‘Considerations’ – terms that crop in the courts
The notion of ‘consideration’ is a fundamental aspect of English contractual law but like so many well-used legal terms, it has proved to be a fuzzy concept that has given rise to masses of case law. Willans looks into the different types of consideration that crop up in the courts.
The idea of ‘benefit’ and ‘detriment’ still underpin much of consideration case law – meaning that each party must, at the request of its counterparty, either provide a benefit to the other, or incur a detriment itself.
- Adequate consideration is an area where judges have tried to resist involvement. This is because the fact a bargain appears one-sided does not mean that insufficient consideration has been given. However, the semantic difference between ‘adequate’ and ‘trifling’ consideration is hard to discern as, in the case of Chappel v Nestlé (1959), the courts ruled that while chocolate wrappers formed part of the consideration, they were worthless or, in their words, “trifling.”
- Nominal consideration is often used by lawyers (such as a peppercorn or £1) as a device to support an otherwise gratuitous (and so unenforceable) promise with consideration. It is nothing more than a token consideration. But such a device is effective in creating binding obligations, breach of which will result in damages. This is in contrast to Equity, where the equitable remedy of specific performance requires valuable consideration. Such a notion hinges on the facts of each case, and as such, does little to clarify this area.
- Discretionary consideration is rare, It can apply where an exclusion clause is so widely drafted that it excuses one party from any liability for failure to deliver, since such a clause essentially excuses that party from performance. Courts are understandably keen to avoid such a prospect, since it will have the effect of destroying the whole contract. They prefer a narrow interpretation of the clause, thereby ensuring that there is consideration.
- Past consideration is a term often used but only in so far as to discount its validity. This is because consideration is seen as an exchange. If the proffered ‘consideration’ has been completed before the parties enter into their agreement, it cannot be said to have been as a result of that exchange.
Although all types of consideration will have certain core elements, there will also be considerable differences depending on the purpose for which consideration is being asserted. As a result, although key principles can be extrapolated, there will always be issues which can only be resolved by the courts.
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