Consideration

In the case of Currie v Misa, Lush J said that a valuable consideration, in the sense of the law,
may consist either in some right, interest, profit, or benefit accruing to the one party for some
forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. The
concept of consideration is based on the doctrine of reciprocity.
Consideration can be either a detriment to the promisee or some benefit to the promisor – the
promisee being the party who gives value and the promisor being the party who receives value.
Consideration is sufficient where the promisee receives a detriment, but the promisor receives
nothing or no benefit. See O’Sullivan v Management Agency and Music Ltd 1985.
The rules regarding consideration can be discussed under three general headings:
- consideration must be sufficient and not necessarily adequate
- past consideration is not good consideration
- consideration must move from the promisee
Consideration must move from the promisee
The general rule is that consideration must move or pass from the promisee to the promisor. See
Thomas v Thomas 1842.
Consideration must be sufficient and not necessarily adequate
As long as something of value is given or shown, there is no need for an inquiry as to whether it
would be adequate. See Thomas v Thomas 1842 where there was a promise by a widow to buy a
house and to pay an annual, specified sum. The court found that the relevant commitment was
good consideration.
Sufficiency in the eyes of the law is something of value and trivial acts may be recognised
consideration. See Chappell & Co Ltd v Nestle Co Ltd and Williams v Roffey Brothers 1991.
The court imposes a test to see what constitutes sufficient consideration. They consider these
questions:
- whether it is a mere sentiment and
- whether it is a promise to give up rights that are not possessed.
If it is a mere sentiment, then this does not constitute consideration and a person cannot give up
rights that he does not possess. See White v Bluett 1852, where a son's promise not to complain
of his father’s distribution of property was held to be no consideration.
Any amount of consideration, once it is proven that the person receiving it regards it as
sufficient, is acceptable by the court. See Chappell & Co Ltd v Nestle Co Ltd.
Past consideration is not good consideration
In the case of Roscorla v Thomas 1842, there is was a promise, regarding the sale of a horse, that
the said horse was sound and free from vice. The court held that the terms ‘sound and free from
vice’ were not enforceable as consideration, since they were given after the formation of the
contract in question. See Re McArdle 1951, where children were entitled to property under the
father’s will. The wife of one of the children made improvements and the other children all
agreed to pay her for the said improvements. It was held that this did not constitute good
consideration since the work done was not given in exchange of a promise.
There is, however, an exception to this rule. The rule concerning past consideration does not
apply to business situations and professionals where there is an understanding without a contract
that goods or services are to be supplied but no agreement as to the quantity is made before some
performance is executed, for example, a lawyer’s and accountant's service. See Pao On v Lau
Yiu Long and Lampleigh v Braithwaite 1615. The courts have applied a test to determine whether
it would be right and just for this exception to apply. The test is as follows:
- was there a request to perform the act?
- can it be said that this request carries with it an implied promise to pay or compensate?
See Re McArdle, Re Casey’s Patents 1892.