First a reminder from last week….

Split in your Groups - what did we learn last week.

- Does a contract exist? Time and Place?

-What do we need?

-Carbolic?

-Offer – reasonable person?

-Invitation to treat? Example?

-Termination of offer - how? By whom?

- Acceptance what is required?

In this seminar we will focus on: Offer

Acceptance

Consideration Certainty

Intention, and

Capacity (online module)

Refer seminar guide

Consideration

The doctrine of consideration requires that something be given in return for a promise in order to make it binding.

If the promisee wants to enforce the promise made by the promisor, the promisee must be able to demonstrate that he or she has paid for the promise – i.e. given something in exchange for the promise. Classical theory. Can anyone think of an agreement that lacks consideration?

Without consideration, an agreement is said to be nadum pactum (a naked agreement). An empty promise is not legally binding!

Rules have been developed which establish what may amount to consideration. However there are many exceptions to these rules!!

Common consideration

▪ exchange of things (e.g. money for goods);

▪ I give you a laptop, you give me $500 cash

▪ (Executed consideration)

▪ exchange of a thing for a promise (e.g. money for some future service);

▪ I pay you $70, you promise to landscape my garden

▪ My consideration = Executed, yours = Executory

▪ exchange of a promise for a promise.

▪ I will sell you my house, at settlement you will pay me $400k

▪ Both sides = Executory

Classification of consideration

Terminology - Executory vs Executed Consideration

As we’ve seen, the mere making of a promise may be regarded as consideration although the promise has yet to be fulfilled. This is called executory consideration. Dan and Virginia enter into an agreement whereby Virginia is to

paint Dan's fence and Dan will pay her $75 for doing so when the

jobs done.

Where the promise has been fulfilled (i.e. money paid) or the consideration is an act that has taken place then the consideration is said to be executed. If Dan pays the money but Virginia is still to paint the fence then

Dan’s consideration is executed and hers executory.

Consideration – definition

In Dunlop Pneumatic Tyre Co Ltd v Seifridge & Co Ltd [1915] AC 847 at 885, Lord Dunedin defined consideration as the 'price' for which a promise is purchased.

The 'price' may be an act or another promise, and can, in limited circumstances, constitute a detriment to one party or a benefit to the other (flows to a third party).

A valuable consideration, in the sense of the 1aw, may consist either in some right, interest, profit, or benefit accruing to the one party; or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other -Currie v Misa (1875) LR 10 Ex 153 at 162

8

You can use my ute over

the weekend.

Great thanks, it’s

a deal!

You can use my ute over

the weekend._______________________________________________

OK, it’s a deal!

Great thanks, I’ll pay you

$100 for the 2 days and I’ll

refill the tank.

• No consideration given by B

• Nudum pactum, empty promise by A to hand over the car

• If A refuses to hand over the car, B cannot force A to keep his promise as B did not pay for A’s promise

• A = promises to hand over his car… B = promises to pay $ and refill the diesel tank

• B’s promise of $ was given IN RETURN FOR A’s promise to hand over the car (quid pro quo)

• If A refuses to hand over the car, B can force A to keep his promise as B paid for A’s promise with a promise

A B

A B

Referability

In Australian Woollen Mills Pty Ltd v Commonwealth(1954) 92 CLR, the court introduced the bargain element, which says that

‘In cases of this class [unilateral; such as Carbolic] it is necessary, in order that a contract

may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak the relation of a quid pro quo’

This bargain requirement means that there must be sufficient connection between the consideration and the promise which it is said to support.

Case Analysis: Australian Woollen Mills v Cth Think – how does this case relate to the bargain theory of contract? Was there a relationship of quid pro quo?

Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 HCA

FACTS

In June 1946 the Commonwealth Government announced that it would pay a subsidy to manufacturers of wool who purchased and used it for local manufacture after 30 June 1946.

The Plaintiff purchased and used wool for local manufacture between 1946-48 and received some payments. The Government subsequently stopped its subsidy scheme and the Plaintiff sued the Government for subsidies it claimed it was due.

Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 HCA

Plaintiff argued

1. There was a unilateral contract between it and the Government under which Commonwealth promised to pay subsidies if wool was bought for domestic consumption/manufacture.

2. By purchasing the wool, it provided consideration for the Commonwealths promises to pay the subsidies.

3. The plaintiff made purchases of wool in pursuance of the agreement (i.e. accepted the offer as per Carlill v Carbolic Smoke Ball Co.)

