Lecture 5: Consideration

1. Introduction --- Consideration1

 Common Law: only an agreement or promise with consideration is enforceable
 If not, this naked agreement (or nudum pactum) is contractually void
 Four elements must be satisfied in order to have consideration for contract formation:
I. Consideration must be either a new benefit to the promisor or a new
detriment to the promisee
II. Consideration must be sufficient, but need not be adequate
III. Consideration must not be in the past
IV. Consideration must move from promisee at the promisor’s request
 General Rule of Consideration: Currie v Misa [1975]:
A valuable consideration, in the sense of the law, may consist either in some right, interest, profit,
or benefit accruing to one party, or some forbearance (不行使或延遲行使權利), detriment, loss
(or inconvenience), or responsibility, given, suffered, or undertaken by the other

2. Detriment or Benefits

A. Executory benefit or detriment

 Bilateral contract: consideration is valid on each side even where it remains
entirely executory (待履行) mere promise of consideration is valid consideration
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915]
 Unilateral contract: a promise in exchange for an act; once V performs an act,
he supplies consideration for P’s promise

B. Avoiding troubles and compromising claims

 General Rule: Benefits to promisor can take the form of avoiding trouble or
inconvenience which might otherwise lawfully be caused by the promisee,
including bona fide (a belief of a fair chance of winning the case) forbearance
from starting or continuing legal proceedings constitute good consideration

 Forbearance from pursuing [a groundless but honestly believed] claim will still
constitute consideration. (supported by the benefits to promisor: avoidance of

1
In civil law system, an agreement can be formed without consideration. Consideration is only an
(ancillary) indication of contractual intention which is prerequisite for contract formation.
 expense and troubles of legal proceedings) Pitt [1993], Cook [1861]

 Exception: If the party compromising the claims (i.e. promisor) knows it to be

unfounded (or not made in good faith), he does not provide consideration
(because conduct of compromising party would be fraudulent & abuse of
judicial process)
Callisher v Bischoffsheim [1870], Cosmo Sea Freight [1994]

*** Pitt v PHH Asset Management Ltd [1993]

Fact: Mr. Pitt bid £200,000 for a cottage, which PHH accepted subject to contract and to
stop Mr. Pitt from attaining an injunction against PHH. Afterward, the another
person bid £210,000, PHH then withdrew its acceptance from Pitt.
Held: Avoidance of nuisance lawsuit (i.e. threat to issue injunction) was benefit capable
of providing consideration to support the promise not to consider alternative offer.

Cook v Wright [1861]

Fact: P caused paving work to be done outside the D’s residence and demanded payment
from him in the sum of $30. He refused to pay, correctly believing himself not to be
liable as he was not the property’s owner. P incorrectly but honestly believed D to be
liable and threatened to sue D unless he paid. In response D agreed initially but
refused to make the payment on promissory note because no consideration is
provided.
Held: There was sufficient consideration supporting the promises to pay because D
knew that P thought him liable, and would sue him if he did not pay and in order
to avoid the expense and trouble of legal proceedings , he agreed to a
compromise.

Callisher v Bischoffsheim [1870]

Held: If the claimant bona fide believes he has a fair chance of success, he has a
reasonable ground for suing, and his forbearance to sue will constitute a good
consideration.

**** Cosmo Sea Freight (HK) Ltd v Gold King Consolidator Ltd [1994]
Fact: A consignee sued Cosmo (P) for negligently handling of the good, which found that
the clothing was already spoiled prior to the stuffing of the containers at Gold King’s
premises. Cosmo agreed to accept compensation from Gold King as contribution to
 Cosmo’s liability for damages but Gold King (D) later refused to make payment.
Held: It is satisfied that P thought that they had a claim against D and this was a view
honestly (i.e. compromise of a claim was made in good faith) and reasonably
held.

