Contract Law - Consideration Revision Sheet and Key Cases

Introduction

Contract law is a foundational subject of legal studies, providing the framework for understanding how agreements are formed, enforced, and interpreted. There are five elements of a contract:

• Offer and acceptance

• Consideration

• Intention to create legal relations

• Certainty of terms

• Capacity

For any student studying contract law, mastering the key legal principles and cases is essential for academic success. This article serves as a no-nonsense guide to consideration and provides a table of landmark cases that have shaped this area of English contract law. Familiarity with these key principles and cases will help equip students with the necessary tools to navigate the complexities of contract law and provide the foundations to succeed in their exams.

Revision Sheet

🔑 Core Principles

• What is consideration?

• Executed and Executory Consideration

• Consideration Must Move from the Promisee

• Consideration Must Be Sufficient but Need Not Be Adequate

• Performance of Existing Duties

• Past Consideration is Not Valid Consideration

• Part Payment of a Debt

• Promissory Estoppel

📌 What is Consideration?

Consideration is the price paid for a promise, meaning that each party must give or promise something of value in exchange for the other party’s promise. A simple contract will generally only be legally enforceable if each party provides valid consideration.

📌 Executed and Executory Consideration

Consideration may be executed or executory, depending on when the consideration is provided. 

Executed Consideration

Executed consideration occurs where one party performs an act in response to the other party’s promise. Once the act has been completed, the consideration is executed. 

💡Example: A offers a £50 reward for the return of a lost dog. B returns the dog and claims the reward. B’s consideration is executed because the act has already been performed.

Executory Consideration

Executory consideration occurs where both parties exchange promises to perform their obligations at a future date. The consideration consists of the promises themselves, even though performance has not yet taken place. 

💡Example: A agrees to sell their car to B for £4,000. B promises to pay £4,000 upon delivery. Both parties have provided executory consideration because they have exchanged promises to perform in the future

✅ Exam Tip

• Has the act already been performed?  → Executed consideration

• Have the parties merely exchanged promises to perform in the future → Executory consideration

📌 Consideration Must Move from the Promisee

The general rule is that consideration must move from the promisee. This means that only a person who has provided consideration can enforce the contract. A person who receives the benefit of a promise, but has not provided consideration cannot generally enforce it. 

💡Example: A promises to pay B £500 if B paints A’s house. B completes the work, but A refuses to pay. B can enforce the contract because B provided the consideration by painting the house.  If A instead promises to pay C £500 because B painted the house, C cannot generally enforce the promise because C provided no consideration.

In Tweddle v Atkinson [1861], two fathers agreed to pay money to a couple upon their marriage. When one father died without paying, the groom attempted to enforce the agreement. It was held that the groom could not enforce the contract because he had provided no consideration. 

Exception: Third Parties

Although consideration must move from the promisee at common law, the Contracts (Rights of Third Parties) Act 1999 creates an important exception. Section (1)(1) and (1)(2) provide that a third party may enforce a contractual term where: 

• The contract expressly provides they may do so; or

  
  

• The term purports to confer a benefit on them, unless it appears that the contracting parties did not intend the term to be enforceable by the third party.

✅ Exam Tip

• Who is bringing the claim?

• Did they provide consideration?

• If not, does the Contracts (Rights of Third Parties) Act 1999 allow them to enforce the contract?

📌 Consideration Must Be Sufficient but Need Not be Adequate

The general rule is that consideration must be sufficient, meaning it must have some legal value. However, it does not need to be adequate, meaning the courts will not assess whether the consideration is equal in value or whether the bargain is fair (Thomas v Thomas [1842]).

💡Example: A agrees to sell their motorbike worth £10,000 to B for £1. Although £1 is significantly less than the market value of the motorbike, it is still valid consideration because it has legal value. 

Things That May Amount to Valid Consideration

Consideration may include:

• Money 

• Goods

• Services

• A promise to do something 

• A promise not to do something

In Chappell & Co Ltd v Nestlé Co Ltd [1959], customers sent chocolate bar wrappers together with money to purchase records. It was held that the chocolate wrappers formed part of the consideration because they had legal value, even though they had little economic value. 

✅ Exam Tip

• Sufficient = has legal value

• Adequate = equal or fair value

📌 Performance of Existing Duties

The general rule is that performing an existing duty does not usually amount to valid consideration. However, there are important exceptions depending on the type of duty being performed. 

Existing Public Duty

Performing a duty that is already imposed by law will generally not amount to valid consideration. 

💡Example: A police officer is promised £100 to investigate a crime. The officer cannot enforce the promise because investigating crimes is already part of their public duty.