Australian Woollen Mills Pty Ltd v The Commonwealth

Held

There was no contract. The statement made by the Commonwealth was not offered as consideration for the plaintiff buying the wool. The Court stated that in cases such as this: ‘… it is necessary, … that it should be made to appear that the

statement or announcement which is relied on as a promise [here the subsidy statement] was really offered as consideration for the doing of the act, and that the act [buying and using the wool as directed] was really done in consideration of a potential promise inherent in the statement or announcement.’

There must be a relationship of quid pro quo between the Commonwealths promise and the acts relied upon as consideration for that promise. Here there was no promise offered in consideration of doing an act.

Australian Woollen Mills Pty Ltd v The Commonwealth

Held

Buying the wool was merely a condition precedent to entitlement to the subsidy. It was not intended as the consideration for a promise to pay the subsidy. In this respect the Court also noted that there was no offer or request or invitation to purchase wool or anything else suggesting that ‘payment of subsidy and the purchase of wool were regarded as related in such a way that the one

was a consideration for the other.’

Note: The Court also concluded that there was no intention on the part of the government to create legal relations; it was instead a government scheme to promote industry.

Privy Council upheld decision.

Australian Woollen Mills Pty Ltd v The Commonwealth

Held

[39] ‘When one comes to the documents, it is not, in our opinion, possible to construe

them as containing a standing offer, a standing offer capable of acceptance by the purchase of wool. It is impossible to find anywhere anything in the nature of a request or invitation to purchase wool, or anything which suggests that the payment of subsidy was put forward in order to induce any manufacturer to purchase wool, or which suggests that the payment of subsidy and the purchase of wool were regarded as related in such a way that the one was a consideration for the other. Whichever of the possibly legitimate tests is applied, the answer is the same. If we ask (what we think is the real and ultimate question) whether there is a promise offered in consideration of the doing of an act, as a price which is to be paid for the doing of an act, we cannot find such a promise. No relation of quid pro quo between a promise and an act can be inferred. If we ask whether there is an implied request or invitation to purchase wool, we cannot say that there is. If we ask whether the announcement that a subsidy would be paid was made in order to induce purchases of wool, no such intention can be inferred. (at p461)’

Australian Woollen Mills Pty Ltd v The Commonwealth

Held

[32]‘One simple example will suffice to illustrate this. A, in Sydney, says to B in

Melbourne: "I will pay you 1,000 pounds on your arrival in Sydney". The next day B goes to Sydney. If these facts alone are proved, it is perfectly clear that no contract binding A to pay 1,000 pounds to B is established. For all that appears there may be no relation whatever between A.'s statement and B's act. It is quite consistent with the facts proved that B intended to go to Sydney anyhow, and that A is merely announcing that, if and when B arrives in Sydney, he will make a gift to him. The necessary relation is not shown to exist between the announcement and the act. Proof of further facts, however, might suffice to establish a contract. For example, it might be proved that A, on the day before the 1,000 pounds was mentioned, had told B that it was a matter of vital importance to him (A) that B should come to Sydney forthwith, and that B objected that to go to Sydney at the moment might involve him in financial loss. These further facts throw a different light on the statement on which B relies as an offer accepted by his going to Sydney. They are not necessarily conclusive but it is now possible to infer (a) that the statement that 1,000 pounds would be paid to B on arrival in Sydney was intended as an offer of a promise, (b) that the promise was offered as the consideration for the doing of an act by B, and (c) that the doing of the act was at once the acceptance of an offer and the providing of an executed consideration for a promise. The necessary connection or relation between the announcement and the act is provided if the inference is drawn that A has requested B to go to Sydney.’

Consideration – two requirements

As a result of this case law there are two thresholdrequirements for consideration to be valid:

1. The first aspect of valuable consideration is that it must consist of a detriment to the promisee or a benefit to the promisor

2. The second aspect of the doctrine of consideration is that the benefit conferred on the promisor or the detriment suffered by the promisee must be given in return for the promise, that is, quid pro quo.

Key Concept!

Bargains vs reliance

The concept of bargain is differentiated from an act performed in reliance on a promise, which is not sufficient consideration - Kirby P in Beaton v McDivitt (1987) SEE P 182-183.

That relates to the Offer element and not the Consideration element of Formation

For a contract to exist, acts must simply not be performed in reliance on a promise, rather they must be done in return for a promise to constitute a quid pro quoconsideration. It has to be a two sided deal.

