Kara Sears
In contract law, past consideration refers to a benefit that was provided by one party to another before the contract was formed. In other words, it is a type of consideration that predates the promise. For example, if Isabelle sells a book to Nicole and Nicole informs Isabelle that her payment for a different purchase years ago will count towards the book, this would constitute past consideration. This type of consideration is typically not recognised as valid in contract disputes and may render the contract unenforceable.
| Characteristics | Values |
|---|---|
| Definition | Past consideration refers to a benefit that was provided before a promise was made. |
| Necessity | In English common law, consideration is a necessity for simple contracts but not for special contracts (contracts by deed). |
| Validity | Past consideration is not considered valid in English law. |
| Exceptions | Past consideration may be considered valid if: 1. It was provided at the request of the promisor 2. Both parties understood that the act would be remunerated 3. There is evidence that this remuneration would be enforceable if it had been promised in advance. |
| Impact | Past consideration can significantly impact a party's obligations and liability under a contract. |
| Examples |
Explore related products
What You'll Learn
Past consideration is not considered 'good consideration'
In contract law, consideration is the benefit a party receives from the deal negotiated in the contract. It is the answer to the question: "What does each party receive by entering this contract?" A legally binding and legitimate contract must include the consideration for every individual or entity involved.
Consideration may be past, present, or future. However, past consideration is not considered good consideration in English law. Past consideration is not typically recognised as valid when involving a dispute over a present contract and may render it unenforceable. For example, if you buy a car, you need to promise to pay for it. The car dealer will give you the car once you pay for it. You cannot tell the car salesman that you will use your payment from five years ago on your old car as appropriate payment for the transaction. That older payment would be considered past consideration, which is not permitted in contracts. Rather, contracts require present consideration.
Consideration must be provided either during or after the formation of the contract. For instance, if Isabelle sells a book to Nicole and Nicole informs Isabelle that her payment to Isabelle for a different purchase a few years ago would count towards the purchase of this book, this would constitute past consideration and therefore not valuable consideration with respect to the agreement regarding the sale of the book.
In the case of Roscorla v Thomas (1842), the plaintiff purchased a horse from the defendant, and after this transaction, the defendant promised the plaintiff that the horse was sound and free from vice. When the plaintiff later determined that the horse was not sound, they commenced proceedings against the defendant for breach of contract. It was held that the plaintiff did not provide consideration for the defendant's promise that the horse was sound, and the sale of the horse previously would be deemed to be past consideration, and therefore not good consideration.
There is, however, an exception where past consideration will be held to be proper consideration. This will be the case where:
- The act of consideration was provided at the request of a party
- Both parties reached an understanding that some form of remuneration would be provided for this act
- From the evidence, it is clear that this remuneration would be enforceable if it had been promised in advance
Cells and the First Law of Thermodynamics: A Complex Dance
You may want to see also
Explore related products
Past consideration in other legal systems
India
In India, past consideration is a valid form of consideration. Section 2(d) of the Indian Contract Act, 1872, states that consideration may be past, present, or future. This is in contrast to English law, which does not recognise past consideration.
For example, in Sindha v. Abraham, A rendered services to B during his minority at B’s request, which continued after B was no longer a minor. After attaining the age of majority, B promised to pay an annuity to A for the services rendered in the past. It was held that this was a valid contract and A could recover the money.
Civil Law Systems
Civil law systems, including those based on Roman law such as Germany and Scotland, take the approach that an exchange of promises or a concurrence of wills alone is the correct basis for a contract, rather than an exchange of valuable rights. Therefore, consideration is not required in these systems.
United States
In the United States, past consideration is generally not considered valid and can render a contract unenforceable. However, there are exceptions to this rule, such as new promises to pay debts barred by limitations or debts discharged in bankruptcy.
Modern Rule
There is an emerging modern rule that a promise based on past consideration is enforceable, even if it does not fall within the traditional exceptions, as long as the promise is based on a material benefit that was previously conferred by the promisee on the promisor and provided that the benefit gave rise to a moral obligation to make compensation.
The First Cyber Law: A Historical Overview
You may want to see also
Explore related products
Examples of past consideration
In contract law, past consideration is a benefit that a party receives as a result of making the contract. It is a promise to do something in the future in exchange for something of value that has already been received. However, past consideration is typically not recognised as valid and may render a contract unenforceable.
Roscorla v Thomas (1842)
In this case, the plaintiff purchased a horse from the defendant. After the transaction, the defendant promised the plaintiff that the horse was sound and free from vice. When the plaintiff discovered that the horse was not sound, they commenced legal proceedings against the defendant for breach of contract. The court held that the plaintiff did not provide valid consideration for the defendant's promise, as the sale of the horse was considered past consideration.
Moore v. Elmer (1901)
In this case, Moore, a clairvoyant, advised Elmer that he would die before 1900. Elmer promised to pay Moore's mortgage if the prediction came true. When Elmer died before 1900, Moore sued to enforce the promise. The court ruled that the consideration was insufficient and that there was no understanding between the parties. The court indicated that the consideration was past consideration and not applicable to the current agreement.