Miles v New Zealand Alford Estate Co [1886]

Held: P gave up his right which he bona fide but mistakenly believes he possesses. It is
a detriment borne by the party agreeing to compromise the claim. [criticized for
failing to explain why the compromise of a groundless claim involves a real
detriment for the claimant]

C. Detriment to promisee
Inconvenience
 Where a thing requested by the promisor can be of any real value to him,
common law courts are nevertheless distinctly ready to find that the thing
constitutes sufficient consideration because it is a detriment to the promisee
 General Rule: any trouble or inconvenience undertaken by the promisee can
provide good consideration
 Example: Promise to pay $100 to run for 1hr (an act would be detriment to
promisee in the form of inconvenience while there is no benefit to promisor)

Bainbridge v Firmstone [1838]

Fact: D promised to reassemble two boilers if P allowed him to dismantle them. When D
failed to honor his promise, P claimed damages for breach of contract where D argued
that there was no consideration for his promise to reassemble because he has derived
no benefits from this transaction.
Held: The loss of use of the boilers was sufficient consideration for D’s promise to
restore them to P in working order.
similar Carlill v Carbonic Smoke Ball [1893]:
case It was held that the inconvenience suffered by the plaintiff in using the product
was sufficient to constitute constitutes.

Expenditures (which might not otherwise have incurred because of a promise)

Chappell & Co Ltd v The Nestlé Co Ltd [1960]

Held: Acquisition by promisee of chocolate wrappers “required expenditure by the
acquirer which he might not otherwise have incurred” and such acquisition was
certainly consideration for the promise to supply a musical recording in
exchange of the wrapper

Receipts and post-dated cheques (valid consideration)

Kao, Lee & Yip v Euro Treasure Ltd [1985]

Held: Drawee (受票人) of a cheque was held to have suffered a detriment sufficient to
constitute consideration for the drawer’s ( 出 票 人 ) promise to pay merely by
issuing receipts (傳票) for the cheque (debt due to him had been satisfied)
similar Yue Tai Plywood & Timber Co Ltd v Far East Wagner Construction Ltd [2001]:
case Drawee of a cheque had provided consideration for drawer’s promise to pay by
suffering detriment of accepting the cheque in post-dated form ( 期 票 ) and
consenting to delayed presentation (forbear on time and not to present the
cheque)

Loss of Liberty/abandonment of legal right

 General Rule: A thing requested by the promisor may be regarded as a detriment
to promisee even where it involves pursuing a course of action which is objectively
in the promisee’s best interest
 Detriments: surrender/abandonment of a right or liberty enjoyed by the promisee

*** Hamer v Sidway [1891] (US)

Fact: Was a promise to abandon a legal right to use tobacco and alcohol considered
sufficient consideration to enforce a contract?
Held: It was held that surrendering freedom or legal right to use tobacco and alcohol
(which both were not forbidden by law) was a detriment to D that constitute
good consideration for promise to pay him a sum of money.

Dunton v Dunton [1892] (Australia)

Fact: D agreed to pay her former wife $6 per month on condition that she should “conduct
herself with sobriety and in a respectable and virtuous manner”.
Held: It was held that the former wife war free within the law to conduct herself in any
manner she chose; surrendering the freedom was a detriment to her and
provided good consideration for D’s promise to pay
similar White v Bluett [1853]:
case Surrendering the liberty to complain in the judge’s view constitutes no consideration.
(Professor’s view: it should have constituted; the case is deviated from standard
mainly because of its peculiar facts and doubtful testimony made by Bluett )

Detriment not necessary

 General Rule: Even if neither party to an exchange of promise incurs a detriment
it is possible for the resulting agreement to be supported by consideration. “If
both parties benefit from an agreement, it is not necessary that each also suffers a
detriment”
William v Roffey Bros & Nicholas [1990]

D. Subsisting obligation to third party (對第三者履行的責任為有效對價)

 General Rule: The performance of a pre-existing contractual or other private law
duty owed to a third party can provide sufficient consideration to support a
promise because the promisor ‘obtains the benefit of a direct obligation which he
can enforce. (For Pao On, Fong Huen case, write “which was entirely privy b/w
…”)

Obtaining Legal Interest [2 scenarios: NZ (diagram 1) or Pao On (diagram 2)]