Bargains vs reliance

Example:

Your parents offer to pay for a holiday in Bali if you finish the law degree which you have already started and would have finished in any case – Reliance

What if you had decided to quit and changed your mind (not to quit) as a result of the promise?

Exercise: Consideration must move from the promisee

Consideration must move from the promissee although it need not move to the promisor - Coulls v Bagot's Executor and

Trustee Co Ltd (1967) 119 CLR 460.

Example: loan guarantee (see Seminar guide)

AFather (‘promisor’)

BBank (‘promissee’)

CImpoverished

student

1. Contract is between A & B (Guarantee)2. A promises to pay B if C defaults (promise in

Guarantee)3. B promises to lend C the money4. A’s consideration moves from A to B –

sufficient to make loan between C and B enforceable

5. B’s consideration (for A’s promise) move from B to C (loaned $).

Question:

How many contracts are there

here?

More than one promisee..?

What happens when there is more than one promisee? Do they both have to pay something for the ‘bargain’?

Case Analysis: Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460

Note: This case is interesting because of the range of views expressed by the judges on such a basic issue. You should read the reasoning of the Chief Justice in this case, although he was in a minority as to outcome. Much of his reasoning overlaps with the majority judgment.

A

C

B

E.g. Husband and wife take

out an insurance policy. Can

the wife benefit if only the

husband paid the premium?

Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460

Mr Coulls entered into a contract to allow O’Neil Constructions to quarry part of his land. In exchange, O’Neil was to pay royalties to Mr Coulls and his wife as joint tenants. Property held as joint tenants passes to surviving tenant when one of them dies. When Mr Coulls died, a dispute arose as to whether the company was required to pay the royalties to the wife or the executor of Mr Coulls estate.

Issues:

1. Was the wife a party to the agreement; and

2. Had she given consideration for the company’s promise to pay royalties?

Coulls v Bagot's Executor and Trustee Co Ltd

Held

Taylor and Owen JJ (majority)

They held that the promise of the Construction Co was made to Mr Coulls alone.

A majority of the High Court held that the royalties were payable only to the estate on the ground Mrs Coulls was not a party to the contract. In discussing the issue of consideration, a majority of judges (concurring with Barwick CJ) concluded that where a promise is made to joint promisees then either promisee can enforce although consideration only moved from one.

Mrs Coulls lost on the basis of she wasn’t a party to the agreement.

Coulls v Bagot's Executor and Trustee Co Ltd

Barwick CJ (dissenting)

Given that we have the grant of a licence to quarry for cash consideration, and all 3 parties have participated in a single arrangement, the promise to pay should be considered a promise to both of them. This was a promise made by one party to 2 others - it is not therefore open to the first party to question whether the consideration came from one party or the other or both.

Such promise however is only enforceable if both parties acting together to enforce it. However if one of the joint promisees refused to join as a plaintiff, the other could join them as a defendant, and judgment would be given for them jointly.

Coulls v Bagot's Executor and Trustee Co Ltd

Windeyer J (dissenting)

This is either a contract with 1 party and 2 others, or a contract with 1 party and another for the benefit of a 3rd. In my view the former is correct. However, it is said that there was no consideration from the wife. This is irrelevant. Joint promisees do not have to furnish the consideration separately. It means a consideration on behalf of them both.

McTiernan J

He considered that the promise was made to Mr Coulls alone, and did not consider the joint promisee situation.

Coulls v Bagot's Executor and Trustee Co Ltd

Majority opinion:• Company owed no obligation to Mrs Coulls: she wasn’t a party to the

agreement (the fact that she signed the agreement did not make her a party)-(see [8.15] Text)

• Contract was expressly between Plaintiff (Mr Coulls estate) and the company

• Company made no promise to pay Mrs Coulls

• Mrs Coulls signing did not make her a party

Dissenting opinion: Signature did make the wife a party

The Company’s promise was made to the Plaintiff and his wife jointly.

However, their Honours held that if the wife was a party to the contract, and specified as a joint-Promisee, the consideration of her husband would have applied to her as well. WIFE IN THIS CASE NEEDED TO PROVE THAT ON CONSTRUCTION SHE WAS A JOINT PROMISEE NOTHWITHSTANDING THAT SHE DIDN’T PROVIDE CONSIDERATION

Coulls v Bagot

Key points:

Consideration must move from the promisee

However, if there are two promisee’s it is sufficient that consideration flows from one of them as there is a single promise made to both of them ie consideration moves from all of them collectively.

