LWZ118 Lecture Notes - Lecture 3: Unconscionability, Forego, Alimony
Lecture 3.1
Contracts
CONSIDERATION
In contract law CONSIDERATION is concerned with the bargain of the contract. A contract is based on an
exchange of promises. Each party to a contract must be both a promisor and a promisee. They must
each receive a benefit and each suffer a detriment. This benefit or detriment is referred to
as consideration.
Consideration must be something of value in the eyes of the law - Thomas v Thomas (1842) 2 QB 851. This
excludes promises of love and affection, gaming and betting etc. A one sided promise which is not
supported by consideration is a gift. The law does not enforce gifts unless they are made by deed.
Whilst the common law strictly adheres to the requirement of consideration (although in some instances
the courts seem to go to some lengths to invent consideration eg Ward v Byham [1956] 1 WLR
496, Williams v Roffey Bros[1990] 2 WLR 1153) equity will, in some instances, uphold promises which are
not supported by consideration through the doctrine of promissory estoppel .
There are various rules governing the law of consideration:
1. The consideration must not be past.
2. The consideration must be sufficient but need not be adequate.
3. The consideration must move from the promisee.
4. An existing public duty will not amount to valid consideration.
5. An existing contractual duty will not amount to valid consideration.
6. Part payment of a debt is not valid consideration for a promise to forego the balance.
Past Consideration – The consideration must come into existence either with or after the promise. Where
the stipulated consideration pre-dates the promise, it will not be considered good consideration (eg, a
promise by A to transfer ownership of a car to B in exchange for assistance B provided to A the previous
month). This was discussed in, Roscola v Thomas where the promise was not binding because the only
“consideration” provided for a promise about the soundness of a horse was entering into the original
contract - this had occurred before the promise was made.
‘An act already done without reference to a promise does not satisfy the concept of an exchange which
underpins the law of consideration’. In Attorney-General for England and Wales v R [2002] 2 NZLR 91 at
106, R was a member of the SAS. He was a member of the patrol Bravo Two Zero which became infamous
after other members of the patrol had published books on the activities and a film was made based on the
books. The publicity lead to controversy amongst the patrol as it was motivated by commercial gain and
distorted the truth placing blame on some of the dead and surviving members of the patrol. In response to
this the Ministry of Defence introduced confidentiality agreements to prevent future publications. R was
told that he must sign the confidentiality agreement if he wished to continue in the regiment or be
returned to Unit which would be a considerable demotion for the claimant and was generally given as a
form of punishment. R asked if he could take legal advice on the agreement and was told that he could not.
He signed the agreement in Oct 1996 and in March 1997 took the decision to leave the Army. The
following year he wished to put his side of the events of Bravo Two Zero to correct the earlier errors and
save the memories of his lost colleagues. He entered a contract with a publisher and the Attorney- General
brought a claim seeking an injunction to prevent publication. R sought to have the confidentiality
agreement set aside as it was signed under military orders he raised both duress and undue influence in his
defence.
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Lecture 3.1
Contracts
Held: A lawful demand may constitute illegitimate pressure where the demand is not justified. However,
there must still be absence of choice. R was not acting under military orders to sign the agreement. He may
have been faced with overwhelming pressure, but he still had choice. The MOD were justified in
introducing the confidentiality agreement therefore the demand was both lawful and justified and thus did
not amount to illegitimate pressure.
Exceptions: Past consideration can be good consideration if (a) provided at the request of the promisor (b)
the parties understood that the act would be remunerated and (c) had the promise occurred in advance of
the act it would have been enforceable.
In Pao On v Lau Yiu Long [1980] AC 614 at 629, Pao agreed to sell shares to Fu Chip (controlled by Long) in
consideration for certain shares. To protect the share value, Pao and Fu Chip agreed that Pao would retain
60% of the acquired shares until April 1974. However, in April 1973, Pao refused to proceed with the
contract unless Long agreed to indemnify him against the value of the retained shares falling below a set
level. Long agreed, but only to ensure public confidence in the company. The sale proceeded and Pao
sought to enforce the indemnity. The court held, There was consideration here – an act done prior to a
promise can be good consideration in some cases; in particular, it will be good consideration if the act
done was done at the promisor’s request, the parties understood that the act would be remunerated in
some way and, if the promise had been given in advance of the act it would be legally enforceable. In this
case all three elements were present. In particular, the defendant had requested that Pao On retain 60%
of shares and the parties understood at that time that that act would be compensated by the provision of a
guarantee.