Stevedores (NZ) -------------------------------------- Carrier (3rd Party; agent)
| (consideration: Contract B) /
| (benefits) / (Contract A)
| / - - - - - - - - - - - - - -/
Owner of Drill (Eurymedon)
 A promise in exchange for executed performance of contractual obligation
owed to the third party (not really intersection between two parties)
New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (The Eurymedon)
[1975]
Fact: The owner of drill equipment attempted to sue the stevedores for damage to the drill
during its unload, but after the agreed limitation period had expired. The stevedores
raised the promised limitation as a defense, but the owner argued that the stevedores
had given no consideration for the promise. As per the owner, because stevedores
were already under contractual obligation (Contract B) to carrier to unload the
 equipment, such unloading could not constitute sufficient consideration for owner not
to sue.
Held: Consideration was well provided by Stevedores (NZ) in the form of service of
unloading the machine even though it was already under a contractual
obligation to discharge to carrier. The promisor (the owner) obtained the
benefits of direct obligation which he could enforce.
similar Scotson v Pegg [1861]:
case Scott contracted to deliver coal to X. X sold the coal to Pegg and order Scotson to
deliver the coal to Pegg. Pegg promised Scotson he would unload it at fixed daily
rate [promise to pay]. However, Pegg did not fulfil his promise.
Held: The delivery of coal to Pegg (performance of existing contractual duty owed
to X) was good consideration to enforce Pegg’s promise to pay.

Pao On (Ps) ------------------------------------- Fu Chip Co (third party)

| (Main contract: not to sell 60% of Fu Chip shares)
|
|
| (Indemnity agreement from Lau to Pao)
| (on the basis that Pao does not sell that amount of Fu Chip shares; same
| contractual obligation in main contract for Pao On)
Lau Yiu Long (Ds)

**** Pao On v Lau Yiu Long [1979] --- Fu Chip Co (legal entity separate from owner)
Fact: Pan On (the plaintiff) acquired shares in Fu Chip company. Lau (the defendant) were
the majority shareholders of Fu Chip Company. Pan On entered into main contract
with Fu Chip Co that they would not sell 60% of Fu Chip Co shares. Later Lau made
promise to indemnify Pan On against any loss incurred from the fall of share price of
Fu Chip. In April 1974, due to the fall in share price, Pao On sought to enforce
indemnity agreement against the Lars.
Held: Benefits to Lau: obtained the direct obligation (which he can enforce) in respect
of an arrangement which was entirely privy to Paos & Fu Chip Co.
Consideration: provided by Pao for the performance of existing contractual duty
owed to Fu Chip Company (the third party) to honor the agreement (i.e. by not
selling 60% of shares)

Private non-contractual obligation or duty

  In Hong Kong, performance of private law duty owed to third party (including
non-contractual duty) can provide valid consideration for a promise.

Father (P: Fong Huen) --------------------------------------------------- Daughter (3rd party)

| (release of title deed of the flat to Daughter for mortgage)
|
|
| (promissory note from D to P possibly repaid the debt)
Antony Wong (D: Daughter’s husband)
Fong Huen v Anthony Wong [1975]
Fact: D approached his wife and suggested her to ask for a loan of $25000 from her father
(P). She correctly foresaw this would not be granted and decided to mortgage her flat
registered under her name. However, the title deeds of the flat was retained in the
father’s safe custody. She understood that her father would not be in favor of this
plan without security and therefore asked D to sign a promissory note to her father for
security. Such a promissory note was confirmed between D and P personally. After
receiving the money from mortgage of the flat, P refused to sign a promissory note.
Held: It was held that P’s obligation to his daughter was not contractual but analogous to
such obligation because “it arose from deliberate transaction between private
individuals and could only be enforced by those directly concerned”.
Consideration for D’s promissory note: provided by P’s performance of the
obligation to his daughter (release to deeds to hers from his custody of title
deeds)
Benefits to Anthony Wong (D): direct obligation owed to him which was entirely
privy to P & his daughter

E. Performance of public duty

 General Rule: the performance of a public duty imposed by law cannot constitute
consideration (e.g. police’s duty – “obey lawful orders of superior officers”)
 Exception: Where the promisee provides something beyond the requirements of
his legal duty/more than is strictly required by law, however, that additional thing
can serve as good consideration [such extra elements are not legally entitled]

Collins v Godefroy [1831]

Fact: Collins had been summoned to attend court as a witness in separate court case
involving the defendant, Godefroy. Godefroy had sued his attorney for malpractice
and Collins was required by the court to attend as an expert witness. After the trial
Collins gave Godefroy an invoice to cover his time spent at court.
Held: Collin’s attendance at court was a (public) duty imposed by law, and any
agreement concerning remuneration was without consideration.

