Consideration not required? **
 * Consideration is **//not//** required for promises contained in a deed
 * a deed is an instrument in writing (signed, and sealed- note: delivered contained in sealed definition)


 * (d) When is Consideration required? **
 * Consideration required to make contract enforceable
 * When contract made by exchange of promises party gives consideration in support of the other’s promise
 * Agreement not supported by consideration is called **//nudum pactum//** (naked agreement) and is unenforceable (except for when it is constituted in a deed)
 * Consideration is important when an agreement is entirely one-sided and a promise remains unperformed


 * (II) Elements of consideration **

promisee or a benefit to the promisor: **//__Currie__//**; mutual promises fulfil this: **//__Pecke__//** promisee must be given **//in return//** for the promise: **//__AWM__//**. Can't be a conditional gift:
 * 1. ** **Benefit/detriment requirement**: consideration must consist of a detriment to the
 * 2. ** **Bargain requirement**: benefit conferred on the promisor or detriment suffered by
 * //__ AWM __//**** ; ** or mere act in reliance of the gift: **//__Beaton__//**.


 * **// Note //** : courts don’t expressly use a two-stage test- some cases focus on benefit/detriment aspect while other cases focus on bargain requirement


 * (a) The benefit/detriment requirement **
 * Valuable consideration **//must//** consist of a detriment to the promisee **//OR//** a benefit to the promisor
 * i.e. the person to whom the promise is made must either confer/give a benefit on the promisor, **//or//** must incur a legal detriment (i.e. giving something up- eg: transfer of property, car/ OR undertaking an obligation- eg: a promise not to trade in competition with A)
 * mutual promises provide good consideration for each other: if A and B exchange promises, each promise will constitute a legal benefit to the promisee and a legal detriment to the promisor only if it is enforceable
 * but return promise will be binding **//only if//** it is enforceable


 * (b) The bargain requirement **
 * the benefit conferred on the promisor or the detriment suffered by the promisee must be **//given in return for the promise//**
 * i.e. the act relied on as consideration must be performed as the agreed price of the promise
 * The bargain notion of consideration was adopted by the HCA in **//__AWM; Beaton__//**


 * __Bargains and reliance__ **
 * **// Quid pro quo //**//// Act performed in reliance on a promise not good consideration, but can give rise to an estoppel.
 * Whilst there needs to be a detriment and a benefit, there must be a relation of //quid pro quo// between the promise and the acts relied on as consideration for the promise: **//__AWM__//**


 * __Bargains and Conditional gift__ **
 * **// Conditional gift //** = promise to pay someone $100 **//if//** they perform a certain act → **//cannot//** give rise to a contract.
 * **// Bargain //** = promise to pay someone $100 **//in return//** for performance of the act → **//capable//** of giving rise to a contract.


 * (III) Consideration must move from the Promisee **

**//Promisor//** =the person who makes promise; **//Promisee//**= person to whom promise is made


 * Consideration: must move from promisee
 * ** BUT **, need **//not//** move to the promisor
 * EG ** : A may undertake a contractual obligation to B in return for a benefit conferred by B on C
 * Where two or more parties to a contract are regarded as joint promisees, consideration may be provided by one of them on behalf of both of them or all of them: **//__Coulls v Bagot’s Executor and Trustee Co Ltd__//**
 * Note: it is possible to be a party to a contract in which a promise is made, but still be a stranger to the consideration given in return for that promise


 * (IV) Adequacy/sufficiency of consideration **


 * (a) **** Consideration must be sufficient **
 * Consideration must be sufficient, but need **//not//** be adequate: **__Nestle__**
 * Consideration need **// not be equal or even proportionate //** to the promise it supports because (Kirby J, **//__Woolworths Ltd v Kelly__//** outlined reasons why):

1. Courts have no way of assessing the value a particular person places on the consideration they havecontracted to receive 2. Any requirement of adequacy of consideration would render the enforceability of a contract uncertain 3. Courts’ stance protects economic freedom.