The Adequacy and Sufficiency Rule

Consideration need not be adequate nor fair.

Adequate (not worth the promise); Sufficient (something that the law regards as valuable)

Following the classical theory of contract, parties are presumed to be able look after their own interests when negotiating a contract.

The courts are not prepared

‘to evaluate the multitude of economic and other decisions daily made by people of different, and even like, backgrounds in entering into bargains’ - Kirby P, Woolworths v Kelly (1991) see 193

Consequently, Courts do not consider the adequacy of consideration, only that it is sufficient or real.

Illusory or Vague Consideration

What is the situation if the consideration is optional? If you mow my lawn I might pay you $75. Good consideration?

What if it was vague? If you mow my lawn I’ll pay you $75 provided I am feeling OK on the day.

A promise or apparent promise is not good consideration if it is too uncertain to be enforced or the promisor has retained discretion on whether or not to perform that promise – Placer Development Ltd v Cth 121 CLR 353

Past consideration is not good consideration

Consideration is past when the acts relied on as consideration, predate the promise.

Past consideration – usually labour

Future Promise of money for past labour

Circumstances post contract such as ‘the car is OK isn’t it?’; ‘did the car get serviced regularly?’ but where a contract for the car has already been ‘formed’ or ‘entered into’.

Case Analysis - Roscorla v Thomas (1842)

Roscorla v Thomas (1842) 3 QB 234; 114 ER 496

Facts:

• The plaintiff bought a horse from the defendant for ₤30.

• After the sale was made, the defendant promised the plaintiff that the horse was ‘sound and free from vice’.

• The plaintiff sought damages for breach of warranty when the horse turned out to be ‘very vicious, restive, ungovernable and ferocious’.

History:

On trial before Wightman J., at the Cornwall Spring Assizes in 1841 a verdict was found for the plaintiff. The defendant then appealed to the England and Wales High Court, Queen’s Bench Division and came before Lord Denman CJ.

Roscorla v Thomas (1842) 3 QB 234; 114 ER 496

Issues:

Whether there was a breach of contract by the defendant. (No)

Whether there was sufficient consideration to support the subsequent promise. (No)

Reasoning (Per Lord Denman CJ): General rule: Past consideration (payment of the ₤30) is not considered

sufficient consideration for the current promise (answer to the question).

Lord Denman found that the original terms of this contract excluded a warranty. The payment of the horse’s purchase price was a past consideration. The only promise resulting from the consideration was the delivery of the horse upon request and this was done.

Past consideration is bad consideration

So Roscorla v Thomas tells us that past consideration cannot be used to support a new promise.

However the Courts have been asked to identify if there any exceptions to this rule?

For example in Re Casey’s Patents it was confirmed that the rule does not apply when:

1. The act was done at the request of the promisor, and

2. It was understood (but not stated) between the parties that some payment would be made.

Case Analysis – Re Casey’s Patents

The holders of letters patent employed Casey to promote their invention in the commercial world. Afterwards, they undertook in a letter, "in consideration of his services as manager in working the patents" to give him A one third share of the patents. Later, the other patent holders attempted to have his name removed from the Register of Patents.

Key points:

Where a promise is made for services after the service has been performed then such a promise is enforceable if the services were carried out at the request of the promisor and the parties understood that there was an implied promise of payment when the service was first asked for.

Fulfilling a public duty as consideration?

A public duty is one that has to be undertaken as a result of a person’s official position or because of the effect of some law that affects everyone. E.g. voting is a public duty.

As early as 1809 (Stilk v Myrick) the courts established that fulfilling your legal obligations could not be considered as good consideration.

However, the question then arises (as always) as to whether there are any circumstances in which the performance of a public duty can be good consideration?

Case Analysis: Glasbrook Bros Ltd v Glamorgan CC(1925)

Glasbrook Bros Ltd v Glamorgan CC (1925)

FACTS

• Glasbrook Bros was a colliery in Wales.

• During a coal strike, miners were involved in picketing which sometimes led to violence.

• The colliery manager insisted on extra police cover.

• The police only had the resources to make visiting patrols, but offered to place 70 constables at the site for a financial contribution.

• Under a written agreement, the colliery promised to pay 2,200 pounds.

• When the payment was sought, the colliery refused to pay.

• The police sued for payment.

Glasbrook Bros Ltd v Glamorgan CC (1925)

Held

It was held that the Stilk v Myrick rule did not apply. Although performing a statutory duty could not be sufficient consideration to support an agreement the action of the police in this case was beyond statutory requirements, and payment could therefore be claimed.

