BTF1010 Chapter Notes - Chapter 2: Contract
6 Jun 2018
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CONSIDERATION
• Something of value given or a detriment suffered in exchange for the promise
• If nothing of value is given, the promise is not enforceable
Must move from the promise
• Must always flow from the offeree to offeror
• The promise is the party suing the other for breach of promise
• In a bilateral contract, each party is both a promisor and a promisee
Need not flow to the promisor
• Normally, the benefit of the consideration will flow to the promisor
Simple contract: Requires consideration
Formal contract: No consideration required because of its ‘form’
Rules of consideration
1. May be a benefit to the promisor or a detriment to the promise at the request of the promisor
2. May be ‘executory’, ‘executed’ but not ‘past’
o Executory consideration: A promise in exchange for a promise (eg; $500 to sell a TV)
o Executed consideration: Consideration performed in exchange for promise (Carlill)
o Past consideration: Must be something given for the promise
o Case: Anderson v Glass (1868)
o The contract was unenforceable as to the past period for want of consideration. The promise
to pay increased wages for past services was based on a past consideration
o A past promise or act which forms the basis of a future promise
o Case: Roscorla v Thomas (1842)
o Plaintiff had given no consideration for the subsequent promise and thus it was not
enforceable
3. Exception to the “past consideration” rule
• When the consideration amounts to some past act or forbearance that was done at the request of the
person making the present promise
o Case: Pao On v Lau Yiu Long (1980)
o There was consideration here – an act done prior to a promise can be good consideration in
some cases; in particular, it will be good consideration if the act done was done at the
promisor’s request
Principle: An act done prior to a promise will be good consideration if
1. The act was done at the promisor’s request
2. The parties understood that that act would be remunerated; and
3. had the promise occurred in advance of the act it would have been enforceable
4. Consideration must not be illusory