Forbes Engineering (Asia) Pty Limited v Forbes (No 4) [2009] FCA 675
PERFORMING EXISTING DUTY NOT GOOD CONSIDERATION - Where the promisee is already contractually
bound to the promisor, the general rule is that performance of an existing contractual obligation will not
be good consideration unless some additional benefit is conferred. However, it is sometimes difficult to
determine whether an additional benefit is conferred; in particular, a benefit may exist if performance of
the existing duty avoids problems that are associated with non-performance!
For e.g. In Stilk v Myrick 1809 2 Camp 317, Before the start of a voyage, plaintiff contracted to work as one
of 11 seaman for the voyage for $5 a month. During the voyage 2 seamen deserted; Captain then made an
agreement with the rest of the crew that they should receive the wages of the deserters if they continued
to work the ship back to London. Plaintiff sued for his share of the wages of the two deserters. The Court
held:
(1) The agreement was not enforceable because there was no consideration given by the plaintiff for the
promise to pay.
(2) The remaining crew were already bound to work the vessel back to London. The desertions were
merely an emergency of the voyage and the rest of the crew remained bound by the terms of the original
contract to bring the ship back to London.
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Lecture 3.1
Contracts
However, In Williams v Roffey Bros Plaintiff contracted to perform carpentry work for Defendant. When it
became apparent he could not complete on time, Defendant promised to pay Plaintiff extra money to
ensure it was completed on time. Defendant would incur liability to a third party if the work was not
completed on time.
The Court held that Defendant was liable. Per Glidewell LJ If
(1) A enters into a contract with B for the supply of goods or services in return for payment by B; and
(2) Prior to completion B has reason to doubt whether A will complete; and
(3) B then promise A additional payment in return for B promising to perform on time; and
(4) As a result of this promise B obtains a benefit or obviates (removes) a disbenefit [eg, liability to third
party]; and
(5) B’s promise is not given as a result of A’s economic duress or fraud
Then
(6) The benefit to B (or obviation of disbenefit) is capable of being good consideration for B’s promise
Ward v Byham [1956] 1 WLR 496, An unmarried couple had a child together and lived together for five
years. The father then turned the mother out of the house and sent the child to live with a neighbour and
the father paid the neighbour £1 per week. The mother then got a job as a live in house keeper and wished
to have the daughter live with her. The father agreed to allow the daughter live with the mother and
agreed to pay her £1 per week provided she ensured the child was well looked after and happy. The father
made payments but then when the mother remarried he stopped making payments. The mother brought
an action to enforce the agreement. The father argued that the Mother was under an existing legal duty to
look after and maintain the child and therefore was not providing any consideration for the promise to
make payment.
The court held, by promising to ensure the child was well looked after and happy she had gone beyond her
existing legal duty and therefore had provided consideration. She was entitled to the payment.
The position is different where the promisee contractually bound to a 3rd party to perform the obligation.
In a case where the promisee’s contractual duty is owed to a third party, performing (or promising to
perform) that duty is good consideration for the promisor’s promise. (PAO ON case above)
DUTY IMPOSED BY LAW - Where a duty is imposed by law to perform a certain task mere performance of
that task is not good consideration. This seeks to prevent corruption - public officials extorting money
from the public for performing tasks they are already required to perform. However, if the promisor
does more than merely perform an existing duty this will be good consideration. In Glasbrook v
Glamorgan County Council [1925] AC 270 Glasbrook promised to pay the Council for special police
protection during a strike (after requesting police protection and being refused). The protection Glasbrook
received was more than the police thought necessary. Glasbrook refused to pay and Council sued. The
Court held there was no consideration because the provision of protection was a public duty.
(1) The public cannot be called upon to pay the police for performing their obligations and any promise to
do so will be unenforceable (in this case there is an obligation to keep the peace, prevent crime, protect
property etc)
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Document Summary
In contract law consideration is concerned with the bargain of the contract. A contract is based on an exchange of promises. Each party to a contract must be both a promisor and a promisee. They must each receive a benefit and each suffer a detriment. This benefit or detriment is referred to as consideration. Consideration must be something of value in the eyes of the law - thomas v thomas (1842) 2 qb 851. This excludes promises of love and affection, gaming and betting etc. A one sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by deed. Whilst the common law strictly adheres to the requirement of consideration (although in some instances the courts seem to go to some lengths to invent consideration eg ward v byham [1956] 1 wlr.