Exception rule: Exceeding legal duty

 Additional legal duty required by D + D’s promise to do more than law
request
Glasbrook Bros Ltd v Glamorgan County Council [1925]
Fact: D asked the police to provide protection during a miner's strike and agree to pay for
the police officer billeted on site. The police provided protection as requested and
provided the man power as directed by D although they disputed the level of
protection required to keep the peace. At the end of the strike the police submitted an
invoice to cover the extra costs of providing the protection.
Held: The police, having reasonably opined that mobile squad was sufficient to
discharge obligation towards D, had done more than legal duty required upon
D’s request (i.e. police garrison). There exists consideration for D’s promise to
pay.

Ward v Byham [1956]

Fact: P was a mother of D’s infant daughter but they had later separated. P subsequently
took custody of the daughter, and D agreed to pay her $1 for daughter per week if
“you can prove that she will be well-looked after”
Held: P agreed to do more than the law strictly required (ensuring the daughter’s
happiness and allowing her to decide with which parent to live).

 Hong Kong: it may be that performance of a public duty may serve as

consideration unless there is a public policy reason requiring otherwise

*** City Polytechnic of Hong Kong v Blue Cross (Asia-Pacific) Insurance Ltd [1995]
Held: City Poly was under public duty to consider Blue Cross’s tender in accordance with
its published procedure. City Poly’s performance of that public duty provided
consideration for tender not to withdraw for 3 months.
3. Sufficiency of consideration

 Consideration need not be adequate (fair or reasonable price for the

promise) but sufficient, anything of value to the promisor or detriment to
the promisee
 General Rule: Once the promisor has requested sth. from promisee in
exchange for the promise, it is strongly presumed that the thing requested is
of benefit to promisor even if it possesses little/no intrinsic commercial value
[Example: annual rent of $1 is sufficient consideration for lifetime
tendency2]

*** Chappell & Co Ltd v The Nestlé Co Ltd [1960]

Held: Although wrappers were of no value to Nestle, they were of commercial value
since it formed part of company’s campaign to increase sales (it would have been
good consideration even without commercial benefits). The chocolate wrapper is
not a precondition of sale but rather part of price since the advertisement suggests that
they would help customers get the recording. “an expenditure which could not have
incurred without the promise of acquiring wrapper in exchange of record”

*** Bainbridge v Firmstone [1838]

Held: He could only do so by obtaining P’s permission, which he did obtain by promising to
return them in good condition

4. Past Consideration
 General Rule: A promise to make payment for an act performed in the past
will not be supported by sufficient consideration.
 Application: A term will not be contractually enforceable if it is introduced
into a contract after an agreement was concluded. It can also prevent
formation of contract as well.

Roscorla v Thomas [1842]

Held: The rule against past consideration can prevent enforceability of an contractual
term to form part of the contract.
similar Re McArdle [1951]:

2
Thomas v Thomas (1842)
case The work had been completed before Marjorie had requested payment from the
rest of William McArdle’s children. The rule can prevent formation of contract

A. Timing of term’s introduction

 General Rule: Whether the term was introduced after the act for which
it was promised as payment or after the contract was already
concluded.
Exception: If so, a fresh consideration will be needed to give
contractual effect to the new term

 Exclusion Clauses introduced after contract had been concluded

** Olley v Marlborough Court Ltd [1949]
Fact: The claimant booked into a hotel. The contract was made at the reception desk where
there was no mention of an exclusion clause. In the hotel room on the back of the
door a notice sought to exclude liability of the hotel proprietors for any lost, stolen or
damaged property. The claimant had her fur coat stolen.
Held: The exclusion clause was not contractually enforceable because it was introduced
into the contract after the agreement had been made. The contract concerning
the supply of accommodation had already concluded, leaving P no chance to
accept it.
similar Thornton v Shoe Lane Parking Ltd [1971]:
case A term seeking to exclude tortious liability was printed on the ticket granting entry to
a car parking facility. The ticket was issued by machine after P deposit money into it.
Held: The clause was not enforceable because it had been introduced by D after
the contract had been concluded when P deposited the price into the machine.
similar Ho Sang v The Hong Kong & Kowloon European Style Tailors Union [1953–55]:
case Held: A clause on a rent receipt forbidding gambling on the premise was not
enforceable because it was given by landlord after the agreement had been concluded

