Consideration is an essential element in the formation of a contract. Consideration may be a promise to carry out an action or a promise to refrain from carrying out an act that one is legally entitled to perform. Consideration may be defined in many ways, the following definition was obtained from Currie v Misa (1975) LR Exch 153. In this case, Lush J said: “A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” (An introduction to the Law of Contract, 2005) Consideration may be “executory” which means that the action has not yet been performed. Consideration may be executed which means that the party has already carried out the action which was promised. But consideration cannot be “past”. This means that if a party performs an action voluntarily and after this action is performed, the other party makes a promise, this is said to be “past” consideration. Consideration must be sufficient. This means that consideration must have a value that can be objectively determined. A promise of love or affection cannot be enforced because of its subjective nature. Consideration need not be adequate. The court will not decide whether consideration is adequate. This is left to the parties to decide Two cases illustrate these rules of consideration.
Thomas v Thomas (1842), 2 Q.B. 851, 114 E.R. 330
Facts: M.R John Thomas verbally expressed on his death bed that after he died his wife should be permitted to remain on the premises of the matrimonial house which was in his name. The conditions were as follows; 1) She paid £1 per annum as rent, 2) She kept the premises in good condition and 3) She did not remarry. After M.R. Thomas died, the executors refused to sign the deed and tried to make MRS Thomas vacate the premises.MRS Thomas sued Held: she succeeded on the grounds that £1 was sufficient consideration and therefore the agreement was binding. Chappell & Co Ltd v Nestlé Co Ltd (1960) AC 87 House of Lords Facts: To promote chocolate sales, Nestlé advertised that it would sell a record of the song “Rocking Shoes” for 1shilling and 6pence plus 3 Nestlé chocolate bar wrappers. However, Chappell & Co owned the copyright for the song and Nestlé did not seek their permission to use it. Therefore, Chappell & Co sued Nestlé. Under the Copyright Act Nestlé would have to pay Chappell & Co royalties based on the “normal retail selling price”. Nestlé offered Chappell & Co 6.25% of 1s 6d. Chappell & Co refused it stating that the “normal retail price” was not only 1s 6d but also 3 chocolate wrappers. Nestlé argued that the wrappers were valueless and that they had already disposed of them. Held: the court ruled in favor of Chappell & Co on the basis that even though the wrappers had no value in the “eyes of the public”. They held value “in the eyes” of Nestlé due to the fact that without the wrappers, an individual would not be able to obtain a record. Therefore, because the wrappers promoted Nestlé’s products, increased sales and public relations, they were thought to be good consideration. This leads us to the point that even though some acts and promises are considered to have value, they cannot be accepted as good consideration. Therefore, performance of an act that a public duty obliges an individual to perform is not acceptable consideration. A case can be used to illustrate this.
Collins v Godefroy (1831)1 B & AD 950; ER 1040
Facts: Collins was served with a subpoena to give evidence in a case in which Godefroy was a litigant. Collins alleged that Godefroy promised to pay him 6 Guineas for him to go into court and that he was not paid. Held: There was no consideration for the promise. A subpoena means that a public duty would have to be carried out by attending a court hearing. This led to the decision that there was no consideration and therefore Collins...
References: Ronald I C Bartsch (2004), ‘Aviation Law in Australia, Second Edition’, Thomson
Stephen Graw (2005), ‘An introduction to the Law of Contract, Fifth Edition’, Thomson
Vermeesch, RB & Lindgren, ‘Business Law of Australia’, Butterworths
Turner, Clive, ‘Australian Commercial Law’, Thomson.
Farlex, ‘The Free Dictionary’, >http://legaldictionary.thefreedictionary.com/consideration
Professor Demeyere, (2003), ‘Contract Law 410 Section E (003)-Thomas v Thomas’ >http://instruct.uwo.ca/law/410-003/thomas.html
Patterson and Hocker (1998),‘Chappell v nestle’ > http://law.anu.edu.au/COLIN/Lectures/consid.htm
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