CONSIDERATION

S
 Introduction

 Legal obligation is a fundamental feature of a contract. Infact, it

distinguishes a legally enforceable contract from a mere social
agreement. Therefore, every agreement does not always result in a
legal obligation. For an actionable agreement to occur,
consideration is indispensable. Consideration plays a vital role in a
valid contract.

 Consideration is derived from the idea that there is a mutual

exchange of something of value between the parties.
 Introduction

 In English law, the general rule is that a promise is not binding

as a contract unless it is either made in a deed or supported by
some consideration.
 Definition

 Overtime, the validity and scope of consideration has evolved. Lord

Mansfield in Pillans v Van Mierops( 1765) 3 Burr 1663 held that if a contract
was reduced into writing consideration was not essential .Thus consideration
was merely evidentiary. However, in 1778, in Rann v. Hughes (1778) 7TR
350, the Court rejected the doctrine laid down in Pillans v Van Mierops. The
Court stated :

 “The law…supplies no means nor affords any remedy to compel the

performance of an agreement made without sufficient consideration. Such an
agreement is ‘nudm pactum ex quo non ortur acto’
 Definition

 In Currie v Misa (1875) LR 10 Exch 53, Lush J stated : “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 ,detriment ,loss, or responsibility given,
suffered or undertaken by the other”

 In Chabasanya v. Anwasi (2010) 2 CLRN 2, it is noted that “the absence of

consideration in a contract renders it unenforceable and also leads to a breach of
contract which entitles the other party to rescind the contract”. In that case, the
appellant agreed that he did not pay the agreed price for the house and since there
was failure of consideration the respondent is entitled to rescind the agreement and
resume possession of his property.
 Definition

Note that: A contract is illegal where the consideration or any part

of it is illegal.- Pan Bisbilder (Nig) Ltd v First Bank Nig. Ltd.
 Definition

 Also in Myddleton v Lord Kenyon, 2 Ves Jun 391 at p.408, it is

stated : “A bargain(synonymous with ‘contract’) without a
consideration is a contradiction in terms and cannot exist.”
 Definition

 Simply put, consideration is the contribution of a party to the agreement.

Consideration makes the contract actionable.

 It may also be described as the price for the contract. This price may be
benefits accrued by the party or detriment/loss suffered by the party in
exchange for what they would obtain from the other party.In addition, it
may be described as the purchase price of the promise.

 It is noteworthy that the promise of each party must be supported by a

consideration.
 Definition

 The definition of consideration is nebulous. However, Fabiyi JSC in

BFI Group Corporation v Bureau of Public Enterprises(2012)
LPELR-9339(SC) opines: “Consideration has been defined as the
inducement to contract: the cause, motive, price or impelling
influence which induces a contracting party to enter into a contract :
the reason or material cause for a contract. Some right, interest or
profit or benefit accruing to one party or some
forbearance ,detriment ,loss or responsibility given, suffered or
undertaken by the other.
 Interestingly, the reference of consideration in terms of detriment
and benefit has been question. Which led to the identification of
consideration on promise. In Hawkes v Saunders, the house of
Lords adopted the definition credited to Sir Frederick Pollock:
“An act of forbearance of one party, or the promise thereof , is
the price for which the promise of the other is bought and the
promise thus given for value is enforceable. See Dunlop v
Selfridge Ltd(1915) A. C. 847. at p.855.
Why do we need consideration?

 Enforceability – only promises that are backed by consideration are

actionable/enforceable. Consideration is an essential part of a contract because
it creates obligations on parties to fulfill terms of the contract. A promise which
is not supported by a consideration is a gift which is not enforceable.

 Example: If Mr A promises to give Mr B a plot of land without Mr B doing or

abstaining to do an act for it. This promise is not actionable because it is
considered a gift not a contract. Consideration is a right, benefit, interest,
forbearance, abstinence, burden or loss. Therefore, a benefit or a detriment
must be accrued or suffered by one party.
 Why do we need consideration

 The requirement of consideration puts legal limits on the

enforceability of agreements even where they are intended to
be legally binding and are not vitiated by some factor such as
mistake, misrepresentation, duress or illegality.-Edwin
Peel,Treitel :The Law of Contract,( 13th Edition, Sweet &
Maxwell 2011). The rationale is that English law restricts the
enforceability of agreements, not in deeds by alluding a varied
body of rules known as ‘the doctrine of consideration’.
 Foundation of the doctrine

 Reciprocity-The doctrine is based on the idea of reciprocity- “something

of value in the eye of the law” must be given for a promise in order to
make it enforceable. See Thomas v Thomas(1842) 2 Q B851 at 859. An
informal gratuitous promise can not lead to a contract, See Re Hudson
(1885) 54 L.J. Ch. 811.Also, an individual to whom a promise of a gift is
made from entirely emotional or charitable motives gives nothing for the
promise; and the claims of such a promisee are less compelling than
those of an individual who has handed out or promised some return for
the promise.-Edwin Peel,Treitel: Law of Contract.
 Each party to a contract must be a promisor or a promisee. One
must receive a benefit/right while the other suffer a loss,
forbearance or a detriment.