"Although the police authority are bound to provide sufficient protection to life and property without payment, if in particular circumstances, at the request of an individual, they provide a special form of protection outside the scope of their public duty they may demand payment for it."

Fulfilling a public duty as consideration?

So in summary:

A promise to perform a public duty is not sufficient consideration (Stilk v Myrick).

However, providing a service over and above that required as public duty is sufficient consideration (Glasbrook Bros Ltd v Glamorgan CC).

Williams v Roffey Bros & Nicholls

Facts

• Roffey Bros was contracted by Shepherds Bush Housing Association Ltd to refurnish 27 flats.

• They subcontracted carpentry to Mr Lester Williams for £20,000 payable in instalments.

• Some work was done and £16,200 was paid. Then Williams ran into financial difficulty because the price was too low.

• Roffey Bros was going to be liable under a penalty clause for late completion, so they had a meeting on 9 April 1986 and promised an extra £575 per flat for on time completion.

• Williams did eight flats and stopped because he had only got £1,500. New carpenters were brought in. Williams claimed.

Williams v Roffey Bros & Nicholls

IssuesWas the promise by Roffey Bros to pay to Williams additional sums above the agreed price supported by consideration (by Williams)?

Held

Glidewell LJ held Williams had provided good consideration even though he was merely performing a pre-existing duty (under contract).

The test for understanding whether a contract could legitimately varied was set out as follows:

1. if A (ie Williams) has contract with B (Roffey Bros) for work

2. before it is done, has reason to believe A may not be able to complete

3. B promises A more to finish on time

4. As a result of giving his promise B obtains in practice a benefit, or obviates a disbenefit provided that A's performance, having regard to what has been so obtained, is capable of being viewed by B as worth more to B than any likely remedy against A (allowing for any defences or cross-claims), taking into account the cost to B of any such payment or concession to obtain greater assurance of A's performance,

5. there is no economic duress or fraud...

...then the practical benefit constitutes good consideration.

Williams v Roffey Bros & Nicholls

On Stilk v Myrick 1809, Glidewell LJ said,

"It is not in my view surprising that a principle enunciated in relation to the rigours of seafaring life during the Napoleonic wars [From Stilk: Lord Ellenborough is reported as having held that a seaman engaged to serve for an entire voyage “was not entitled to any apportionment of wages for his service during the voyage which had not been completed” ] should be subjected during the succeeding 180 years to a process of refinement and limitation in its application to the present day."

Russell LJ said

“the courts nowadays should be more ready to find [consideration’s] existence so as to reflect the intention of the parties to the contract where the bargaining powers are not unequal”.

Williams v Roffey Bros & Nicholls

As a result of this case the English courts are more inclined to find consideration where there is agreement between two equal parties to vary a previous contract.

The obvious question is whether this liberalisation in contract interpretation has extended to Australia.

Case Analysis: Musemeci v Winadell (1994) 34 NSWLR 723

Musemeci v Winadell

FACTS

• Charles and Margaret Musumeci entered into a lease for premises within a shopping centre owned by Winadell Pty Ltd.

• When a larger competitor opened in the same shopping centre the Musumeci’s found it hard to pay the full rent.

• In response to this the landlord promised to accept 2/3rds of the original rent.

• The landlord later withdrew from the arrangement.

• The Musumeci’s sought a declaration that the landlord had made a binding promise in regards to the rent.

Issue: Can a contract exist where consideration is an existing contractual obligation? Stilk v Myrick (1809)

Musemeci v Winadell

Argument for the plaintiff:

• The Musumeci’s claimed that the terms of the lease had been varied so that the sum due was two thirds of that which was otherwise due.

• Consideration given was like that in Williams v Roffey, i.e. there was an overall benefit to the landlord by keeping the Musumeci’s as tenants even at a lower rent (ie “obtains in practice a benefit, or obviates a disbenefit ”).

• Musumeci’s had to overcome the Stilk v Myrick arguments re fulfilment of existing duties.

Musemeci v Winadell

Court found in favour of the Musemecis

Ratio

• The judge suggested that Australian courts should follow Roffeyand regard practical benefit as good consideration with the following qualifications:

• Practical benefit should include situations where the modifier agrees to accept less (as opposed to paying more as in William & Roffey).

• The practical benefit test should only apply where no “undue pressure” has been applied.

