1. Comparative Contract Law Part II: The law of contract (Continued)
Comparative Law
LLM
KiLAW
fall 2013
Dr Myra Williamson

2. consideration

3. Roadmap - Contract Law
Offer Acceptance Intention to create legal relations Consideration Capacity Other aspects: Consent Void and voidable contracts Performance of contract Breach and remedies

4. Consideration: an overview
Unless a contract is made by deed, consideration is a universal requirement of contracts in the common law
A bare promise (nudum pactum in Latin) is not legally binding
A promise without consideration is a gift

5. terms to know #1 – deed Deed – What is it?
A signed (and sometimes sealed) instrument in writing that gives legal rights
It is like a contract but it is enforceable without consideration
A deed is a document that says “This is a deed…”
It is usually executed in front of witnesses (this is called being in solemn form)
Some type of transactions MUST be done by deed
For example conveyances (buying and selling real estate), mortagages, leases
For present purposes it is important to simply note that a deed is enforcebale without consideration

6. TermS to kNow #2: consideration
Consideration: what is it?
“…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)
Consideration means any benefit to the promisor or detriment to the promisee

7. Consideration
Each party to the contract must receive something of value
To put it simply: “consideration” is the price for which the promise of the other is bought
Eg. I promise to give you my watch. You don’t give me anything in return. If I break my promise and decide not to give you my watch, you can’t go to court to make me give it to you. There would be no legally-binding contract because you didn’t give me consideration for my promise

8. Civil law?
Although consideration is a key requirement of a contract in the common law countries, there is no exact equivalent
The closest equivalent in the civil law is the requirement of ‘cause’
I will distribute a reading which shows some differences between ‘consideration’ and ‘cause’
Please consider how the Kuwaiti law compares with both the common law and the other civil law jurisdictions in the reading

9. General rules of consideration
a)It must be real/genuine b)It need not be adequate c)It must be legal d)It must move from the promisee e)It must be possible f)It must not be past

10. a) Consideration must be reaL
General principles The court will not enforce vague or sham promises or promises in which there is no benefit at all There must be some real benefit OR real detriment Many cases are authority for this proposition – we will look at just two cases : White v Bluett (1853) Shadwell v Shadwell (1860)

11. a) consideration must be real continued…
White v Bluett (1853) Facts: Mr Bluett had lent his son money. Mr B died. The executor (Mr White) sued the son – asking him to pay the money back to the estate Son argued that father had told him he need not pay back the money if he would stop complaining about how he was going to distribute the money in his will The consideration = the promise to stop complaining Held: The promise to “cease complaining that he was not as well-treated as his brother” was not sufficient (ie. Not good enough) consideration “not complaining” was not a tangible (or real) benefit so there was no contract

12. a) consideration must be real cont’d…
Shadwell v Shadwell (1860) Facts: Uncle promised to pay nephew £150 a year if he married Ellen Nicholl The nephew married Ellen Nicholl Some payments were made – uncle died Nephew sued executor of uncle’s estate for the rest Held: by marrying, the nephew had incurred responsibilities and had changed his position; the uncle had obtained benefit in seeing his nephew marry The consideration was real – nephew won

13. b) Considerations Doesn’t need to be adequate
“adequate” = fair or a good price; enough Parties are free to make whatever types of contracts they like They can name the price for their goods – whatever price they like The rule is: The price does not need to be “fair” or “adequate” but it must have some value in the eyes of the law A person cannot complain to the court simply because they have paid too much – ie. If they made a bad bargain The court applies the rule caveat emptor which means “let the buyer beware” This rule means that the court is not going to interfere if a person pays too much or too little – the parties have to look out for their own interests when entering into contracts

14. b) Consideration need not be adequate cont’d…
Cases which are authority for the proposition that consideration need not be adequate:
Bainbridge v Firmstone (1838)
Chappell & Co Ltd v Nestle Co Ltd (1960) *

15. b) Doesn’t need to be adequate cont’d…
Bainbridge v Firmstone (1838)
The facts:
Bainbridge allowed Firmstone to weigh two boilers owned by Bainbridge on the condition that they were returned in the same condition
F took them apart and returned them without putting them back together
Held: there was consideration
“there is a detriment to the plaintiff in parting with the possession of the boilers even for so short a time”
Plaintiff (B) was successful

16. b) Consideration need not be adequate cont’d…
Chappell & Co Ltd v Nestle Co
Ltd (1960)
Facts: Nestle was giving away records to people who bought 3 chocolate bars and sent in the wrappers with an extra “1s 6d” (ie 1 shilling and 6 pennies). The chocolate bars cost 6 pennies each
Copyright Act stated that 6.25% to be paid on the “ordinary selling price” of the records
Chappell & Co owed the copyright to the
music (“Rocking Shoes” by the King Brothers)

