Contract Law

Recap
• The existence of an agreement is usually established by proof of offer and acceptance

• An offer must:
• Be certain
• Unilateral or bilateral
• Made orally, in writing or by conduct
• Must be communicated to the offeree, who must have knowledge of it;
• Distinguished from an invitation to treat
• Under contract law, the agreement between the parties
will not in itself create a legally binding contract.

• For there to be a valid contract- there needs to be some

degree of consideration.

What is
consideration???
 Consideration
• A contract is a bargain

• The essence of a bargain is that the parties each give up something they have in order to get
something they want

• It is this conception of what contractual relationships are about which underpins the idea that a
contract can only come into being if each of the parties to the contract furnishes consideration
to the other
 Task
In pairs –

list 3 different types of contract that show a benefit and a detriment to the buyer
and seller.....

I’ll get you started....my mobile phone contract.

You have 2 minutes

 Consideration defined
• ‘The price paid for a promise’

• ‘You don’t get something for nothing’

• Benefit and Detriment (Currie v Misa [1875])

• Element of exchange
What can a party give as consideration?
 In business, the consideration exchanged between the parties usually amounts to
money on the one hand and goods or services on the other

 There may be a barter arrangement where one type of goods or services are
exchanged for another.

 Consideration is not limited to tangible exchanges. A mutual exchange of

promises is an equally valid exchange of consideration.
 Rules governing consideration
1. Consideration must always move from the promisee to the
promisor.

Therefore there must be consideration from both parties to a

contract- it cannot be one sided

I promise student X that I will pay £10 to student Y.

• Who is the contract between?

• Can Y sue for the money if I refuse to pay?

This relationship is called the Privity of Contract - third parties cannot acquire rights under
the contract. Nor can the contract place a burden on third parties (subject to statutory
exceptions).
2. Consideration must not be past

A's promise to pay B £50 after B has saved him

drowning. A's promise is made for PAST
CONSIDERATION and is therefore unenforceable
 The doctrine of implied assumpsit

• There is a major EXCEPTION to the past consideration rule

• At the request of the other performs a service of a kind that is normally paid for, the court will
usually assume that the service was meant to be paid for and will enforce a later promise to pay

• For example a taxi or hair cut

• For something to serve as consideration it must meet several criteria. The
thing given or promised must have some value, however small.

Question:
• Would £1 for the sale of my house be adequate consideration?

• The courts will not help parties who agree consideration, then complain of
making a ‘bad bargain’.
2. Consideration need not be adequate

The consideration must have some value but does

not need to be adequate or equal in value. The
value is agreed between the parties.
2. Consideration must be sufficient

What is to be given in return for the promise

must be recognised in law as being of some
benefit to the promisor or detriment to the
promisee.

Question:
Would it be sufficient consideration if I promise to
pay student X £20 if they will do 100 press ups?

Why?
Task:
Read about the following case and you will
see why it is said that anything of value can
serve as consideration; and that value is in
the eye of the beholder.

Chappell & Co. Ltd. v Nestle Co. Ltd.

[1959] 2 All ER 701, HL
If the promisee is using something that he is already legally obliged to do as consideration
for a new contract...the general rule is that it is NO consideration to do something you must
do anyway

The following are situations where consideration is NOT sufficient:

Existing public duties (Collins v Godefroy – witness attending trial)

Existing contractual duties
Existing duties to repay a debt (Pinnel’s Case (1602))