 Hence, the benefit or detriment is referred to as consideration

 General Rules Applying to
Consideration
Consideration must move from the promisee : It is a fundamental principle of law that a person who seeks
to enforce a simple contract must be prove that some consideration was furnished by him or his agent in
return for the defendant’s promise. This means that the plaintiff must be in a position to show that he has
paid the price for the defendant’s price. Therefore, only a person who provides consideration in a contract
can bring an action to enforce a promise given by the defendant. Contrariwise, a party that has not furnished
a consideration in a contract cannot file an action to enforce the contract because his action will fail for
absence of consideration. Where there is complete failure of consideration, such contract can be avoided and
the innocent party is entitled to restitution. In Tweddle v Atkinson(1861) EWHC J57 (QB), (186) 1B &S 393.
The son and daughter of the parties involved in the dispute were getting married. The father of the groom
entered into an agreement with the father of the bride that they would each pay the couple a certain sum of
money. Afterwards, the bride’s father died before making payment and the father of the son died before he
could sue on the agreement between the parties. The groom made a claim against the executors of the will
for the payment that was previously agreed between the fathers. The court rejected the claim of the groom
and held that the groom was not a party to the agreement between the fathers and he did not provide any
consideration for promise made by the father of the bride. Since consideration did not move from him, he
cannot enforce the contract.
 General Rules Appplying to
Consideration

 Where there is a complete failure of consideration, such

contract can be avoided and the innocent party can sue for
restitution. In Dantata v Mohammed,(2000) 5SC 1 7N.W.L.R
at 11,Ayoola J.S.C opined: “It is clear that where a contract is
avoided for breach, the innocent party is entitled to restitution
where there is a claim of total failure of consideration.
 Consideration must move from
the promisee
 Akenzua II,Oba of Benin v Benin District Council,(1959) W.R.N.LR. 1. In this case, the defendant
approached the plaintiff who was president of the defendant council to use his influence to persuade the
company to release some woodlands, which the company had exclusive rights over to the Benin District
Council. The company conceded based on goodwill gesture. Subsequently, the plaintiff requested the
defendant to grant him a concessionary right(and exclusive right) to exploit timber in the forest area
under his jurisdiction. The defendant agreed. Afterwards the Benin District Council(defendant) withdrew
the concession without notice or cause.The plaintiff filed an action against the defendant for breach of
contract on the basis of failure to acknowledge the consideration of services rendered. He also claimed a
declaration of his rights, and injunction against the council and damages. The plaintiff pleaded as
consideration for his claim the services he rendered to the council, consisting of using his influence to
persuade the company to release some forest areas over which the company had exclusive rights. The
defendant council denied the presence of any consideration. The court held that since the concession to
the plaintiff was by a mere resolution of the Benin District Council, the plaintiff was subject to revocation
at any time. In addition, the court held that his(plaintiff) services had been rendered before the defendant
resolved to grant him concessionary right to exploit timber in an area under his jurisdiction .Simply put,
the consideration was in the past and did not move from the plaintiff to the defendant.
Consideration cannot be furnished
by stranger

 Where a stranger to the contract furnishes the consideration the plaintiff cannot
ground his action on it. In Bourne v Mason,(1670) 1 Ventris 6.In this case, P.
was indebted to the plaintiff and the defendant, severally, and C also was
indebted to P. It was agreed that in consideration that P would allow the
defendant to use his name to sue for the money that C owed him(P.), the
defendant promised that he would pay the plaintiff the sum of money P owed
him. The defendant successfully sued and recovered from C and the plaintiff
was allowed to recover from the defendant on assumpsit. On appeal from this
decision, the Court held that decision must be reversed “for the plaintiff was a
stranger to the consideration”.
Consideration cannot be furnished
by stranger
 Dunlop v Selfridge (1915) A C 847, in this case, the defendants bought tyres from Dew Company
which were manufactured and sold to the latter by the plaintiffs under an agreement which required
them to impose on all buyers from them and undertaking not to resell below list prices(RRP).If they
did, they would pay £5 in damages to Dunlop. Both dealers and Selfridge entered into the agreement,
which made Dunlop a third party to the agreement. Subsequently ,Selfridge sold the tyres below the
agreed price and Dunlop sued Selfridge for damages and injunction to discontinue the activity. At the
first trial, the decision was made in favour of Dunlop. On appeal, the decision was reversed in favor
of Selfridge. Dunlop the appealed. On appeal, Selfridge argued that Dunlop was not part of the
agreement between the dealers and Selfridge. Therefore, Dunlop could not enforce the contract. In an
unanimous decision, the Court held that Dunlop could not claim damages as it is only a party to a
contract can claim such damages. In addition, the Court also held that Dunlop had not provided any
consideration to Selfridge therefore, there was no binding contract between them.
 Consideration must not be past

