Question Tasnim Law

Problems with Contractual Consideration

what are the problems of consideration in law?

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Answer Internal Staff

When reviewing the concept of consideration, although deemed an important contractual concept by many, its flaws become rather obvious when subject to light scrutiny.

In Thomas v Thomas (1842) 2 QB 851, it was established that consideration need not be adequate but must have some value. This concept is intrinsically flawed. If consideration need not be sufficient in value to deem the agreement ‘fair’ then why is it required at all?

A rebuttal to the point above is that consideration must have economic value (White v Bluett (1853) 23 LJ Ex 36), and the principle of freedom of contract in conjunction with this would indicate that the contracting parties should be those with the power to deem whether a particular agreement is ‘fair’. Economic value however is a term subject to a large amount of criticism. Chappell & Co Ltd v Nestle Co Ltd [1960] AC 97, provides that given particular context, chocolate wrappers will be considered to economic value. Clearly this indicates that the term ‘economic value’ cannot possibly have a precise definition. Legal concepts that are open to vague interpretation can be considered inappropriate for a number of reasons.

Other issues with consideration include its limitations. Such as;

  • The inability to use the part-payment of a debt as valid consideration even when the other party is willingly agreeable (Foakes v Beer (1883) LR 9 App Cas 605). This has obviously been done to prevent the abuse of parties in vulnerable positions, this does not however negate the issues it causes to parties willing to settle a contract for a lesser sum.

  • There are difficulties with past consideration amount to valid consideration (see, Williams v Roffey [1991] 1 QB 1).

  • Finally, there are issues with consideration being considered in relation to the performance of a duty owed to a third party (see, Shadwell v Shadwell (1860) 9 CB NS 159).