Consideration is essential for contract formation.
"No consideration, no contract".
Definition of Consideration
Cited from Curry v. Misa:
A valuable consideration can be a right, interest, profit, or benefit to one party, or a forbearance, detriment, loss, or responsibility by the other party.
Consideration is a benefit to one party or a detriment to the other exchanged for a promise.
Courts' View:
Courts do not usually assess the adequacy (quality or quantity) of consideration.
Even nominal consideration (e.g., a "peppercorn") suffices.
Characteristics of Consideration
Must be mutually related to the promise given.
Must be the motive for the other party's promise.
Must be given in response to that promise.
Nature of Consideration
Legal Benefit or Detriment:
A tangible benefit is not necessary.
Example: Hamer v. Sidway.
Uncle promised $5,000 for the nephew abstaining from certain behaviors.
Nephew’s abstention was a legal detriment despite no material benefit to the uncle.
Illusory Consideration
Occurs when one party does not actually provide consideration despite appearances.
Example: Tobias v. Dick
Tobias had exclusive rights but did not promise to sell machines.
Court found no contract formed.
Implied Terms and Consideration
Courts might imply terms to validate contracts.
Example: Wood v. Lucy, Lady Duff-Gordon
Wood’s promise to use reasonable efforts implied.
This made the contract bilateral.
Valid Consideration Requirements
Must be requested by the promisor.
Must not be an act or benefit already performed ("past consideration").
Example: Natalie buying lunch.
Exceptions to Past Consideration
Pao On Test:
Act performed at promisor’s request.
Understanding that the act would be compensated.
Example: Charlie driving to the mall.
Consideration in Contract Amendments
Amendments require new consideration.
Example: Gilbert Steel v. University Construction
Gilbert Steel’s demand for higher price lacked new consideration as they were already obligated to deliver at the original price.
Conclusion
Understanding of consideration is crucial for contract formation.
Next lesson: Intention to create legal relations.
Reminder to complete knowledge check questions.
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