 It is noteworthy that any act carried out before a promise is made

is not a sufficient consideration to support the promise because it
is not carried out in exchange for the promise. It is therefore a
ground rule that the consideration required to support a contract
must either be ‘executory’ or ‘executed’ but not in the past.
Consideration is executory when the promise to do an act or
forbear is given in exchange for the other’s promise. For example,
where two individuals exchange promise to marry each other or
Consideration must not be past

 Where Mr A promises Mr B £20 if Mr B clean his(Mr A) house, the consideration

in both illustrations are executory because they consist of promises to be carried
out in future.

 However, it is an executed consideration when the promise of one is given in

exchange for the act of the other, that one of the parties has discharged his
obligation under the contract while the other party’s promise remains to be carried
out. For instance, a casual labourer has cleared the bushes in my farm for my offer
to pay him N500.The performance by the casual labourer constitutes an executed
consideration, and this act of performance makes it obligatory on me to pay.
Therefore, the performance of the act converts my offer to a promise.
 Consideration must not be past

 It is worthy of note that executed consideration are illustrated in reward cases where
the performance of the act constitutes the consideration. In Carlill v Carbolic Smoke
Ball Company (1893) 1 Q. B. 256, the Court held that executed consideration was
identifiable in the use of the smoke balls by the claimant, Mrs Carlill.

 Where the consideration is motivated by sentiment or gratitude, and does not

necessarily form part of the contract is said to be in the ‘past’ and is not capable to
support an action in contract. See UTC Ltd v. Hauri (1940) 6 WACA 148.Where a
contract has been made, a subsequent promise which is made independent of the
contract is a past consideration.-a mere expression of opinion. In Roscorla v Thomas
(1842) 3 Q. B. 234 , the defendant sold a
 Consideration must not be past

 Horse to the plaintiff. Subsequently,the defendant in

consideration of the previous sale promised the plaintiff that
“the horse was sound and free from vice”. The plaintiff sued
for breach of warranty on discovering that the horse was
vicious. The court held that there was no implied warranty that
the horse was free from vice. The supposed warranty was given
subsequently and independently of the sale. Hence, it was
unenforceable, the consideration was past.
 Consideration must not be past

 However, there are situations in which some courts have applied discretion in interpreting the
principle of past consideration because to irrevocably commit to the principle of past consideration to
its logical conclusion would amount to outre(strange) outcome. The rule has therefore in some
justifiable situations been relaxed and applied with rationality. For example in Lampleigh v
Brathwait(1615) Hobart 105.Braithwait, the defendant killed a man named Mahume and requested the
plaintiff, Lampleigh to secure him a free pardon from the king. In the process of doing this, the
plaintiff incurred expenses and spent ample time transporting himself to the king’s location. The
plaintiff obtained the free pardon for the defendant. Afterwards, the defendant promised to pay the
plaintiff £100 in gratitude. The defendant failed to pay the money and the plaintiff sued. The
defendant argued that the plaintiff had acted before he(defendant) made the promise to the plaintiff, as
such he had only provided past consideration for the promise made in the future. The court found in
favor of the plaintiff and noted that the plaintiff was entitled to recover regardless of the fact that the
promise was given after the plaintiff
 Consideration must not be past

 had acted. Brown LJ said: “A mere voluntary courtsey will not

have a consideration to uphold an assumpsit. But if that
courtsey were moved by a suit or request of the party that gives
the assumpsit, it will bind: for the promise, though it follows,
yet it is not naked, but couples itself with the suit before and
the merits of the party procured by that suit.”
 Consideration need not be
adequate

 It is a general rule that in the absence of fraud, duress or

misrepresentation, the court will not question whether the value is
adequate and will not interfere with the fairness of the bargain
between the parties. For an enforceable contract, the consideration
must have value in the eyes of the law i.e valuable consideration. This
means the courts do not measure the comparative values of the
considerations furnished by the plaintiff and the defendant
respectively. See Chappel v. Nestle(1960) AC 87;(1959) 2ALL E.R.
701,H.L
 Consideration need not be
adequate

 As stated by Lord Somerwell in the above case: “A contracting party can stipulate
for what consideration he chooses. A peppercorn does not cease to be good
consideration if it is established that the promisee does not like the pepper and will
throw away the corn.”

