CONSIDERATION Introduction >'Offer' and 'acceptance' are required for there to be an agreement which can lead to a binding contract. Having an agreement is necessary, but, it is not sufficient to create a legally binding contract. English courts have developed other tests to assess the enforceability of agreements. The main test is the requirement for 'consideration'. What is meant by 'consideration'? The idea of exchange or bargain is the essence of a contract. Each party pays a 'price' for whatever is obtained from the other. That price (the exchange element) is consideration. > Bargain I give you my book- this is not a contract as there is no bargain. I give you my book and you give me £10- there is a bargain and this can be a contract. There is consideration on both sides of the agreement. Common Law Definitions '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.' Currie v Misa (1875) Benefit and Detriment I give you my book You give me £10 >Benefit=£10 > Detriment=Book Benefit=Book > Detriment=£10 >Definitions Contd. 'An act or forbearance of the one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.'
Dunlop Pneumatic Tyre Co v Selfridge (1915) Executed and Executory Consideration: Where the promise has been performed, the contract (or the consideration) is said to be 'executed'. Where the promise is yet to be performed, the contract (or the consideration) is said to be 'executory'. > Example: Executed Consideration Alice orders and pays for one dozen bottles of wine from Tim's off licence with delivery to be in one week's time. If Tim does not deliver them, this is a breach of contract and Alice can sue. Alice has performed her side of the bargain - her consideration for Tim's promise to supply the wine is 'executed'. Example: Executory Consideration Alice orders one dozen bottles of wine from Tim's off licence and agrees to pay for them on delivery in one week's time. Tim PROMISES to deliver and Alice PROMISES to pay on delivery. Both parties' consideration is 'executory'. Principles in relation to Consideration 1) Consideration must be 'Sufficient' though it need not be 'Adequate' Thomas v Thomas (1842) White v Bluett (1853) Chappell v Nestle (1960) Edmonds v Lawson (2000) Principles contd. 2) Consideration must move from the promisee A Only the parties to the bargain are able to enforce it. A party cannot sued/be sued under a contract unless he/she has provided consideration- except where the Contract (Rights of Third Parties) Act 1999 applies. 4 Tweddle v Atkinson (1861) Dealt with more fully under the doctrine of 'privity' of contracts. Principles contd. 3) Past consideration is no consideration If A renders a service to B, with no promise of payment given by B,