In Collins v Godefroy [1831], a witness was promised payment for attending court. It was held that the witness could not enforce the promise because attending court was already a legal duty.

Existing Contractual Duty

Performing an existing contractual obligation owed to the promisor will generally not amount to valid consideration.

💡Example: A builder agrees to build an extension for £20,000. Halfway through the project, the builder demands an additional £5,000 to complete the work. If the builder is simply carrying out the work already agreed, there is generally no fresh consideration for the extra payment.

In Stilk v Myrick [1809], two sailors deserted during a voyage. The captain promised the remaining crew additional wages if they completed the journey. It was held that the sailors were already contractually obliged to complete the voyage, so there was no valid consideration for the promise of extra pay. 

Practical Benefit Exception

An existing contractual duty may amount to valid consideration where the promisor receives a practical benefit and the promise is not obtained through economic duress. 

In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991], builders promised additional payment to a subcontractor to ensure work was completed on time. It was held that the builders obtained a practical benefit by avoiding delays and penalties. The additional payment was therefore supported by valid consideration. 

Existing Contractual Duty Becomes More Onerous

Where performing an existing contractual duty becomes substantially more difficult than originally agreed, fresh consideration may exist.

In Hartley v Ponsonby [1857], most of the crew deserted during a voyage, leaving the remaining sailors to undertake significantly greater duties. It was held that the remaining sailors had gone beyond their original contractual obligations and had therefore provided fresh consideration.

✅ Exam Tip

• Is the party simply performing an existing public duty?  → Generally, not valid consideration.

• Is the party simply performing an existing contractual duty?  → Generally, not valid consideration. 

• Has the promisor obtained a practical benefit? → Consideration may exist. 

• Have the contractual duties become substantially more onerous? → Fresh consideration may exist. 

📌 Past Consideration is Not Valid Consideration

The general rule is that past consideration is not valid consideration. This means that if an act has already been completed before a promise is made, that act cannot generally be relied upon as consideration for the later promise. 

💡Example: A helps B move house. One week later, B promises to pay A £200 for the help provided. A cannot generally enforce the promise because the work was completed before the promise to pay was made. 

In Re McArdle [1951], a woman carried out improvements to a family house before the owners later promised to reimburse her. It was held that the promise was not enforceable because the consideration was past.

Exception

Past consideration may be valid where:

• The act was carried out at the promisor’s request;

• Both parties understood that payment would be made; and 

• The later promise simply fixes the amount to be paid. 

In Lampleigh v Braithwait [1615], the defendant asked the claimant to obtain a royal pardon. After the claimant successfully obtained the pardon, the defendant promised to pay him. It was held that the promise was enforceable because the work had been carried out at the defendant's request and both parties understood that payment would be made.

In Re Casey’s Patents [1892], the claimant provided services in managing and developing patent rights at the request of the patent owners. After the work had been completed, the owners promised to give him a one-third share in the patents. It was held that the promise was enforceable because the services had been provided at the promisor's request and both parties understood that the claimant would be rewarded.

 ✅ Exam Tip

• Was the promise made before or after the act was performed?

• If the promise came after the act, was the act carried out at the promisor’s request with an understanding that payment would be made? 

📌 Part Payment of a Debt

The general rule is that payment of a debt is not valid consideration for a promise to accept less than the full amount owed. This means that if a creditor agrees to accept part payment of a debt, they may still be entitled to recover the remaining balance. 

💡Example: A owes B £5,000. B agrees to accept £4,000 in full settlement of the debt. After receiving the £4,000, B later claims the remaining £1,000. B can generally recover the balance because part payment of a debt is not valid consideration for the promise to accept less.

In Foakes v Beer [1884], a debtor agreed to pay a judgment debt by instalments. The creditor later claimed the remaining interest. It was held that part payment of a debt was not good consideration for the creditor’s promise to give up the balance.

Exceptions

Part payment of a debt may amount to valid consideration where: 

• The debtor pays earlier than required (Pinnel’s Case [1602]).

• The debtor provides something different instead of money (for example, goods) (Pinnel’s Case [1602]).

• The debtor pays at a different place if requested by the creditor (Pinnel’s Case [1602]).

• A third party makes the payment (Welby v Drake [1825]).

✅ Exam Tip

• Has the debtor paid only part of the debt? → The creditor may still recover the balance.

• Does one of the recognised exceptions apply?

• Could promissory estoppel prevent the creditor from enforcing their strict legal rights?

📌 Promissory Estoppel

Promissory estoppel is an equitable doctrine that may prevent a party from enforcing their strict legal rights when it would be unfair to do so. It commonly arises where one party promises not to enforce their full contractual rights and the other party relies on that promise. 

