General Principles of Contract Law Consideration

Learning Objectives To understand what consideration is. To know what is meant by the terms ‘valuable’ consideration, ‘sufficient’ consideration and ‘past’ consideration. To appreciate the meaning of ‘estoppel’.

Consideration Every simple contract must be supported by consideration. Consideration is the ‘price’ paid by each party to the contract for the other party’s promise. Involves a quid pro quo - benefit or detriment will suffice. Sale of Goods Act 1893, s.1 - consideration is money. Executed consideration - a promise is made in return for the performance of an act. Executory - means ‘yet to be done’; it is a promise in return for a promise, e.g. ordering goods from a catalogue.

Currie v. Misa (1875) Consideration was defined as: “…some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other.”

Consideration Essentially consideration is where one person (being a party to a contract) does something, omits to do something or promises to do or omit something in exchange for another person (the other party to the contract) doing, omitting or promising something. It must be an exchange – one person does something because the other person does something.

Dunlop v. Selfridge [1915] Consideration is defined as: “an act or forbearance (or the promise of it) on the part of one party to a contract as the price of the promise made to him by the other party to the contract.”

The Rules Consideration must be valuable & sufficient but need not be adequate. Must have minimum economic value. Grogan v. Cooke (1812) 2 Ball & B 234 Hamer v. Sidney (1891) Chappell v. Nestle [1960] AC 87 Lipkin Gorman v Karpnale [1991] 3 WLR 10 O’Keeffe v Ryanair Holdings plc [2003] 1 ILRM 14 Consideration must move from the promisee - basically a person can normally only enforce a promise if s/he provided consideration for it.

The Rules - 2 Performance of an existing legal duty is not sufficient as consideration. Collins v. Godefroy (1831) B & As 950 Glasbrook Bros Ltd. v. Glamorgan County Council [1925] AC 270 Harris v Sheffield United Football Club Ltd. [1987] Ward v. Byham [1956] 2 All ER 318 West Yorkshire Police Authority v Reading Festival [2006] 1 WLR 1005 McKerring v The Minister for Agriculture [1989] ILRM 82

The Rules - 3 Performance of a duty already owed to promisor is not sufficient in absence of a new agreement. Stilk v Myrick [1809]; Hartley v Ponsonby [1857]; North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979]; Williams v Roffey Bros Ltd [1990]; Riordan v Carroll [1996]. Interestingly, performance of an existing contractual obligation is sufficient consideration to support a promise from a third party. Shadwell v Shadwell [1860]; Ward v Byham[1956]

Rule against Past Consideration Past consideration is no consideration. If one party makes a promise in return for an act or promise A promise made after the performance of an act is insufficient & generally not enforceable. Roscorla v Thomas [1842] ReMcArdle [1951] Exceptions to this rule: Lampleigh v. Braithwait (1615) Pao On v. Lau Yiu Long [1979]

Consideration must move from the promisee This rule simply means that consideration must move from the promisee simply means that a person can normally only enforce a promise if he/she/it provided the consideration for it; he/she/it cannot sue if the consideration for the promise came from a third party. McCoubray v. Thompson (1868)

Privity of Contract The rule that consideration must move from the promisee is often confused with the rule called ‘privity of contract’. The privity of contract rule means that only a party to a contract can enforce it. The two rules are interconnected but operate independently of each other. Consideration must be given by a party to the contract - Tweddle v. Atkinson [1861]; Dunlop Pneumatic Tyre Co Ltd v. Selfridge & Co Ltd (1915)

Part-Payment Problem: The Rule in Pinnel’s Case [1602] A promise made without receiving consideration is not legally enforceable. Rule in Pinnel’s case states that payment of a lesser sum in satisfaction of a greater sum cannot be any satisfaction for the whole sum. Foakes v. Beer (1884) 9 APP Cas 605 – House of Lords approved the rule in Pinnel’s case. Sibtree v. Tripp (1846) 15 M & W 23

The Doctrine of Promissory Estoppel Doctrine of promissory estoppel - equitable doctrine - gets around part payment problem. Estoppel operates to prevent a person going back on his or her promise.

Estoppel Hughes v. Metropolitan Railway Co (1877). Central London Property Trust Ltd v. High Trees House Ltd [1946] Cullen v. Cullen [1962] IR 268 Revenue Commissioners v. Moroney [1972] Kenny v. Kelly [1988] IR 457 Amalgamated Investment Property Co Ltd v. Texas Commerce International Bank Ltd [1981] - legitimate expectation of bank’s entitlement to claim against the plaintiffs. Estoppel and legitimate expectation means a promise is enforceable even where the person making the promise is getting nothing back from the person to whom the promise was made.

Legitimate Expectation Webb v. Ireland [1988] IR 353 Conroy v. Garda Commissioner and Ors [1989] IR 140 Kenny v. Kelly [1988] IR 457 Donegal County Council v. Porter [1993] ELR Wiley v. Revenue Commissioners [1993] ILRM 482 Bloomer and Ors v. Incorporated Law Society of Ireland [1995] 3 IR 14 (HC); Supreme Court, 6th Feb 1996 Abrahamson and Ors v. Law Society of Ireland [1996] 1 IR 403 Eogan v. University College Dublin [1996] 1 IR 390