**** Lu Shang Chang v Kingroup Ltd [1995]

Issue: Whether the goods were in the apparent possession of the tenants (Kong Sun) so that
the bailiff had lawful authority to seize them under the warrant of distraint?
(D: P had forfeited goods for failure to comply with the clause in the contract of sale)
Held: It was held that the term of forfeiture was not agreed under contract because the
delivery note carrying the term was given to Lu only after his bid had been
 accepted (i.e. contract had been concluded). With no fresh consideration to
support the forfeiture term, such term will be void.

B. Implied assumpsit (implied contract) (Exception to Past Consideration)

 Outdated: A past service or act can provide consideration for a subsequent

promise to pay in circumstances where it was reasonably understood that:
(1) the past service was requested by the promisor
(2) the service would be paid for

Outdated Lampleigh v Braithwaite [1615]

Fact: Braithwaite had killed another man and asked Lampleigh to secure a pardon.
Lampleigh went to considerable effort and expense to secure the pardon for
Braithwaite who subsequently promised to pay Lampleigh £100. Braithwaite then
failed to pay the £100. Lampleigh sued.
Held: Original request by Braithwaite contained an implied promise that he would reward
for Lampleigh’s efforts (to secure pardon for him). Thus, previous request can provide
consideration for the subsequent promise to pay.

Outdated Re Casey’s Patents, Stewart v Casey [1892]

Fact: D worked on the problem of patents at P’s request. P then wrote to D “in
consideration of his services” they would offer him one-thirds of the patents. P
claimed that there was no contract because D’s service was in the past when promise
was made
Held: The court refined the scope of the doctrine of implied contract: past service can
provide consideration for subsequent promise to pay only where it was reasonably
understood that it would be paid for. (although D’s act was on P’s request as well )

 Reformulated Doctrine of implied assumpsit in Pao On [1979]:

 A past service or act can provide consideration for a subsequent promise to
pay
1. The act must be done at the promisor’s request
2. Parties must have understood the act was to remunerated by payment or
conferment of some other benefits [reasonable man test!!!]
3. Subsequently promised [payment or conferment of benefit] must have
 been legally enforceable had it been promised in advance

Application on this complicated test:

Pao On v Lau Yiu Long [1980]
Fact: February 1973: Main agreement between Pao and Fu Chip in which Pao to sell all
their share in Shing On to Fu Chip in exchange for 4.2mn Fu Chip’s
share
May 1973: Guarantee agreement between Paos and Laus in which Laus guaranteed
the value of Fu Chip shares and promised to indemnify Paos for any loss
Issue: Whether an agreement on Feb 1973 can provide sufficient consideration for
promise under guarantee indemnity agreement on May (subsequent promise)?
Held: Guarantee & indemnity agreement satisfied requirements of implied assumpit:
1. There was an act performed at Lau’s (promisor) request, which is Paos
contractually bound to Fu Chip to delay sale of 60% acquired shares
2. Laus and Paos both understood that restriction on Paos’ freedom to sell
shares would need to be compensated in the event shares fell in value
3. There would have been no legal impediment to enforce Lau’s promise under
the guarantee agreement had they been made with or prior to main
agreement

Condition 1 not satisfied (No request from the promisor)

Re McArdle [1951]
Held: The doctrine did not apply because the beneficiaries of the trust had not
requested their sister-in-law to carry out the improvement works to the property.

Condition 3 not satisfied

 Benefits or payment lack enforceability as it is illegal (e.g. prohibited narcotics)
or contrary to public policy
 Example of public policy: (a) formal requirements relating to writing have not
been compiled with; (b) violation of prohibition rooted in private law such as an
agent acting for more than 1 principal with conflicting interest.
 L & D Associates v Chan Man Chon Madalena [1987]
Fact: L&D Associates were estate agents acting for vendor in the sale of a flat in Happy
valley. In response to a news advert. placed by L&D, Chan inspected the flat with
assistance of an employee from L&D (an agent to the seller). After the end of
inspection, Chan signed a document stating she would pay a commission to L&D if
she purchases the flat (impliedly as an agent to Chan buyer as well). The stated
consideration was L&D introduction of flats to Chan. Chan refused to pay.
Held: It was held that Chan’s promised payment of commission would not have been legally
enforceable had it been promised in advance (in breach of legal rule forbidding an
agent to act for principals with conflicting interest unless consent of both principal is
obtained). [Although Chan requested estate agent’s service and expectation that those
service would be paid for] (condition 1 & 2 satisfied)