 Also in Faloughi v. Faloughi (1995) 3NWLR (Pt.384) 434 at p.451, Kalgo J.C.A,
stressed that it was within the exclusive domain of the parties to a contract to
determine the consideration for the contract. “And once the consideration is of some
value in the eye of the law, even the courts have no jurisdiction to determine whether
it is adequate or inadequate”. See also R.E.A.N v Aswani Textiles (1991) 2 NWLR
(Pt.176) 639 at 667.
 Consideration need not be
adequate

 Therefore, no consideration is too small or too much, as it is

not the duty of the court to interfere with the fairness of the
bargain unless in exceptional circumstances(like fraud or
misrepresentation). The rationale behind this principle is the
doctrine of freedom of contract. The court cannot make
contract for parties. Kindly note that the value of consideration
can be subjective.
 Sufficiency of consideration

 Consideration must be sufficient ,but need not be adequate, it must

have value in the eye of the law. The rule that courts will not
inquire into adequacy of consideration is founded on freedom to
contract. It means that the fairness of the exchange of the price
bargained for and paid is not legally material. In as much as the
person gets what he bargained for it is valuable in the eye of the
law. The court cannot inquire or determine if it is of value to him or
the proportionality of the exchanged promises between the party.
 Sufficiency of consideration

 However, sufficiency of consideration connotes the consideration provided must be

capable of expression in economic terms. The test for the sufficiency of consideration
is whether the return promise act or forbearance results in a benefit to the promisor on
the one hand, or a detriment to the promisee on the other hand.

 Determination of value in the eye of the law: Ames in his lectures on legal history
contends that with reservations in the interests of morality and public policy, any act or
promise accepted by one party to a contract as the price for his own act or promise
constitute valid consideration(Lectures in Legal History, p.323 et seq). According to
Sagay, ‘value in the eye of the law’ could mean (a) consideration does not have to be of
economic value.
 Sufficiency of Consideration

 (b)once it is clear that it is what the defendant requested, it is

valuable consideration

 (c) it may be quite useless to either of the two parties;

 (d)it, however, must be something owned by the party giving it

out ,or at something to which he is entitled. See Bainbridge v
Firmstone(1938) 8 A &E.743., Faloughi v Faloughi(1995)
3NWLR (Pt 384)p.434. White v Bluet(1853) 23 L.J Ex.36
 Sufficiency of Consideration

 Performance of existing duty: if a person either does or promises to do what

they are already legally bound to do in exchange for a promise made to them,
they suffer no legal detriment and confer no legal benefit see Stilk v
Myrick(1809) 1 Camp. 317. Thus, this does not constitute sufficient
consideration. However in Hartley v Ponsonby(1860) 3LT 628,it was held that
the seamen were entitled to the extra wages for the unseaworthiness of the ship
discharged because the seamen exceeded their duties by navigating
unseaworthy ship home,Which was different from the original contract.
Hence, the unseaworthy ship was a sufficient price for the promised extra
wages.
 Sufficiency of Consideration

 Performance of a duty imposed by law: Performance of public

duty is not a sufficient consideration.In Collins v Godefroy(1831)
1B & Ad 950, 109 ER 1040, the Court held that a promise by
Godefroy to pay Collins, who he had subpoenaed to appear at a
court, a certain sum of money in exchange for appearing as
witness was unenforceable because he was under a legal duty
imposed by law to attend and give evidence. Thus performance
of that duty could not be supported by consideration.
 Sufficiency of consideration

 Performance of an existing contractual duty to a third party: The performance of an

existing contractual duty owed to a third party is a sufficient consideration. The rule is that a
promise to perform to a third party is sufficient consideration if the promisee thereby gets any
benefit or the promisor thereby suffers any detriment. Shadwell v Shadwell(1860) 9CB
NS159, 142 ER 62(Court of Common Bench).In this case, after the engagement of plaintiff to
Ellen Nicholl, an uncle wrote to his nephew, the plaintiff,promising him £150 per annum on
his marriage. The plaintiff later got married to Ellen Nicholl.The plaintiff sued his uncle’s
executors and claimed arrears in these yearly sums. The defendants’(uncle’s executors) argued
that there was no sufficient consideration. The plaintiff argued that consideration for the
promise to his marriage to Ellen Nicholl. The Court found in favour of the plaintiff on the
grounds that the promise was binding since it was supported by good consideration.
 Sufficiency of Consideration