 * **// Note //** : courts refusal to consider adequacy of consideration means that a promise to give a peppercorn is good consideration for a promise to pay $1m
 * If the consideration is too uncertain or inadequate, that may be evidence to infer the promise was not intended to be enforced: **//__Woolworths Ltd v Kelly__//**


 * (b) Discretion as to performance **
 * Nominal consideration is fine: **//__Thomas__//**//.//
 * ** BUT, ** if promisor retains an unfettered discretion as to performance (promisor not bound to perform), promise is not = good consideration – **//illusory//** consideration
 * **// Note //** : the concept of illusory consideration overlaps with the concept of an illusory promise which may render a contract uncertain


 * (V) Past consideration **


 * (a) Past consideration not good consideration **
 * Past consideration is **//not//** considered sufficient consideration
 * Something given **//before//** promise is made **//not = good consideration//**.
 * Past consideration rule commonly invoked **//after//** contract completed and one of the parties makes a promise the other seeks to enforce (eg: Roscorla v Thomas)
 * // EG //** : A gives B a dog, and B subsequently promises to pay $x for it. Giving of dog not = good consideration for B’s promise to pay**//timing//** to determine if a promise is supported by good consideration
 * Past consideration not the same as executed consideration (**//executed consideration-//** something given as part of the **//same//** transaction as the promise eg: unilateral contract)
 * Promises made atfer the contract has been formed are considered to be made gratuitously. The contract remains binding regardless of a false promise after the formation of the contract: Roscorla v Thomas


 * (b) Exception: Promise to pay for past services **
 * Where services are performed at the request of the promisor and in circumstances that raise an **//implication that they are to be paid for//**, then performance of the services by the promisee will constitute good consideration for a subsequent promise to pay for them: **//__Ipex v Hosking; Lampleigh v Brathwait; Re Casey’s Patents; Steward v Casey__//**


 * (VI) The existing legal duty rule **


 * (a) An existing legal duty may arise from **
 * Contract
 * An imposition of law or a court (eg: judgment debt)
 * Public duty (eg: employment)


 * (b) Existing Legal Duty Rule usually seen in **
 * promise of extra money for an existing undertaking (eg: **//__Stilk__//**)
 * agreement to accept part payment of a debt in full settlement (eg: **//__Pinnel’s__//**__; **//Foakes//**__)
 * government agency providing extra service to citizens (eg: **//__Glasbrook__//**)


 * (c) //Promise to perform// an existing legal duty not good consideration **
 * Promise to perform an existing legal/public duty not = good consideration.
 * where a public duty is imposed upon the plaintiff, performance of that duty is **//insufficient//** consideration for the defendant’s promise of payment for the performance of that duty: **//__Collins v Godefroy__//**
 * ** BUT **, where the plaintiff acts **//in excess of the duty//**, that performance **//will be sufficient//** consideration to support the promise of payment
 * // EG //** : in **//__Glasbrook Bros v Glamorgan County Council__//-** police provided guards, 24 hours a day; held- acting in excess of their public duty and thus was good consideration to support the D’s promise to pay for those services
 * Invoked most commonly in relation to one-sided variations to contracts where one party either assumes an additional obligation or agrees to release the other party from an obligation: **//__Stilk__//**
 * It does not amount to good consideration because the promisee is doing “no more than...bound to do under the contract”: **Mason J, //__Wigan__//**
 * The promisor incurs no new burden, promisee receives no new benefit. Thus the rule discourages parties from seeking additional benefits by threatening to breach.


 * (d) //Performance of// existing legal duty not good consideration **
 * Where the P is bound by an existing contractual duty to the D, performance of that duty will **//not//** amount to sufficient consideration to support a further payment made by the D.
 * **//__ Stilk v Myrick __//****__ : __** held- the sailor was **//already bound//** to do what was necessary to see the ship returned home, the performance of the work could **//not//** be good consideration to support the promise by the captain to make the extra payment
 * **//__ Hartley v Ponsonby __//**** : ** held- crew were entitled to enforce a promise by the captain to pay the deserter’s wages to them as the desertion made the voyage perilous and thus, as the remaining crew were **//performing over and above their contractual duty//**, they had provided good consideration for the promise
 * **//__ Williams v Roffey Bros __//**** : ** the decision here suggests that the performance of an existing contractual duty will be good consideration where it provides **//a benefit to the promisor//**
 * **// Note: //** Williams was followed in Australia by **//__Musumeci v Winadell Pty Ltd__//** (NSW decision)- it remains to be seen whether this approach will be adopted by higher courts