C. Legislation (Exception to Past Consideration)

 Exception: Where a promise to pay is embodied in a bill of exchange, the rule
against past consideration has been made inapplicable by legislation [Section 27
& 30 Bills of Exchange Ordinance (Cap 19)]

 Section 23(3) Limitation Ordinance (Cap 347): an “acknowledgement” of a debt

whether in the form of promise or not, will have the effect of extending the
period within which court proceedings may be commenced to recover the debt.
5. Consideration must move from promisee at promisor’s request

 Definition: Promisee must do (or restrain from doing) something which

results in detriment or benefit first, and promisor must have requested that
conduct from promisee as the price of the promise

A. Bilateral Agreement --- Promisor request nothing from promisee for promise
 X (promisor) agrees with Y (promisee) to give something to Y in
exchange for something from Z
 Problem: X has not asked Y to do anything in exchange of promise to Y

Thomas v Thomas [1842]

Fact: A husband expressed a wish that his wife should be allowed to remain in their house
after his death. This was not written in his will. After his death, his executors allowed
his wife to stay at a rent of £1 per year. They later tried to dispossess her.
Held: 1. While the husband’s wish alone would not have been sufficient
consideration for the contract to be enforceable, but the payment of £1 rent
was sufficient consideration for the contract (with executor) to be
enforceable.
[Executor’s argument: the motive was testator’s and consideration must move
from the promisee (i.e. widow) but it did not move from move from the
promisee]

B. Multilateral Agreement
Scenario 1: Joint and Several (enforceable his own even if no one died)
 When X make promises to Y and Z jointly and severally (共同連帶 3),
and Z supplies consideration on Y’s behalf as well as his own. Y may
enforce promise in his own name. (even if Y supplies no consideration)

McEvoy v Belfast Banking Co Ltd [1842]

Fact: A customer (the father) opened a bank account of $10000 jointly in his own name and
his infant son. The father died shortly afterward, then the bank permitted executors of
the father’s estate to withdraw fund from that account and deposited them into
executor’s account. The son brought proceedings against the bank.
[Bank’s argument: the son had provided no separate consideration for opening a/c. ]
General It was held that where two persons are promisees under an agreement, either one
Rule: or both of them may enforce the promise even if one of them has not personally
provided any consideration.

Scenario 2: Joint (only enforceable his own when one of them died)
 Where X makes the promise to Y and Z jointly (but not severally) and
Z dies, Y may enforce the promise in his own name
 What is Jointly: while joint promisees are both alive, they must jointly
enforce the contract. If one of joint promisees dies, the survivor may bring
the action in his own right.

 Conveyancing and Property Ordinance (Cap 219): summary

Any agreement or covenant relating to land or other property, express or
implied, with 2 or more persons jointly to do any act for their benefit shall
be deemed … to include obligation to do that act for the benefit of survivor.

3
they share all rights and responsibilities equally, and if any partner is unable to share in a
responsibility, the others become responsible for that partner's share
 Coulls v Bagot’s Executor and Trustee Co Ltd [1967]
Fact: Mr Coulls entered into a contract with O’Neil Constructions Pty Ltd to quarry a part
of his land. In exchange, O’Neil was to pay royalties to Mr Coulls and his wife, Mrs
Doris Coulls, as joint tenants.[the wife only play her part by signature]. When Mr
Coulls died, Bagots (the executor) sought to determine whether O’Neil was required
to pay the royalties to the estate or to Mrs Coulls.
Held: Where a promise is made to joint promisees then either promisee can enforce
even though consideration only moved from one
[However if both of them are alive, while one of them refuse to sue, the another one
cannot sue alone. Yet one of them may join the another one as the defendants]

C. Practical (indirect) Benefits

 The benefits result incidentally from the conduct of the promisee and
not necessary for the conduct to be conferred directly from promisee
himself [i.e. consideration will arise out of contractual relationship,
having benefit indirectly moving to the promisor]
 Example in Carlill [1893] & Chappell [1960]: both defendants had indirect
benefits (promote their sale by way of advert.) arising indirectly out of
conduct of promisees (both P as consumers) on promisor’s request.

