Lernzettel: Understanding Consideration in Contract Law

Contract Law: Consideration - Exam Revision Sheet

1. 📌 Essentials

• Consideration: Something of value exchanged, forming the basis of enforceability.
• Legal Value: Must have some legal benefit or detriment; adequacy is irrelevant.
• Types: Executed (done at formation), Executory (to be done later).
• Past Consideration: Generally invalid unless exceptions apply.
• Existing Duty: Performance of a pre legal obligation is not valid consideration unless beyond obligation.
• Part Payment of Debt: Usually not valid consideration; exceptions include early payment, third-party payment, or practical benefits.
• Practical Benefit: Can support consideration if the promisor gains a real, tangible benefit.
• Promissory Estoppel: Equity doctrine preventing strict enforcement of rights based on a clear promise and reliance.
• Modification: Usually requires fresh consideration unless practical benefits are present.
• Forbearance to Sue: Valid consideration if claim is valid and made in good faith.

2. 🧩 Key Structures & Components

• Consideration / Exchange — must involve a benefit to the promisor or detriment to the promisee.
• Legal Value — consideration must have some legal significance.
• Executed / Executory — consideration given at or after contract formation.
• Past Consideration — consideration given before the promise, generally invalid.
• Existing Duty — performance of an obligation already owed is not consideration.
• Part Payment of Debt — typically not consideration unless exceptions apply.
• Practical Benefit — tangible benefit to the promisor supports consideration.
• Promissory Estoppel — stops enforcement of rights based on reliance.
• Modification — needs fresh consideration unless practical benefits.
• Forbearance to Sue — promise not to enforce a claim can be valid consideration.

3. 🔬 Functions, Mechanisms & Relationships

• Consideration links promise and enforceability; it evidences mutual intention.
• Benefit/Detriment principle underpins validity; must involve legal value.
• Hierarchical flow:

  Offer → Acceptance → Consideration → Enforceability
  

• Past consideration is invalid unless:

  - Requested
  - Understood
  - Made in response to a prior request
  

• Modification:
  • Positive (additional payment): valid if supported by consideration or practical benefit.
  • Negative (lesser sum): valid if supported by consideration.
• Promissory estoppel:
  • Requires a clear, unambiguous promise.
  • Reliance must be reasonable and detrimental.
  • Can suspend or extinguish rights.

4. 📊 Comparative Table

Item	Key Features	Notes / Differences
Consideration	Exchange of benefit/detriment with legal value	Must move from promisee; not necessarily to promisor
Sufficiency	Some legal value; not proportional	Peppercorns (e.g., £1) are sufficient
Adequacy	Not relevant	Courts do not assess fairness of value
Past Consideration	Usually invalid	Exceptions: requested, understood, prior promise (Pao On)
Existing Duty	Not valid unless beyond obligation	Williams v Roffey supports practical benefit
Part Payment of Debt	Generally invalid	Exceptions: early payment, third-party, practical benefit
Practical Benefit	Can support consideration	Enforces additional payments if benefit gained
Promissory Estoppel	Equity doctrine	Prevents enforcement if promise relied upon in good faith
Effect of Estoppel	Suspensory or extinguishing	Can delay or permanently stop enforcement
Forbearance to Sue	Valid if claim is valid & in good faith	Invalid if claim is invalid or known to be so

5. 🗂️ Hierarchical Diagram (ASCII)

Consideration
 ├─ Definition & Significance
 │    └─ Exchange of legal benefit/detriment
 ├─ Types
 │    ├─ Executed
 │    └─ Executory
 ├─ Issues & Exceptions
 │    ├─ Past consideration (exceptions)
 │    ├─ Existing duty (beyond obligation)
 │    ├─ Third-party performance
 │    └─ Contract modification (consideration or practical benefit)
 ├─ Part Payment of Debt
 │    ├─ Generally invalid
 │    ├─ Exceptions: early, third-party, practical benefit
 │    └─ Practical benefit (Williams v Roffey)
 └─ Promissory Estoppel
     ├─ Clear promise + reliance
     ├─ Inequity
     ├─ No bad faith
     └─ Effects: suspend or extinguish rights

6. ⚠️ High-Yield Pitfalls & Confusions

• Confusing past consideration with valid consideration.
• Assuming part payment of debt is always enforceable.
• Overlooking exceptions to the "no consideration" rule for modifications.
• Misunderstanding promissory estoppel as a cause of action, not a defense.
• Ignoring the requirement that consideration must move from the promisee.
• Thinking that adequacy of consideration affects enforceability.
• Overestimating the scope of practical benefit in supporting consideration.
• Confusing "performance of existing duty" with "beyond obligation" scenarios.
• Forgetting that consideration can be given to third parties.

7. ✅ Final Exam Checklist

• Define consideration and its purpose in contract enforceability.
• Identify types of consideration: executed vs. executory.
• Recognize valid vs. invalid consideration, including past consideration.
• Understand the benefit/detriment principle (Currie v Misa).
• Know that adequacy is irrelevant; sufficiency is key.
• Explain exceptions to the rule that part payment of debt is not consideration.
• Describe the concept of practical benefit supporting consideration.
• Understand the doctrine of promissory estoppel and its requirements.
• Differentiate between suspensory and extinctive effects of estoppel.
• Know when forbearance to sue is valid consideration.
• Recognize the importance of good faith and valid claims in forbearance.
• Be aware of the limits of consideration in contract modifications.
• Understand the role of reliance and fairness in promissory estoppel.
• Remember that consideration must move from the promisee.
• Be able to identify common pitfalls and misconceptions.
• Know key case examples: Williams v Roffey, Foakes v Beer, Hamer v Sidway, Thomas v Thomas.

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