Shadwell v Shadwell (1860)
In this case, an uncle promised his nephew a sum of money if he married his fiancée. At the time, the nephew had already agreed to marry his fiancée, which created a legal obligation. The outcome of the case is not considered good law, but it serves as an example of a duty owed to a third party.
Thomas v Thomas (1842)
This case involved the rental of property for £1. It was argued that the £1 consideration was not valid due to the actual value of the property rental exceeding the consideration. However, the courts ruled that the existence of some consideration, regardless of its sufficiency, made the agreement valid.
Transfer of Property for Tax Benefits
An example of nominal consideration is when a person transfers property to another individual for a minimal amount, such as $1.00, to obtain favourable tax benefits. In such cases, the court typically recognises the nominal consideration as valid.
In summary, past consideration is not typically recognised as valid consideration in contract law and may render an agreement unenforceable. The key issue when reviewing past consideration is whether the consideration was sufficient and provided during or after the formation of the contract.
First Black FSU Law Graduate: Trailblazer and History-Maker
You may want to see also
Explore related products
Past consideration in famous cases
Past consideration is a promise or an act that was made or performed before a contract was formed. It is not typically recognised as valid when involving a dispute over a present contract and may render it unenforceable.
Roscorla v Thomas (1842)
The plaintiff purchased a horse from the defendant and after this transaction, the defendant promised the plaintiff that the horse was sound and free from vice. When the plaintiff later determined that the horse was not sound, they commenced proceedings against the defendant for breach of contract. Lord Denman ultimately held that the plaintiff did not provide consideration for the defendant’s promise that the horse was sound, and the sale of the horse previously would be deemed past consideration.
Moore v. Elmer (1901)
Moore, a clairvoyant, advised Elmer that he would die prior to 1900. Elmer gave Moore a letter promising to pay her mortgage if the prediction came true. Elmer died before 1900. Moore sued to enforce the letter. The court ruled that the consideration was insufficient, indicating that there was nothing in the letter about their understanding, and Moore lost the case.
Foakes v Beer
This case established the rule that part payment of a debt is not good consideration for the creditor’s promise to forgo the balance.
Glasbrook v Glamorgan County Council (UK CA, 1925)
This case established that a promise to pay the council for special policy protection is not good consideration unless it involves more than what is required by public duty.
Mills v. Wyman (1825)
This case is an example of the modern rule that a promise based on moral or past consideration is enforceable, even if it does not fall within one of the three exceptions, as long as the promise is based on a material benefit that was previously conferred by the promisee on the promisor and provided that the benefit gave rise to a moral obligation to make compensation.
Pao On v Lau You Long (1980)
This case is an exception to the rule that past consideration is not valid. The court held that past consideration will be held to be proper consideration when the act of consideration was provided at the request of a party, both parties reached an understanding that some form of remuneration would be provided for this act, and it is clear that this remuneration would be enforceable if it had been promised in advance.
Advertising Laws: Protecting Consumers from False Claims
You may want to see also
Explore related products
When past consideration is proper consideration
In contract law, a legally binding contract is formed when both parties provide something of value to one another. This exchange, known as consideration, is essential for the formation of the contract. For instance, agreeing to pay money for services or goods in exchange for their delivery demonstrates good consideration. Past consideration is not typically recognised as valid when involving a dispute over a present contract and may render it unenforceable.
However, there are some exceptions where past consideration is proper consideration. Firstly, in the case of debts, if one owes someone a debt and the statute of limitations has expired, the debt can still be enforced if a promise to pay was made. Secondly, if there was a voidable obligation involved, a promise for past consideration can be enforced. For example, if a sports franchise signs a minor athlete to a contract, the athlete could hold the franchise to the contract after they turn 18. Thirdly, courts sometimes recognise "material benefit" exceptions where the promisor gains a substantial benefit. For example, if a person rescues another from harm and the rescued individual later promises compensation, some courts may enforce that promise, recognising the substantial benefit or moral obligation.
Additionally, the doctrine of promissory estoppel allows for the enforcement of a contract based on past consideration if both parties received a benefit from reliance on the contract. Under this theory, if one party relied on an invalid contract to their detriment, the court will find that a contract existed in the interest of justice.
Child Labor Laws: Protecting Children's Rights and Future
You may want to see also
Frequently asked questions
Past consideration refers to something of value that was provided by one party to another prior to the formation of a contract. This could be in the form of money, products, services, promises, or labour.
Past consideration is important because it determines whether a contract is legally binding or not. In most cases, a contract is only valid if both parties provide consideration, i.e. something of value, in exchange for the other party's promise.
In English law, past consideration is typically not recognised as valid. This means that a contract cannot be formed based on something of value that was provided in the past. However, there are exceptions, such as in the case of Pao On v Lau You Long [1980] AC 614, where past consideration was held to be proper consideration.
Past consideration refers to something of value that was provided before the formation of a contract, while present consideration refers to the exchange of something of value at the same time as the formation of the contract. Present consideration is typically required for a contract to be valid.