 Indirect benefits also include avoidance of inconvenience of making

alternative arrangement or liability for a third party claim on the
promisor [William v Roffey Bros & Nicolas Contractor Ltd. [1991]]
D. Move to Promisor not required (can also move to third party)
 The common law does not require that the consideration move to the
promisor; thus it may move towards a third party
 X offers to pay $100 to Y in exchange for Y promising to clean Z’s flat. Y
(promisee) provides consideration for X’s offer even if Z is benefitted from Y’s
consideration

Bolton v Madden (1873–74)

Fact: The parties were members of a charity and both could vote on how the charity's funds
were to be spent. They both agreed that in consideration of the claimant using his 28
votes to support the defendant's child, the defendant would use his 28 votes to support
the claimant's child. The claimant did use his votes to support the defendant's child,
 but the defendant did not. The claimant sued, but the defendant argued that the
claimant had not provided him with any consideration.
Held: There was considerations because the claimant had given a benefit to a third
party (the defendant’s child) – it does not matter that the defendant himself did
not receive that benefit. Consideration can therefore be given to a third party at
the promisor’s request.

E. At Promisor’s request
 An unrequested benefit to the promisor or detriment to the promisee cannot
serve as consideration
 X promises to give something to Y without asking anything in exchange from
Y, there is no consideration for the promise even if Y gives something (but not
in X’s request) for the promise

Combe v Combe [1951]

Held: The wife’s forbearance from suing on a husband’s promise to pay maintenance
was not consideration for promise because the husband had not asked for such
forbearance

Darton Ltd v Hong Kong Island Development Ltd [2001]

Fact: P negotiated with D for the lease of certain commercial premises of which D were
landlord. D in correspondence proposed certain terms on a subject to contract. D
also required P to pay a deposit on a non-refundable basis, expressly stipulated the
deposit is not subject to contract. P paid the deposit but did not proceed with
execution. D sought a refund of deposit from D, saying that they were entitled to
retain it.
Held: D’s forbearance from offering the property for lease to other persons could not
constitute consideration for P’s agreed obligation concerning the deposit. P had
not expressly requested any such forbearance. P did not impliedly request
because both parties expressly agree that the agreement to lease is subject to
contract.
[Therefore, P succeeded in claiming restitution of deposits from D.]

Cheat Note (how to make a contract with new consideration?)

1) Normal circumstance but with exception that it is not public duty:
(Benefits: your performance of conduct; or your promise to perform conduct)

If I make a promise in exchange for you either commencing or completing a

course of conduct (or promising to do so), there will be good consideration for
my promise, subject to the principles on performance of a public duty imposed
by law.

2) Collateral: B make a contract with you for you to form new contact with Y
(Benefits: making of contract between you and Y)

If I make a contract with you in exchange for you making a new contract with X,
there will be consideration for my promise (my promise to you will be part of a
contract collateral to the contract between you X, because the consideration for
our contract is the making of the contract between you and X).

3) Pre-existing contractual duty owed to third-party: B make a contract with X for X

to perform what is already required in X’s contract with Y
(Benefits: direct obligation on a transaction to which I am not privy)

If I make a promise to you if you will perform your existing contract with X,
there will be consideration for my promise in the form of an enforceable
obligation in relation to a transaction to which I am not privy (Pao On).

4) (mix of 2 & 3) B makes a contract with you to form a contract already existing
(instead of performance of the pre-existing contract such as 3, then it is past
consideration unless bring the case with implied assumpsit.

If I make a promise to you in consideration of your having already made a

contract with X, my promise is nudum pactum for past consideration (unless you
can bring the case within implied assumpsit, as in Pao On).

In the case of implied assumpsit, your act must be done at the request of me which is
contractually bound with X and an expectation between you and I that the act would
be paid for/conferred with other benefits, also there was no legal impediment to
enforce my promise had they been made with or prior to main agreement