 Will a promise to pay less than the amount owed be sufficient

consideration(Variation of contractual rights):The legal effect of a promise to
pay less than the amount he is bound to pay in discharge of his full obligation
cannot discharge a debtor from the obligation to pay the full amount of the debt.
The payment of a lesser sum of money was no satisfaction of the greater. See
Pinnel’s case(1602) 5 Co. Rep. 117a.However, the court listed exceptions in the
the Pinnel’s case,the introduction of some new element at the creditor’s request
for instance, horse, hawk, robe or part payment at a different place or earlier date
, was good satisfaction for the whole debt. See Sibree v Tripp(1846) 15 M& W
23;Godard v. O’ brien(1882) QBD 37.
 In the absence of consideration ,
there is no contract….
 However, for every rule, there is
an exception…..
 Promissory Estoppel

 Promissory estoppel is a fairness doctrine that is an exception to

contract law. It is applicable to unenforceable contracts, where there is
lack of consideration.

 If a creditor promises to accept a smaller sum in full settlement

intending the debtor to rely on that promise, and the debtor does rely
on it, the debtor may have a defense of promissory estoppel when sued
for the balance by the creditor. The promise will in this way be
enforced despite the absence of consideration to support it.
 PROMISSORY ESTOPPEL

 Central London Property Trust Ltd v High Trees House Ltd(1947) K. B 130.In this case, the
defendants leased a block of flat from the plaintiff, Central London Property Trust. As a result of
outbreak of World War II in 1940, the occupancy rates of the property declined. The parties agreed
to reduce the rent into half. The defendants, High Trees House continued to pay the rent at the new
rate.The war ended in 1945 and the flats were at full occupancy. The plaintiffs sued the defendants
for the full rent from 1945.The defendants argued that the plaintiffs were estopped from claiming
the full rent because the agreement to pay the rent at reduced rate was applicable to the whole term.
The Court noted that parties should be prevented from going back on a promise to waive certain
rights. Therefore, a promise which the promisor knew would be acted upon by the promisee to
whom it was made was enforceable despite lack of consideration. The Court held that the plaintiffs
had made a binding promise to the defendants. However, the facts of the case demonstrated that this
only applied during the war. Hence, after the war, the defendants were liable for the full rent.
 PROMISSORY ESTOPPEL

Combe v Combe(1951) 1ALL E. R. 767 Birkett L. J stated “the scope of the the doctrine vividly; “A
doctrine which would enable a person to use it as a shield not as a sword”. Within similar context of
Combe v Combe, an agreement made by two contracting parties without consideration would be
recognised as legally binding on the qualification, that such agreement cannot give rise to a cause of
action. In the same case, Denning L J stated: “..where one party has, by his words or conduct , made to
the other a promise or assurance which was intended to affect the legal relations between them and to be
acted on accordingly, then the other part has taken him at his word and acted on it, the one who gave the
promise or assurance cannot afterwards be allowed to revert to the previous legal relations as modified by
himself even though it is not supported in point of law by any consideration, but only by his word”.

 BFI Group Corporation v. Bureau of Public Enterprises(2012) 18NWLR (Pt.1332) 209 at 236

 Ajayi v. Briscoe(Nigeria) Ltd(1964) 3 ALL ER. 55 P.C

 PROMISSORY ESTOPPEL

 In Tika Tore Press v Abina ( 1973 ) LCN/1653 (SC) , the defendant had
bought goods from the plaintiff at the sum of £3,665, the defendant could not
sell the goods. As a result of the defendant’s challenges of selling the goods,
the plaintiff requested the defendant to pay a fraction of the contract price,
£1,200 and the £2,465 would be written off. The defendant paid the
£1,200.Afterwards, the plaintiff instituted an action to recover the balance and
the defendant pleaded the equitable doctrine of promissory estoppel. The court
found in favour of the defendant. It is noteworthy that the principle can only be
invoked by the defendant. It is for defence and will not support a cause of
action.
 References

 Edwin Peel, Treitel on the Law of Contract(Sweet & Maxwell

13th Edition, 2011) Chapter 3

 I. E Sagay, The Nigerian Law on Contract( Spectrum Books

Ltd 2007) Chapter 3

 Geoffrey Oputa, Achike on Contract( Justice Watch

2014)Chapter 3.