Rules of Consideration

Topics: Contract, Consideration, Money Pages: 8 (2516 words) Published: December 5, 2014
Rules of consideration

1. Consideration must not be past:

Re McArdle (1951) Ch 669 Court of Appeal

Majorie McArdle carried out certain improvements and repairs on a bungalow. The bungalow formed part of the estate of her husband's father who had died leaving the property to his wife for life and then on trust for Majorie's husband and his four siblings. After the work had been carried out the brothers and sisters signed a document stating in consideration of you carrying out the repairs we agree that the executors pay you £480 from the proceeds of sale. However, the payment was never made.

Held:

The promise to make payment came after the consideration had been performed therefore the promise to make payment was not binding. Past consideration is not valid.

Past consideration may be valid where it was proceeded by a request:

Lampleigh v Braithwaite [1615] EWHC KB J17

The defendant had killed a man and was due to be hung for murder. He asked the claimant to do everything in his power to obtain a pardon from the King. The claimant went to great efforts and managed to get the pardon requested. The defendant then promised to pay him £100 for his efforts but never paid up.

Held:

Whilst the promise to make payment came after the performance and was thus past consideration, the consideration was proceeded by a request from the defendant which meant the consideration was valid. The defendant was obliged to pay the claimant £100.

Bill of exchange
 

2. Consideration must be sufficient but need not be adequate:

There is no requirement that the consideration must be market value, providing something of value is given eg £1 given in exchange for a house would be valid. The courts are not concerned with whether the parties have made a good or bad bargain\

Chappel v Nestle [1960] AC 87 House of Lords

Nestle ran a sales promotion whereby if persons sent in 3 chocolate bar wrappers and a postal order for 1 shilling 6d they would be sent a record. Chappel owned the copyright in one of the records offered and disputed the right of Nestle to offer the records and sought an injunction to prevent the sales of the records which normally retailed at 6 shillings 8d. Under s.8 of the Copyright Act 1956 retailers were protected from breach of copyright if they gave notice to the copyright holders of the ordinary retail selling price and paid them 6.25% of this. Nestle gave notice stating the ordinary selling price was the 1 shilling 6d and three chocolate bar wrappers. The question for the court was whether the chocolate bar wrappers formed part of the consideration. If they did it was impossible to ascertain the value they represented and therefore Nestle would not have complied with their obligation to give notice of the ordinary retail selling price. If the wrappers were a mere token or condition of sale rather than constituting consideration, then the notice would be valid and Nestle could sell the records.

Held:

The wrappers did form part of the consideration as the object was to increase sales and therefore provided value. The fact that the wrappers were simply to be thrown away did not detract from this. Therefore Chappel were granted the injunction and Nestle could not sell the records as they had not complied with the notice requirements under s.8.

3. Consideration must move from the promisee

If a person other than the promisee is to provide the consideration, the promisee can not enforce the agreement:

Tweddle v Atkinson [1861] EWHC QB J57 Queen's Bench Division

A couple were getting married. The father of the bride entered an agreement with the father of the groom that they would each pay the couple a sum of money. The father of the bride died without having paid. The father of the son also died so was unable to sue on the agreement. The groom made a claim against the executor of the will.

Held:

The claim failed: The groom was not party to the agreement and the...
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