Discuss what the term ‘sufficient’ means in this context and whether the statement is accurate in regards to Australian contract law.
Introduction: consideration is the price that is asked by the promisor in lieu of the promise therefore, consideration can be described as the price that is paid by the promisee in return of the promise made by the promisor. According to common law, for the purpose of creating a legally binding agreement, it is required that consideration should be provided by the promisee in return of the promise that has been made by the promisor. The result of this legal position is that generally the gratuitous promises are not enforced by the law although some exceptions are present. Therefore, the law of contract provides that gratuitous promises cannot be enforced by the court and it is necessary for a legally enforceable agreement that some consideration should have been provided by the promisee.
In this way, consideration is the price that the promisor has stipulated for the promise made by him. At this point, it needs to be mentioned that in context of consideration, ‘price’ is used in its wider sense. As a result, it is not necessary for consideration to be monetary in nature and moreover it is not even necessary that the consideration should at least have any monetary value. The only thing that is required in such a case is that the consideration should have some detriment that will be suffered by the promisee. Therefore the detriment suffered by the promise that can be the losing of a freedom that the promisee otherwise enjoys. An example in this regard can be given of a promise according to which the promisee agrees to study on a Saturday night or where the promisee agrees to quit smoking. As a result, in case of consideration, it is not necessary that some tangible benefit should be received by the promisor. An example in this regard can be given of the famous case of Carlill v Carbolic Smoke Ball Company in which it was mentioned that consideration was present in the form of the detriment suffered by Mrs. Carlill as a result of using the snowball as per the directions given by the company although no direct benefit has been received by the company by such use. However, in this case it was also mentioned that infect a monetary benefit has been received by the company.
The law of contract also requires in this regard that consideration should be provided by the promisee however in such cases it is not required that it should be provided to the promisor only. For example if the promisor asks that some money should be given by the promisee (B) to C a third-party, in such a case the money can be the consideration in the present case. But if it is required by A that the money should be given by C, this does not amount to a consideration. The reason is that in such a case, the promisee (B) has not suffered a detriment. On the other hand in case of joint promisees, the consideration provided by only one of the promisees is considered as good consideration.
According to the law of contract, a consideration can be anything specified by the promisor. Therefore, the consideration for the promise made by the promisor has to be stipulated by the promisor himself and it is not possible for the promisee to offer something and then turn the same as the consideration. The only thing that is required in such a case that the consideration specified by the promisor should be legal. As long as his condition is satisfied, the consideration can take place in any form. The law does not require that the consideration provided by the promisee should be comparable in value to the promise made by the promisor. In this regard the case of Chappell v Nestlé Co. Ltd. needs to be noted. In this case, the famous statement was made by Lord Somervell according to which a ‘peppercorn’ can be treated as consideration if the promisor has specified the same to be the consideration for the promise even if it is known that the promisor did not like peppers and also discarded the corn. But at this point it also needs to be mentioned that in some other aspects, the issue related with the adequacy of consideration can be significant, especially in cases where the duress or unconscionable conduct has been alleged.
The facts before the court in this case were that for promoting their chocolate, Nestlé Company advertised that a musical record will be supplied to all the persons who will send some money to the company along with three wrappers of the chocolate of the company. As a result, the court has to decide if these empty wrappers of chocolate can be treated as a consideration. The court decided this issue with the help of the offer made by the company. It was mentioned in the offer that the wrappers will allow a person to get a hit musical record. However, to refute this contention, Nestlé company claimed that the wrappers of chocolate did not have any value. While deciding the case, Lord Somervell made the famous statement according to which anything can be stipulated by a party to the contract as consideration. As a result, even a peppercorn can be considered as good consideration although the promisee did not like the pepper and also threw away the corn. As a result, the legal position that a consideration can be anything that the promisor has stipulated was further strengthened by this decision.
At the same time it is also not necessary for consideration to be adequately and the only requirement is that consideration should not be illusionary. But in this regard it is required that consideration should be something to which a value can be attributed by law or in other words, the consideration should be present and in existence. In this way, an illusionary undertaking is not a good consideration for the creation of a contract. Similarly, there is another requirement according to which, consideration should come into existence along with the promise or it should arise soon after making the promise. Therefore if the stipulated consideration existed even before the promise, such a consideration is not a good consideration.
