Contract Law: Key Principles in Consideration

Posted by Catherine Robinson on October 26, 2023

5-min read

Consideration is a fundamental element in UK contract law, and it refers to something of value exchanged between the parties as part of their agreement. In this blog post, we will explore some of the key principles and cases.

How to Get a First in Law

Consideration Must Be Real and Not Illusory:
- In a valid contract, consideration must be real and have some value. It cannot be illusory or purely nominal. It should represent a genuine exchange of something of value between the parties.
- Case: Currie v. Misa [1875] LR 10 Ex 153 - In this case, it was established that consideration must have some value; it cannot be merely nominal.
Consideration Must Move from the Promisee:
- The consideration must flow from the promisee, the person to whom the promise is made. It signifies that the promisee is conferring something of value to the promisor in exchange for the promise.
- Case: Dunlop Pneumatic Tyre Co. Ltd v. Selfridge & Co. Ltd [1915] AC 847 - This case emphasized that consideration must move from the promisee.
Past Consideration is Not Valid:
- Past consideration, or something done before the contract was formed, is generally not valid consideration. Consideration must be given after the formation of the contract.
- Case: Roscorla v. Thomas (1842) 3 QB 234 - Past consideration was held to be insufficient to support a contract.
Consideration Must Not Be Part of a Legal Duty:
- If a person is already legally obligated to do something, doing that same act cannot serve as valid consideration for a new promise.
- Case: Stilk v. Myrick (1809) 2 Camp 317 - A seaman's promise to do work he was already obligated to do did not provide valid consideration for additional pay.
Consideration Must Be Sufficient But Need Not Be Adequate:
- Consideration must be sufficient, meaning it should have some value. However, it does not need to be adequate, and the courts will not generally inquire into the fairness of the bargain.
- Case: Chappell & Co. Ltd v. Nestle Co. Ltd [1960] AC 87 - Even a small gift (consideration) accompanying a chocolate bar wrapper was considered sufficient to create a contract.
Consideration Need Not Benefit the Promisor:
- Consideration can be something that benefits the promisee, even if it doesn't directly benefit the promisor.
- Case: Tweddle v. Atkinson (1861) 1 B&S 393 - In this case, the principle that consideration must move from the promisee was reinforced, even if the promisor did not receive any direct benefit.
Performance of an Existing Obligation Can Be Consideration in Some Cases:
- In some situations, the performance of an existing duty can be valid consideration if it goes beyond what was originally required or if it involves a practical benefit to the promisor.
- Case: Hartley v. Ponsonby (1857) 7 E & B 872 - When sailors were asked to do more work due to crew shortages, their performance of an existing duty was considered valid consideration because it benefited the ship's safety.

Let's expand on principle #7 and look at the curious case of Williams v. Roffey Bros. & Nicholls (Contractors) Ltd [1991] 1 QB 1.

Williams v. Roffey Bros. & Nicholls is a significant case that expanded the understanding of consideration, particularly in the context of existing contractual obligations. This case introduced the doctrine of practical benefit and established that, under certain circumstances, performance of an existing contractual duty can serve as valid consideration.

In this case, Roffey Bros. were contractors hired to renovate a block of flats. Williams was a subcontractor responsible for carpentry work. Roffey Bros. ran into financial difficulties and were concerned that they might not complete the project on time, potentially incurring penalties. Williams was also facing financial difficulties and was at risk of not completing his subcontracted work.

Roffey Bros. made a promise to Williams to pay him an additional sum if he could complete the work on time. Williams did complete the work on schedule, but Roffey Bros. then refused to pay the additional amount, arguing that there was no consideration for the promise because Williams was merely performing an existing contractual duty.

The Court of Appeal held that the promise to pay Williams the additional sum was enforceable. They reasoned that there was a practical benefit to Roffey Bros. in ensuring that Williams completed the work on time. The court established the principle that if a promisor obtains a practical benefit from the promisee's performance, even if it involves a pre-existing contractual duty, the performance can constitute valid consideration.

Glidewell LJ set out that if:

There is a contract for goods or services between A and B
And A cannot perform as promised
And B agrees to pay more for the performance
From which B obtains a benefit, or obviates a disbenefit (meaning avoids a bad thing)
And there is no evidence of fraud or duress by A to obtain the promise from B
Then this can amount to consideration for that promise from B

The Williams v. Roffey Bros. case is particularly important because it expanded the traditional view of consideration, recognising that in some cases, practical benefits can constitute valid consideration. It illustrates the flexibility of the law in adapting to different circumstances and underscores the importance of looking at the overall context when determining the presence of consideration in a contract.

Hopefully this article cleared up any confusion you might have on consideration. Please feel free to leave a comment if there's anything you'd like clarifying!

Disclaimer:

The information provided in this blog post is based on the research I carried out for my law degree which I completed in 2020. I accept no responsibility for errors or omissions. Legal principles and interpretations may change over time, and the content presented here may not reflect the most current developments in UK contract law. This information is intended for general informational purposes only and should not be considered as legal advice or relied upon as a substitute for professional legal counsel. For the most up-to-date and accurate legal information or advice, it is advisable to consult with a qualified legal professional who is knowledgeable about the latest legal developments and can provide guidance specific to your situation.