17. Chappell & Co Ltd v Nestle Co Ltd (1960)
Chappell sued Nestle for failing to pay the correct amount of royalties (ie commission on sales of the records)
The case turned on whether the chocolate wrappers were part of the “consideration” for the sale of the records
Held: Majority of the House of Lords held that the chocolate wrappers were part of the consideration; Nestle had to pay Chappell & Co much more in royalties
This statement: “the wrappers will help you to get smash hit recordings” meant Nestle saw the wrappers as consideration
It didn’t matter that the wrappers were “worthless” to Nestle*
* Extract from on of the judgments: “It is said that when received the wrappers are of no value to Nestlé's. This I would have thought irrelevant. A contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn. As the whole object of selling the record, if it was a sale, was to increase the sales of chocolate, it seems to me wrong-not to treat the stipulated evidence of such sales as part of the consideration. For these reasons I would allow the appeal.” - per Lord Somervell’s judgment

18. Road map Where are we at now? Consideration:
a)It must be real/genuine
b)It need not be adequate
c)It must be legal
d)It must move from the promisee
e)It must be possible
f)It must not be past

19. c) Consideration must be legal
The consideration must be legal – this is obvious
Example:
If A agrees with B to break into C’s house and steal something for B, provided that B pays A the sum of $10.
There is an agreement but it is not a contract because there is no consideration.
The purported “consideration” involves something illegal (breaking into a house) so that is not valid consideration and therefore the contract would be void.
Authority:
Pearce v Brooks (1866)
Foster v Driscoll (1929)
*Eg. if A agrees with B to break into C’s house and steal if B pays A $10. There is an agreement but it is not a contract because there is no consideration. The purported “consideration” involves something illegal (breaking into a house) so that is no consideration and the contract would be void (discussed later).

20. c) Consideration must be legal cont…
Pearce v Brooks (1866)
Facts: The owner of a brougham (a closed four-wheeled carriage with an open driver’s seat in front) hired it out to a prostitute for use by her knowing it would be used in her business
She failed to keep up the payments; Plaintiff sued the prostitute
Held: Since the pl. knew that the brougham would be used for an illegal purpose, there was no consideration. The contract was void.
Consideration must be legal.

21. Pearce v Brooks (1866) - vocabulary
A “brougham”:
“Prostitute”:
“Void”:void means that the contract has no legal effect – agreements of this kind do not confer any legal rights on the parties (see Barker at p.103)

22. c) Consideration must be legal cont…
Foster v Driscoll (1929)
Facts: A contract was entered into for the shipment of whiskey from England to the US during the period of prohibition (when alcohol was not allowed).
Held: the English Court of Appeal would not enforce the contract because the “consideration” involved doing something that was against the law of the other country (ie importing whiskey)
Consideration here = the whiskey
Whiskey was not legal in the US which is where it was heading
Contract was void

23. d) Consideration must move from the promisee
The consideration must move from the promisee (the person to whom the promise was made) It is not enough that consideration has been given – it must have been given by the promisee So, if a third party provides the consideration that would not be good enough Privity of contract and consideration are separate (Barker Law Made Simple is a bit misleading on this point)

24. d) Consideration must move from the promisee cont…
Authority: Tweedle v Atkinson (1861) Facts: a contract was made between the fathers of a married couple. Each father was supposed to pay a sum of money to the husband. One of the fathers died. The husband sued the executor (Atkinson) of the estate. Held: Tweedle (the husband) could not succeed because no consideration had been given by him There was consideration – but it had not come from the promisee As far as Tweedle was concerned, the promise was a gratuitous one

25. e) It must be possible
The law will not enforce that which is outside the realm of human endeavour A promise to do the impossible is not consideration eg. A promise to make pigs fly eg a promise to go the centre of the Earth

26. f) It must not be past
A benefit that was conferred in the past cannot be considered as consideration for a present promise If someone did something for you in the past, that can’t be used as consideration for a contract that is made at a later point in time The consideration has to be given or promised at the time of making the contract

27. Summary of consideration
Consideration is something of value given by both parties to a contract that induces them to enter into the agreement
It is an essential element of a contract
If there is no consideration, there is no contract
Remember the 6 rules that relate to consideration – use them as a checklist
If the problem involves consideration, apply those rules and see whether there was “consideration”

28. Comparing common law with civil law
See the reading handed out in class It is an extract from Alain A. Levasseur Comparative Law of Contracts – Cases and Materials It provides some background on the difference between common law and civil law legal systems on this requirement Common law requires “consideration” but the civil law requires a “lawful cause” or a “lawful reason”. It does not require consideration per se. Please read the extract and I will write a post on the Blog. Please try to find the relevant part of the Kuwaiti law which requires a ‘cause’ and compare it to the common law requirement of consideration.