For promissory estoppel to apply:

• There must be an existing legal relationship between the parties. 

• One party must make a clear and unequivocal promise that they will not enforce their strict legal rights.

• The other party must rely on that promise.

• It must be inequitable for the promisor to go back on their promise. 

Promissory estoppel is generally described as a shield, not a sword. This means it can be used as a defence to prevent a party from enforcing their legal rights, but it cannot usually be used to create a new cause of action. 

In Central London Property Trust Ltd v High Trees House Ltd [1947], a landlord agreed to reduce the rent during the Second World War because many flats were unoccupied. After the war, the landlord sought to return to the original rent. It was held that the landlord could not recover the reduced rent for the wartime period because the tenant relied on the promise to reduce the rent. 

🔑 5 Step Exam Checklist

1. Identify the consideration

What has each party given or promised in exchange?

Is the consideration executed or executory?

2. Check whether the consideration is valid

Has the consideration moved from the promisee?

Could a third party enforce the contract?

Is the consideration sufficient, even if it is not adequate?

3. Consider existing duties 

Is the party performing an existing public duty?

Is the party performing an existing contractual duty?

Does an exception apply? 

4. Consider past consideration

Was the promise made before or after the act was performed?

If after, does the Lampleigh v Braithwait exception apply?

5. Consider part payment of a debt 

Is this a case involving part payment of a debt?

Do any of the recognised exceptions apply? 

→ Earlier payment 

→ Different consideration (e.g. goods) 

→ Different place of payment 

→ Third-party payment

Could promissory estoppel prevent a party from enforcing their strict legal rights?

Key Cases

Case Name	Facts	Legal Principle
Central London Property Trust Ltd v High Trees House Ltd (1947)	A landlord agreed to reduce the rent during the Second World War because many flats were unoccupied. After the war, he sought to recover the full rent.	Established promissory estoppel, a party may be prevented from enforcing their strict legal rights where it would be inequitable to do so after the other party has relied on a clear promise.
Chappell & Co Ltd v Nestlé Co Ltd [1959]	Customers sent chocolate bar wrappers together with money to purchase records.	Consideration must be sufficient, but it does not need to be adequate. Even something of little economic value can amount to valid consideration.
Collins v Godefroy (1831)	A witness was promised payment for attending court.	Performing an existing public duty is not valid consideration.
Foakes v Beer (1884)	A debtor agreed to pay a judgment debt by instalments. The creditor later claimed the remaining interest.	Confirms that part payment of a debt is not good consideration for a promise to forgo the balance.
Hartley v Ponsonby (1857)	Most of the crew deserted during a voyage, leaving the remaining sailors to undertake significantly greater duties.	Where contractual duties become substantially more onerous, performing them may amount to fresh consideration.
Lampleigh v Braithwait (1615)	The defendant asked the claimant to obtain a royal pardon. After the claimant obtained the pardon, the defendant promised to pay him.	Past consideration may be valid where the act was performed at the promisor's request and payment was understood.
Pinnel's Case (1602)	A debtor paid part of a debt and the creditor later claimed the remaining balance.	Part payment of a debt is generally not good consideration for a promise to accept unless subject to recognised exceptions.
Re Casey's Patents (1892)	The claimant managed and developed patent rights before being promised a share in the patents.	Confirms the Lampleigh exception, past consideration may be valid where services were requested and remuneration was understood.
Re McArdle (1951)	A woman carried out improvements to a family home before the owners later promised to reimburse her.	Past consideration is not valid consideration.
Stilk v Myrick (1809)	Two sailors deserted during a voyage. The captain promised the remaining crew additional wages if they completed the voyage.	Performing an existing contractual duty owed to the promisor is generally not valid consideration.
Thomas v Thomas (1842)	A widow agreed to pay £1 annual rent to remain living in a house left to her by her late husband.	Consideration need only have some legal value, it does not need to be economically adequate.
Tweddle v Atkinson (1861)	Two fathers agreed to pay money to a couple upon their marriage. The groom sought to enforce the agreement when one father failed to pay.	Consideration must move from the promisee. A person who has provided no consideration cannot generally enforce a contract.
Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991)	Builders promised additional payment to a subcontractor to ensure work was completed on time.	Performing an existing contractual duty may amount to valid consideration where the promisor receives a practical benefit and there is no economic duress.
Welby v Drake (1825)	A third party paid part of a debtor's outstanding debt and the creditor accepted the payment in full settlement. The creditor later attempted to recover the remaining balance from the debtor.	Where a creditor accepts part payment from a third party in full settlement of a debt, they cannot generally later claim the remaining balance from the debtor.