Assignment 1

LAW 200.6

Consideration must be sufficient but need not be adequate

Prepared by :

Nusrat Jahan 101 0352 030

Prepared for :

Mr. Ishtiaque Ahmed

Lecturer School of Business North South University

Date of submission : Word Count :

11 March 2013

1,189 (without reference and cover page)

Consideration is one of the three main building blocks of a contract in English law and a lawful consideration is an essential element of contract law to be binding. All contracts require something to be given in return for something else from the other party. That something is called consideration and each party to a contract must supply consideration for the contract to be valid. This is the bargaining element of a contract, where something is to be gained on each side. A classic definition of consideration, in terms of benefit and detriment was given by Lush J in Currie v Misa (1875), where he said:
A valuable consideration may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.

Analysis:
It is perhaps easier to think of consideration as the price paid for the contract, and this certainly fits in with the commercial concept of bargaining and gain. The House of Lords adopted Pollocks definition of consideration in Dunlop v Selfridge (1915):
An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought and the promise thus given for value is enforceable.

So, if A agrees to dig Bs garden for tk.50, As promise to dig is the price paid for Bs promise to pay tk.50. The words sufficient and adequate, although having very similar meanings in everyday language, have rather different meanings when applied to consideration which is reflected through the statement consideration must be sufficient but need not be adequate. There must the possibility of some value capable of expression in economic term to the original promise but need not be adequate as matter of commercial exchange. For consideration to be considered sufficient, it must be of some value to the other party, however slight or trivial. If a pen is offered in exchange for a new Porsche car, however unlikely, if it is meant seriously, then that is sufficient in the eyes of the law. There is something which is of some value on each side of the bargain, and the courts do not concern themselves with the market price, or adequacy, of the bargain. This supports the idea of freedom to contract, leaving parties to make their own

Consideration must be sufficient but need not be adequate | 1

bargains, whether in their favor or not. The following case is the usual authority for the courts requirement of sufficiency. Thomas v Thomas (1842) A husband wanted his wife, when he died, to have the right to live in the house owned by him, so he formed a contract under which she paid 1 per year rent. This was held to be sufficient consideration to enforce the agreement, even though it was clearly not adequate, as it was far below the market value. Three interesting cases which illustrate sufficiency and adequacy of consideration are as follows. Bainbridge v Firmstone (1838) In the case, the need arose to know the weight of some boilers. It was agreed that if the boilers were taken away for weighing, they would be returned in good condition. On return they were damaged, and it was held that payment should be made for this. In the contract, then, the consideration on one side was the benefit of weighing boilers, and on the other, the entitlement to having them returned in good condition. It can be seen that the benefit of weighing boilers has no real market value, but is acceptable to the courts as consideration because it is recognizable. Chappell v Nestl (1960) In this case, dispute was centered on whether chocolate wrapper could form part of the consideration. Chappell were owners of copyright of a tune called Rocking Shoes and Nestl were manufacturers of chocolate who were selling to the public these records in return for 1s6d and three wrappers of chocolate bars manufactured by Nestl. Under the statutory provision then in force, Nestl were required to pay certain percentage of ordinary retail selling price to Chappell. Chappell contended that Nestl couldnt rely on statute for it contemplated price consisting of money alone, whereas in this case consideration for records included three chocolate wrappers also. However, the issue rose whether chocolate wrappers formed a part of consideration or not.
Consideration must be sufficient but need not be adequate | 2

It was held that they could as they were of value to the person providing them and were therefore sufficient consideration for the promise made. Whether or not consideration is sufficient, that shall be a subjective test. So, it justified the Courts approached to the issue of adequacy by reference to freedom of contract. The Courts would not interfere just because it appears that a person had made a bad bargain. The reasoning of Chappell was presumably that the requirement to send in the worthless wrappers would encourage more people to buy the company chocolate. Therefore, the chocolate wrappers alone could be valid consideration. These are obviously not adequate, having no intrinsic value but formed sufficient consideration. Edmonds v Lawson (2000) A pupil barrister makes a claim against barristers chambers. The pupil was offered a 12 month pupilage, at the end of which she would receive his qualification. Pupil brings a claim against the chambers saying that she is entitled to minimum wage. The chambers argue that they did not pay anything or guarantee anything to the claimant, therefore there is no consideration. Furthermore, the claimant owes nothing to them so there is no consideration there. H of L judgment: There is consideration in this case. Even if there is no money changing hands we can look at the outside circumstances to show that there is consideration: The chambers have the ability to attract good students in the future. The chambers may also get the benefit of having connections with the people who used to train with them. However, there doesnt seem to be any detriment to the promise. The court decided that this issue did not matter as the benefit was enough. Therefore, the agreement of a pupil barrister to enter into the close, important and potentially very productive relationship, which pupillage involves was held to be good consideration.

Conclusion:
In the above cases, chocolate wrappers, productive relationship or benefit of weighing boiler might not have adequate value in the eye of general, but, sufficient enough if the two parties involved in the contract perceive valuable to deal with. It can be summarized the points of law and arguments in the above for the statement consideration must be sufficient but need not be adequate. When considering value, the Courts is not interested in adequacy of consideration,
Consideration must be sufficient but need not be adequate | 3

i.e. whether the price is fair, it is only concerned with whether or not the consideration can be expressed in terms of economic worth. Additionally, it can put forward that consideration need not be adequate which is generous enough to appear a fair bargain in terms of monetary value, but must be sufficient meaning having enough recognizable value to satisfy the courts. This is probably the most important aspect of consideration, and underpins the other rules which have been developed by the courts through case law.

References:
Counsel.net (2006), Explain the statement 'consideration must be sufficient but need not to be adequate'. [online], Available at: <http://counsel.net/chatboards/contracts/topic5/3.31.06.04.51.11.html> [Accessed: 8 Mar 2013]. E-lawresources.co.uk (n.d.), Contract consideration. [online], Available at: <http://www.elawresources.co.uk/Consideration.php> [Accessed: 8 Mar 2013]. Indian Case Laws (2013), Chappell & Co. Ltd. v. Nestle Co. Ltd.. [online], Available at: <http://indiancaselaws.wordpress.com/2013/01/14/chappell-co-ltd-v-nestle-co-ltd/> [Accessed: 8 Mar 2013]. Weitzenbock, E. (2012), English Law of Contract: Consideration. [e-book], Norwegian Research Center for Computers & Law. <http://www.uio.no/studier/emner/jus/jus/JUS5260/v12/undervisningsmateriale/Consideration.pdf/> [Accessed: 8 Mar 2013].

Consideration must be sufficient but need not be adequate | 4