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Adequacy of consideration
Consideration need not be adequate but must be sufficient (peppercorn principle) [nominal consideration]
Value is subjective Courts have no expertise in monetary value judgments Uncertainty with every case Other areas of law could cover it instead Economic freedom which the courts should respect
Sufficiency of consideration
Must be sufficient in the eyes of the law – must have legal value
PAST CONSIDERATION
General rule: Past consideration is not good consideration. Consideration which was for a pre-existing contract [Roscorla v Thomas]
Exception: Services are expected to be paid for. Past consideration is good consideration when it was at the promisor’s request [Lampleigh v Brathwait] [Ipex software]
EXISTING LEGAL DUTY
General rule: Not good consideration as the promisee is not doing anything more than they were obliged to do in the first place [Stilk v Myrick]
Part payment/payment of a lesser sum for a larger sum does not constitute as good consideration [Foakes v Beer]
EXCEPTIONS TO THE EXISTING LEGAL DUTY RULE
Practical benefit
When doing what they were obliged to do would confer a practical benefit to the promisor
Test in [Williams v Roffey Bros] per Glidewell
- A and B enter into a contract
- B has doubts as to whether or not A can complete the contract
- B gives additional payment in return for A to perform their promise
- B obtains a benefit or obviates a disbenefit
- B’s promise is not part of economic duress or fraud on behalf of A
- The benefit to B is valid consideration
Santow’s modifications in [Musumeci v Winadell]
- A and B enter into a contract
- B has doubts as to whether or not A can complete the contract
- B gives additional payment or other concession in return for A to perform their promise A’s performance is worth more than any remedy or damages if they were to breach the contract A suffers a detriment as they could have forgone the concession and breached the contract instead
- B obtains a benefit or obviates a disbenefit
- B’s promise is not part of economic duress or fraud on behalf of A
- The benefit to B or detriment to A is valid consideration
Fresh consideration
Additional consideration that was not given prior [Ponsonby]
Termination and replacement of a contract
After being released from a contract, consideration for the new contract with the same terms [Ponsonby]
Third party
New obligations to a third party Promise to perform a pre-existing obligation for a third party – valid if the promisee gains a benefit from this performance [Pao on v Lau Yiu Long]
Bona fide
If both parties genuinely believe that they had no legal obligation to follow through with the contract [Wigans v Edwards] Edwards believed that they had a right to sue Wigans/not pay him. The consideration was not to sue
[Intention to create legal relations]
Intention – an outward manifestation that suggests that a party intended to enter inter a legal relation
Objective approach: whether or not the party intended to be bound according to a reasonable person [Shahid] – look at the circumstances, status of the parties, their relationship, what they said or did, how weighty the issue is
Presumptions
