Consideration An agreement is not usually binding unless it is . supported by consideration.

This means
that each party must give something in return for what is gained from the other party What is consideration? Consideration may be a thing or a service. It is usually described as being something which represents either some benefit to the person making a promise (the promisor) or some detriment to the person to whom the promise is made (the promisee), or both.

Promisor and promisee In most contracts, two promises will be exchanged, so each party is both a promisor and a promisee. Consideration need not benefit the promisor Consideration need not benefit the promisor so there can be consideration where the promisee suffers some detriment at the promisors request, but this gives no particular benefit to the promisor. Executory and executed consideration Executory consideration is where something is to be done in the future after the contract has been formed.

Executed consideration is where at the time of the formation of the contract the consideration has already been performed. Executed consideration usually occurs in unilateral contracts.

Consideration (rules)
need not benefit the promisor; must not be past; must be sufficient; must be of economic value; can be a promise not to sue; and

can occasionally exist through the performance of an existing duty.

Consideration must not be past Lawyers often say that consideration must not be past, but this is slightly confusing because the emphasis is not really about the time that the consideration was given, but rather about whether the consideration was given in exchange for the other partys consideration. Consideration must be given in return for the promise or act of the other party: Roscorla v Thomas (1842).
There are two exceptions to the rule that past consideration is no consideration. The first is where the past consideration was provided at the promisors request, and it was understood that payment would be made: Lampleigh v Brathwait (1615).

The secondexception to the rule on past consideration is the bill of exchange under s. 27 of the Bills of Exchange Act 1882.

Consideration must be sufficient Consideration must be sufficient but need not be adequate; the courts will not inquire into the adequacy of consideration, so long as there is some: Thomas v Thomas (1842). Consideration must be of economic value Consideration must have some physical value, rather than just an emotional or sentimental one: White v Bluett (1853). Consideration can be a promise not to sue If one party has a possible civil claim against the other, a promise not to enforce that claim is good consideration for a promise given in return: Alliance Bank Ltd v Broom (1864). Contracts (Rights of Third Parties) Act 1999 Following the Contracts (Rights of Third Parties) Act 1999, a term in a contract is sometimes enforceable by a third party. It is not necessary for consideration to have been given by the third party.

Performance of an existing duty Where a promisee already owes the promisor a legal duty, then in theory performing that duty should not in itself be consideration. Existing duties can be divided into three main categories: public duties; contractual duties to the promisor; and contractual duties to a third party. Existing public duty Where a promisee is under a public duty, but does something which goes beyond what they are bound to do under that duty, that extra act can amount to consideration: Glasbrook Brothers v Glamorgan County Council (1925). Existing contractual duty to the promisor In the past, the rule was that performance of an existing contractual duty owed to a promisor was not consideration: Stilk v Myrick (1809). In the light of the Court of Appeal case of Williams v Roffey (1990), a distinction now has to be drawn between contractual duties to supply goods or services and contractual duties to pay debts.

Contractual duties to supply goods or services As a result of Williams v Roffey, the law now seems to be that if one partys promise toperform an existing contractual duty to supply goods or services confers an additionalpractical benefit on the other party, then, providing that no duress is involved, it will besufficient consideration to make a promise given in return binding, even though in legal terms they are only agreeing to carry out their existing contractual duty.

Contractual duties to pay debts Special rules apply to contractual duties regarding debts. Where someone owes another money and cannot pay the full amount, they will sometimes offer to pay a smaller sum, on condition that the creditor promises to accept it as full settlement for the debt in other words, agrees not to sue later for the full amount. Even if such an agreement is made, it is only binding if the debtor provides some consideration for it by adding some extra element: Pinnels Case (1602).

Exceptions to the rule in Pinnels Case The rule in Pinnels Case does not apply if there is a genuine dispute about whether the debt is actually owed, or about the amount owed (Cooper v Parker (1885)). The rule in Pinnels Case does not apply to unliquidated damages. Composition agreements are binding. A creditor who accepts part-payment from a third party, in full settlement of the debtors liability, cannot then sue for the outstanding amount.

Promissory estoppel also constitutes an exception to the rule in Pinnels Case. Existing contractual duty to a third party In some cases, two parties make a contract to provide a benefit to someone who is not a party to the contract, known as a third party. If one of them (X) makes a further promise to that third party, to provide the benefit they have already contracted to provide that further promise can be good consideration for a promise made by the third party in return even though nothing more than the contractual duty is being promised by X: Scotson v Pegg (1861).

Waiver and promissory estoppel Waiver and promissory estoppel are both ways of making some kinds of promise binding even where there is no consideration. Promissory estoppel is a somewhat newer doctrine than waiver. It was developed by Lord Denning in Central London Property Trust Ltd v High Trees House Ltd (1947). The precise extent of the doctrine of promissory estoppel is still unclear. What is clear is that the following conditions must be fulfilled before the doctrine can be applied. A pre-existing contractual relationship. A promise. Reliance. Inequitable to enforce strict legal rights. Future rights not destroyed. No new rights created. Agreement by deed There is one other way in which a promise can be made binding without consideration: it can be put into a document called a deed.