• cont

Musemeci v Winadell

Ratio (cont)• Practical benefit should only constitute good consideration if the

beneficiary’s performance is capable of being regarded by the modifier as worth more than any remedy against the beneficiary (i.e. more than likely damages)

• the practical benefit = the lessor of retaining the lessee as a viable tenant and keeping the centre occupied with both competitors, might serve as consideration for the lessor's promise to reduce the rent.

Musemeci v Winadell

As a consequence of this case it is likely the practical benefit test as an exception to the Stilk v Myrick rule has been accepted in Australia.

READ THIS CASE

Santow J gives an excellent summary of the law of consideration.

Part payment of a debt

What if you owe me $75 and you come along with $50 and say I can only afford to pay this smaller amount and I agree to accept this as full settlement of the debt?

The rule in Pinnels Case (1602) states that the payment of a lesser sum on the due day for payment is no satisfaction of the whole debt because the agreement to accept a lesser sum is not supported by any consideration.

Case Analysis: Foakes v Beer

Foakes v Beer [1884] UKHL 1

The appellant, Dr John Weston Foakes, owed the respondent, Julia Beer, a sum of £2,090 - 19s after a court judgment.

Beer agreed that she would not take any action against Foakes for the amount owed if he would sign an agreement promising to pay an initial sum of £500 and pay £150 twice yearly until the whole amount was paid back.

Foakes was in financial difficulty and, with the help of his solicitor, drew up an agreement for Beer to waive any interest on the amount owed. She signed.

Foakes paid back the principal but not the interest. Then Beer sued Foakes for the interest.

Foakes v Beer [1884] UKHL 1

At trial, the court found in favour of Foakes. Watkin Williams J upheld this decision, given the agreement between the two.

Court of Appeal court overturned the decision

The House of Lords (Earl of Selborne LC, Lord Watson and Lord Fitzgerald) upheld the ruling of the Court of Appeal in favour of Beer. They reasoned that though the agreement did not contemplate the interest owed, it could still be implied given an enforceable agreement. However, the promise to pay a debt was deemed not to be sufficient consideration as there was no additional benefit moving from Foakes to Beer that was not already owed to her.

Case Analysis - Foakes v Beer

Key points:

A promise to perform an existing legal duty (such as paying a debt) is not sufficient consideration – the rule in Pinnell affirmed.

However, the presence of something extra, provided it has some value, may change this result. For example, the date for payment may be brought forward or the place for payment may be changed to suit the creditor.

Summary of rules re: consideration Must be a benefit to the promisee or detriment to the

promisor (Currie v Misa)

Must be ‘referable’ / ‘quid pro quo’ to the promise it supports (Aus Woollen Mills)

Must move from the promissee although it need not move to the promisor (Coulls v Bagot).

Must be sufficient but not adequate (Woolworths Ltd v Kelly)

Illusory consideration is not good consideration (Placer Development Ltd v Cth).

Past consideration in not good consideration (Roscorla v Thomas).

An existing legal duty is not good consideration (Stilk v Myrick).

Part payment of a debt is not good consideration (Foakes v Beer)

HOWEVER there are exceptions to these rules!

59

Extra slides

60

Consideration: RULES

SUFFICIENCY RULE: Consideration need not be ‘adequate’ but must be ‘real’

1. Consideration can be ‘nominal’

• Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87 (p)

2. Past Consideration is not good consideration

• Roscorla v Thomas (see extract p )

• Re Casey’s Patents; Stewart v Casey (p)

3. Illusory or vague Consideration

• Placer Development Ltd v The Commonwealth (p )

• Dunton v Dunton (p )

61

Consideration: RULES

4. Performing existing public duties is not good Consideration

• Pipow v Pipow (p )

• Glasbrook Bros Ltd v Glamorgan County Council (p )

5. Performing Existing Contractual Duties is not good Consideration

• General Rule: Stilk v Myrick (p)

• Exception to the rule: Wigan v Edwards (p )

• Exception to the rule: Williams v Roffey Bros and Nicholls (Contractors)

62

Consideration: RULES

6. Part Payment of a Debt is insufficient

• Rule in Pinnel’s Case (p )

• Foakes v Beer (p )

7. Compromise a Claim/ Forbearance to Sue

• Wigan v Edwards (p )

63

(PRIVITY OF CONTRACT)

8. Consideration must move from the promisee, yet

need not move to the promisor

9. Only parties who gave consideration can enforce the contract

• Coulls v Bagot’s Executor and Trustee Co Ltd (p )

Consideration: RULES