In Roscorla v Thomas, the issue of past consideration was elaborately discussed by the court. The court stated that the promise in that case was not binding on the parties as the only consideration provided in return of the promise made for the soundness of horse was the original contract but that had already taken place before the promise has been made. The facts of this case are that P purchased the horse from D and afterwards D made a promise regarding the soundness of the horse. In reality the horse was not sound and P sued D for the breach of promise. As a result, it was stated by the court that consideration was not present for the promise made by D regarding the soundness of the horse. The contract between the parties regarding the sale of the horse that has been alleged to be the consideration for the promise made by D had already been entered into by the parties before the promise has been made. As a result, the court stated that the promise made by D was not included in the bargain and that bargain has not been made in exchange of the promise.
But at the same time, an exception is also present to the general rule that provides that a past consideration is not a good consideration. Therefore, this exception provides that even a past consideration can also be treated as good consideration if the same has been provided after the request of the promisor or if there was an understanding between the parties that the act will be compensated, and at the same time if such promise occurred before the promise, in such a case, the promises and enforceable by the court. The law of contract also provides in this regard that when an existing duty has been performed by a party, it cannot be treated as a good consideration for the contract.
Therefore the statement which provides that the consideration needs to be sufficient but it is not necessary that it should be adequate also means that in the eyes of law, consideration needs to be sufficient but in such cases it does not require that the consideration provided by the promisee should also be adequate. The only thing that is recording gives a consideration is the presence of a certain value that is capable of being expressed in economic terms but the law does not require that the consideration should also be adequate. The result of this situation is that according to the law of contract, the courts do not enforce a gratuitous promise. Similarly, the law does not treat natural love and affection as well as other sentimental motives are not treated as valid consideration. The result of this position is that the courts do not go into the question related with the adequacy of the consideration and do not make an effort to investigate if equal value has been received by the parties.
Therefore, even if A makes an offer to sell his house for one dollar only, it amounts to a valid consideration. But if A offers to sell the house for nothing at all, in such a case consideration is not present and therefore the agreement cannot be enforced by law. An example in this regard can be given of Thomas v Thomas in which there was a promise to pay the rent of 1 pound per annum however this issue is not considered as relevant for deciding the sufficiency of consideration. At the same time, the court did not go into the question of the adequacy of consideration. Another example in this regard can be given of Chappell v Nestlé which further strengthened this rule that the court will not go into the question of the adequacy of consideration.
Under the circumstances it is justified that the courts consider the issue related with the adequacy of consideration in the light of the freedom of contract. It has been provided in this regard that the parties are free to stipulate anything as the consideration for the contract between them. In this regard, the courts will not make any interference in the choice of the parties only on the grounds that it appears to the court that one of the parties has received a bad bargain. The decision of the court in Chappell was probably based on the reasoning that the requirement according to which the wrappers of chocolate need to be sent to the company would have certainly resulted in encouraging many people to buy the chocolates of Nestlé.
Conclusion: On the basis of the above-mentioned discussion, it emerges that the law is in favor of the statement according to which consideration needs to be sufficient but at the same time it is not required that the consideration should be adequate also. As a result of this position, at the time of considering the ‘value’ that can be attributed to the consideration, the courts do not consider the issue of the ‘adequacy’ of consideration for the purpose of saying if a fair price has been paid under the contract or not. In this regard, the courts are only considered with the fact that the consideration that has been paid in return of the promise should be capable of being expressed in terms of economic value. As a result of this position, intangibles like lack of boredom and emotions are not treated by the courts as valuable consideration. In such a case, it is only required that there should be some economic value of the consideration that has been paid by the party to the contract.
References
Paterson, Robertson & Duke, Principles of Contract Law (Lawbook Co, 3rd ed, 2009)
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Chappell & Co Ltd v Nestle Co Ltd [1990] AC 87
Roscorla v Thomas (1842) 3 QB 234
Stilk v Myrick [1809] EWHC KB J58
Thomas v Thomas, 1842 2 QB 851
White v Bluett (1853) 23 LJ Ex 36
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