LLB202 Study Guide - Final Guide: Deontological Ethics, Selfridges, Chappell & Co.
CONSIDERATION pg 142
Definition
Consideration is the ‘price paid’ for the promise (Dunlop Pneumatic Tyre Company v
Selfridge & Company Ltd). Consideration can be executed or executory but not past.
Consideration in bilateral contracts
Definition:
Diplock LJ in United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Pty Ltd:
information not only in relation to principles of agreement, but also to the notion of
consideration.
When parties enter a bilateral contract- both parties promise to exchange/stop doing
something
Consideration in unilateral contracts
Definition:
Diplock LJ: in a unilateral contract the promisee does not undertake to do or refrain from
doing a particular act. The only promise is the one made by the promisor to do or not do an
act if the promisee does or refrain from doing a specified act eg Carlill
Example:
A is the promisor and has promised to pay B $100 if B contracts the flu after using the smoke
balls as prescribed. B does not make a promise to use the smoke balls and is under no
obligation to do so however if B does then it’s the act of buying and using the smoke ball
(and contracting the flu) that is the consideration for A's promise.
Rules of consideration
1. Consideration must move from the promisee
2. Consideration must be bargained for
3. Consideration must be sufficient but need not be adequate
Something of value
Performance of existing duties
Part-payment of debt
Forbearance to sue
4. consideration may be executed or executory (promise to execute), but not past
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3.1 Consideration must move from the promise
Consideration must move from the promisee, although it need not move to the promisor.
Eg moves from A to C instead of A to B
Common that the consideration moves from promisee to promisor whether the promisee
promises to pay money or do/not do an act
However, sufficient if consideration moves from promisee to third party at the
direction of promisor
= money/act does not have to be done to the promisor it can be to a third party eg in
consideration for A's promise, B promises to teach E (A's son) math
Overlap with doctrine of privity
Only one person who is a party to a contract can sue on it
Above a promisee is only able to sue on a promise if the promisee has given
consideration for that promise however as shown below there is an overlap between
these doctrines
Example
A and B agree that if B does specified work for A, A will pay C $500. B does the work but A
refuses to pay the $500 to C
Using common law principles:
C will not be successful in action against A to enforce the promise
Because-
1.C is not party to the contract (doctrine of privity)
2.C has not provided consideration for A's promise
Case example
Tweddle v Atkinson (1861) 121 ER 762
Facts:
Bride's father agreed with groom's father that he would pay 200 pounds to the groom
towards the wedding
After not paying the groom, could the groom enforce the promise with the late bride's
father's estate
Issue:
Could the contract be enforced by a third party
Decision:
Third party cannot enforce the contract
Consideration must move from promisee for enforcement to be allowed
Groom provided no consideration for the promise
Same decision was applied in Trident General Insurance Company Ltd v McNiece Bros Pty
Ltd
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Whether doctrine of consideration and doctrine of privity are both needed (as theyre nearly
the same):
In Coulls v Bagot's Executor and Trustee Company Ltd and Trident Case:
Justices agreed that the issues of consideration and privity are separate but interrelated
principles
Example
A and B agree that if B does specified work for A, A will pay C $500. B does the work but A
refuses to pay the $500
B, the promisee has provided consideration for A, the promisor's promise.
A valid contract exists between A and B
If A fails to pay C then B can sue A for breach of contract
C cant sue A because C is not party to the contract
If C was a party to the contract different issues arise:
Example
A, B and C sign a contract under which A pays C $500 if B does specified work. B does the
work but A refuses to pay C.
C is a party to the contract
Doctrine of privity will not bar an action by C against A
Doctrine of consideration- C will be unable to sue A for breach because C hasn’t
provided consideration for A's promise
Doctrine of consideration not privity that prevents a successful action by C
Dunlop Pneumatic Tyre Co v Selfridge & Co [1915] AC 847
Facts:
Dunlop made a contract with Dew for tyres at a discounted price on condition that
they would not resell the tyres for less than listed price and that resellers who purchased
from Dew do not sell at a lesser than listed price.
Dew sold to Selfridge at listed price and made Selfridge agree not to sell at a lower
price either otherwise 5 pounds per tyre in damages if violated this agreement
Selfridge sold tyres below promised price and was sued by Dunlop
Issue:
Is it lawful for Dunlop to sue Selfridge even though no contractual relationship exists
between them?
Decision:
Case was dismissed against Selfridge
Dunlop could not be regarded as to having provided consideration for Selfridge's
promise not to sell at a less than listed price as consideration for this promise was by
Dew
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