Consideration.

As stated above, the English law of contract is concerned with bargains, not mere promises. Thus if A promises to give something to B, the law will not allow any remedy if A breaks his promise. On the other hand, if В promises to do (or does) something in return, so that A's promise is dependent upon B's, this reciprocal element, the exchange of promises, turns the arrangement into a contract. To use legal terminology, A's promise (or action) is the 'consideration' for B's, and vice versa. Thus, the promise of the seller to deliver the car is consideration for the buyer's promise to pay the agreed price.

Consideration may, therefore, be described broadly as something given, promised or done in exchange. The act, forbearance or promise of each party is the price for which the promise of the other is bought.

Consideration can be executory or executed. Executory consideration is a promise yet to be fulfilled, and most contracts start in this way, with the consideration executory on both sides. Executed consideration is the completed performance of one side of the bargain.

The existence of consideration

Consideration must exist and have some value; otherwise there is no contract. The following may have no value and may not, therefore, constitute consideration so as to render a promise actionable:

1. Past consideration. Something already done and completed by В at the time when A makes a promise to him cannot operate as consideration. A already has the benefit of what В has done, and В therefore receives nothing in exchange. Thus if, unasked, I paint my neighbour's house while he is away and, upon his return, he promises me £ 100 for doing so, I have no remedy if he later refuses to pay.

In Eastwood v. Kenyan (1840), the claimant had been the guardian of a Miss Sutcliffe, and had spent money on her upkeep and education. When she came of age, the girl promised to repay her guardian, and her husband, Kenyon, repeated this promise when she married. It was held, however, that the guardian could not recover damages when these promises were broken, because the consideration for them was past. Any moral obligation to repay was irrelevant.

Similarly, in Roscorla v. Thomas (1842), after Roscorla had bought a horse, the seller promised that it was sound and free from vice. It was held that Roscorla could not sue for breach of this undertaking, for which no new consideration had been given. (This would apply equally to promises made by a car salesman after the sale.)

A contrast must be drawn with those situations where, although the actual promise to pay a specific sum is made after the work has been carried out, there was an implied promise to pay (a reasonable sum) before the work was begun. If my neighbour asks me to paint his house, he may be impliedly promising to pay me for my work.

In Stewart v. Casey (1892), Stewart, who was joint owner of some patents, asked Casey to promote them. After Casey had done so successfully, Stewart promised him a share in them. It was held that this promise was binding, and that the consideration was not past. The original request carried with it an implied promise to pay a reasonable amount for Casey's services; the contract was made then. The subsequent promise to share in the profits merely put a figure to the original promise, which was given before Casey carried out his side of the bargain.

2. A promise to perform an existing obligation. This may not be consideration, because the promisor is only giving what he was already bound to give.

(a) This applies particularly if the promisor merely promises afresh to perform an existing contract with the promisee. Therefore, if a debtor promises to pay part of his debt in consideration of the creditor releasing him from the rest, the release is not binding. If A is owed £ 10 by В and agrees to take £ 9 in full satisfaction, A can still go back and demand the remaining £ 1. В gave no consideration for the promise to release him from the £ 1.

In D & С Builders Ltd v. Rees (1966), the defendant owed £ 482 to the builders for work carried out, and refused to pay. Eventually the builders agreed to take a cheque for £ 300 in full satisfaction of the debt. It was held that they were still entitled to the remaining £ 182, because there was no consideration for the earlier promise to settle for less.

Similarly, if a debt is due now, an agreement to allow payment later (for example by instalments) is not binding.

In Re Selectmove Ltd (1995), The Inland Revenue gave a debtor leave to pay arrears of taxes by instalments. This was not binding. The whole arrears were due now, and the debtor gave no consideration for the Revenue's promise of extra time.

The promise to forgo part of the debt will be binding, however, if the debtor gives some new consideration, by doing or promising something which he was not previously bound to do; for example paying the debt earlier than he was bound to do, or at a place other than where he was bound to do. These rules apply equally to obligations other than debts. Where new promises are made in return for work due, there may also be new consideration if: (i) circumstances have changed since the original contract, so as to make it especially difficult for one party to carry out his side of the bargain; (ii) the other party particularly needs to have the contract performed, and therefore promises extra money for this benefit; and (iii) there is no suggestion of fraud or duress.

In Williams v. Roffey Bros (1989), builders had a contract to refurbish a block of flats. They subcontracted the carpentry work to the claimants for a fixed sum of £ 20000. Before the carpentry work was done, the carpenters were in financial difficulties, and would be unable to complete their subcontract. The builders feared that they themselves would therefore be unable to complete the refurbishment on time, and would therefore incur a large time penalty to the owners. To escape this, on their own initiative, they promised the carpenters extra money to help them complete the carpentry promptly. This promise was held binding even though the carpenters were only carrying out their original obligations. The promise had been given for the builders' own benefit and on their own initiative, and this was the consideration for the extra sum.

This case does not apply if the promisee's only obligation is to pay a debt (as in D& C Builders v. Rees, see above). Nor would it apply if a workman demanded extra payment from a builder who was desperate for prompt performance.

(b) The position is more simple as regards a promise to perform a contract which the promisor already has with a third party. This can be binding. The promisor is undertaking a new duty to the promisee in addition to the one which he already has to the third party. He now has two obligations, not just one, and this is the consideration.

In Pao On v. Lau Yiu Long (1979), for example, the defendants gave Pao On a guarantee in consideration of Pao On promising to carry out a contract which Pao On had with Fu Chip Ltd. Pao On's promise was good consideration for the guarantee.

(c) A promise to perform an existing public duty will not usually be consideration. For example, it would be contrary to public policy to allow a public official to take (and, therefore, possibly demand) private payment for carrying out his public duty. However, a promise to do more than his duty can be enough.

In Glasbrook Bros. Ltd v. Glamorgan County Council (1925), the police were offered £ 2000 to provide a special guard for a coal mine during a strike. It was held that they could recover this amount when the owners later refused to pay, because the special guard went beyond the ordinary police duty to protect property.

In Harris v. Sheffield United F. C. Ltd (1987), the police authority was held entitled to payment for providing officers inside the football ground during matches.

If it can be shown that a promise to carry out a public or general duty is not contrary to public policy (e.g. a promise by a man or woman to maintain his or her family), then it might be consideration.

3. A promise made to a third party. Normally, only a person who has given consideration may sue on a contract. For example, A may promise to pay £ 1 to B, if В will give a book to C. If В refuses to deliver the book, A may sue, but not C, who has given no consideration and is not a party to the contract. However, by the Contracts (Rights of Third Parties) Act 1999, a third party ('C' in the above example) can enforce a term of the contract if (a) the contract expressly provides that he may; or (b) (normally) if the term purports to confer a benefit on him. Therefore, in the above example, С might have a right of action against B. This is discussed more fully in Unit 6.

4. Vague promises, which are incapable of monetary value, will not be consideration. A promise to show natural love and affection or to behave as a good son should behave will be of no effect in the law of contract.