Not every promise made is enforceable in law by the Courts, as this would clearly be impractical. A promise backed up by consideration gives a reason for enforcement [Atitah, p.200].
Consideration can be “some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other” [Currie v Misa 1875]. There need not be a benefit or detriment to both parties – it need only be that one party has a benefit or detriment and the other accepts it [Pollock, p.200].
Further, the consideration given by one party doesn’t have to be relative to the promise given by the other – “if a promisor gets what he asks for in return for his promise, he has received sufficient consideration and is bound”, irrespective of how much or little he asks. [Smith p.209; Lord Somervell REF 5]
Consideration may be executory i.e. a promise itself, or executed i.e. an act. Sufficient consideration, coupled with a valid promise incorporating an offer and acceptance, and an intention to create legal creations, gives rise to a binding contract. Where there’s no consideration, the law safeguards against a floodgate of claims by insisting upon such promises being made in the form of a deed.
The rule ‘past consideration is no consideration’ stems from the case of Re McArdle (1951). In that case, a man left a house to his children and one of those undertook some decorating. The other children subsequently signed a document agreeing to contribute to the costs. It was held that the agreement wasn’t enforceable, as it wasn’t supported by consideration. Consideration had to be co-extensive with the promise for which it supported, not subsequent [Roscorla v Thomas 1842].
There are, arguably, exceptions to the rule. In Lampleigh v. Brathwait (1615), Brathwait had killed a man and asked Lampleigh to meet the King and obtain a pardon for him, which Lampleigh did. Brathwait subsequently promised Lampleigh £100 for his services, but when Brathwait didn’t honour this promise, Lampleigh sued him. The court held that Brathwait’s prior request to Lampleigh contained an implied promise to pay him a reasonable sum for his services, and that the subsequent mention of the £100 was merely fixing the sum. The court treated the prior request and the subsequent promise as part of the same transaction.
The point can be clarified by a further case, Re Casey’s Patents, Stewart v. Casey (1892). In this case Casey had been the manager in working the patents of Stewart and Charlton, who promised Casey a third share of the patents. Bowen L.J. said: “the fact of a past service raises an implication that at the time it was rendered it wRegarding be paid for, and, if it was a service which wRegarding be paid for, when you get in the subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered. So that here for past services there’s ample justification for the promise to give the third share.”
Bowen LJ deliberately avoids the question of whether past consideration is no consideration, and certainly does not attempt to “examine the whole state of the Law”. He instead adds a requirement to reexamine the matter and see if it can’t be resolved some other way. He finds that at the time the service was rendered there was an implication it wRegarding be paid for. This may have been from the value of the service, the time and effort afforded, the relationship between the promisor and promisee, and what is usual in such a situation
Consequently, to rely on the exception in Re Casey’s Patents, the son in Re McArdle would not only have to prove that the other siblings had requested him to carry out the decorating, but also prove that both parties understood that he wRegarding be remunerated for it. So, if the siblings had expected the son to do the improvements as a favour, perhaps out of natural love and affection, he would not be entitled to sue them on the subsequent promise to give him a specific sum.
This raises the question of whether every act done should give rise to the type of implication found in Re Casey.
The matter is further clarified in Pao On v. Lau Yiu Long  A.C. 614, when it was stated that subsequent renumeration can sometimes be consideration for the promise, under certain circumstances. The act must have been done at the promisor’s request, the parties must have understood that the act wRegarding be remunerated either by a payment or some other benefit: and the consideration must have been legally enforceable had it been promised in advance.”
So, if McArdle’s son, for example, wishes to rely on the principal in Pao On, he must prove that;
- the other siblings requested him to carry out the decorating
- both he and the siblings understood that the siblings meant to pay the him for his services and
- the payment is legally enforceable.
Clearly McArdle’s son would not be able to use the exception on past consideration.
The Law Reform Committee recommend the McArdle rule be abolished. Just because the promisor had already received the benefit of the promise, should not enable him to break it. If allowed to do so, the rule can produce unfair results. The rule is a technicality allowing subsequent promises to be broken with no recompense for the promisee. Further, it opens up the possibility of misunderstandings – for example, a service is rendered where it is usual and reasonable for renumeration to be given but none is formally agreed until afterwards, and that agreed afterwards can’t be sued on. The criteria in Pao On protects this professional aspect of the problem but isn’t extensive to all cases.
- Atiyah, P. S, Consideration in Contracts (1971) in Smith & Thomas/Smith J., A Casebook on Contract (2000) p.200, Sweet & Maxwell, London.
- Currie v Misa (1875) L. R. 10 Ex. at 162 cited in Pollock, Principles of Contract (13th Edition) p. 133, cited in Smith & Thomas/Smith J., A Casebook on Contract (2000) p.200, Sweet & Maxwell, London.
- Pollock, Principles of Contract (13th Edition) p. 133, cited in Smith & Thomas/Smith J., A Casebook on Contract (2000) p.200, Sweet & Maxwell, London.
- Smith, J. C., Consideration need not be adequate but must be sufficient, Smith & Thomas/Smith J., A Casebook on Contract (2000) pp.209 – 210, Sweet & Maxwell, London.
- Lord Somervell of Harrow (p.213) speaking in Chappell & Co. Ltd v. Nestle Co. Ltd House of Lords (1960) A. C. 87; (1959) 3 W. L. R. 168; (1959) 2 All E. R. 701; 103 S. J. 561 in Smith & Thomas/Smith J., A Casebook on Contract (2000) pp.209 – 210, Sweet & Maxwell, London.
- C: Past Consideration – p. 118 Unit 4, Consideration in W300: Law: Agreements, Rights & Responsibilities Manual 1, The Open University, Milton Keynes
- A: What is Consideration? – pp. 111 – 112 Unit 4, Consideration in W300: Law: Agreements, Rights & Responsibilities Manual 1, The Open University, Milton Keynes
- Re McArdle (1951) Ch 669 cited in C: Past Consideration – p. 119 Unit 4, Consideration in W300: Law: Agreements, Rights & Responsibilities Manual 1, The Open University, Milton Keynes
- Roscorla v Thomas (1842) 3 Q. B. 234; 2 G. & D. 508; 11 L. J. Q. B. 214; 6 Jur. 929; 61 R. R. 216; 114 E. R. 496 in Smith & Thomas/Smith J., A Casebook on Contract (2000) pp.206 – 207, Sweet & Maxwell, London.
- Lampleigh v. Brathwait Common Bench (1615) Hob. 105; Moore K. B. 866; 1 Sm. L. C. (13th Ed) 148; 80 E. R. 255 in Smith & Thomas/Smith J., A Casebook on Contract (2000) p.204, Sweet & Maxwell, London.
- Re Casey’s Patents, Stewart v. Casey Court of Appeal  1 Ch. 104; 61 L. J. Ch 61; 66 L. T. 93; 40 W. R. 180 in Smith & Thomas/Smith J., A Casebook on Contract (2000) pp.205 – 206, Sweet & Maxwell, London
- Pao On v. Lau Yiu Long  A.C. 614;  3 W. L. R. 435;  3 All E. R. 65 in Smith & Thomas/Smith J., A Casebook on Contract (2000) pp.233 – 234, Sweet & Maxwell, London
- Law Reform Committee 6th Interim Report, section 32, in Smith & Thomas/Smith J., A Casebook on Contract (2000) pp.207 – 208, Sweet & Maxwell, London