 * (e) Part payment of a debt **
 * Part payment of a debt does **//not =//** good consideration for an agreement to discharge the debt: (Rule in **//Pinnel’s//** case; **//Foakes v Beer//**)
 * Even if P agrees to a lesser sum than the amount owed, the amount paid is not good consideration, and the P may sue at any stage for the remaining debt: **//__Pinnel’s case__//**


 * (f) Exceptions to Pinnel’s rule for part payment of debt **


 * __1. Composition with creditors__ **
 * creditors enter an arrangement whereby they each accept a percentage of their debts in full satisfaction of their debts = good consideration


 * __2. Payment by a third party__ **
 * a creditor who accepts part payment of the debt from a third party cannot claim the balance from the debtor, as to do so would constitute a fraud on the third party = good consideration


 * __3. Introduction of a new element by the P__ **
 * such as payment in different kind/ another form **//OR//**
 * at a different place/early payment
 * if a creditor agrees to **//accept something different from that which he/she is entitled//**, that would constitute **//good consideration//** for the promise to forgo the balance of the debt = good consideration.
 * EG: ** promise to accept $999 in discharge of a $1000 debt is **//not//** = good consideration
 * BUT ** promise to accept $1 + old sand shoe = good consideration


 * (VII) Exceptions to the existing legal duty rule **


 * (a) Fresh Consideration **
 * Where beneficiary undertakes to do **//something more than he/she originally promised//** or was obliged to do under original contract: **//__Hartley__//**
 * If the beneficiary provides fresh consideration, then the ELDR can have no application: **//__Larkin v Girvan__//**

2. Exception could only apply where promise has **//not//** been induced by ‘unfair pressure’
 * (b) Practical benefit **
 * Where modifying party obtains a **//practical benefit//** from beneficiary’s promise to perform an existing obligation: **//__Williams v Roffey__//**
 * In **//__ Re Selectmove __//** held that //**__Williams v Roffey__** **cannot**// apply to an agreement todischarge a debt in return for part payment.
 * In **//__Musumec__i//**, Santow J said **//__Williams__//** should apply in Australia with 3modifications:
 * // 1. //** Exception could apply where modifying party agreed to **//accept less//** (as in this case) rather than **//pay more//**
 * // 3. //** Exception only applies where beneficiary’s performance is capable of being regarded by the modifying party as worth more than any remedy against the beneficiary i.e. **//performance worth more than award for damages.//**


 * (c) Promises made to third parties **
 * A promise to perform an existing contractual obligation **//does//** amount to good consideration **//if it is made to a person who was not a party to the original contract//**
 * In **//__ Pao On v Lau Yiu Long __//** : Ps provided good consideration because the shareholders obtained the benefit of a direct obligation, which they were able to enforce. Also, the Ps entry into the main contract could not be regarded as past consideration, because they agreed to the restriction on selling their shares to the public company on the understanding that they would be indemnified against loss resulting from a fall in the share price.
 * The ELDR does **//not//** apply (and exception does) because the promisor incurs an additional legal obligation, and confers an additional legal right on the new promisee


 * (d) Compromise and forbearance to sue **
 * Promise to perform an existing legal obligation = good consideration when made by beneficiary as part of a **//bona fide//** compromise of a disputed claim: **//__Wigan v Edwards__//**
 * i.e. in certain circumstances, giving up the right to sue in return for a settlement may be good consideration
 * BUT, the right to sue must **//not//** be frivolous; the promisee must believe that he/she has a reasonable chance of success


 * e) Termination and replacement **
 * Exception applies where parties have terminated original contract and entered into a new contract.
 * Exception applies even when the obligations of modifying party are more onerous than, and those of beneficiary are the same as, under the original contract.
 * **// NOTE //** : this exception to ELDR will only operate where parties must have intended to terminate and replace, rather than modify their original contract.