Consideration & intention to create legal relations

CON.02 — Consideration & Intention to Create Legal Relations

A simple (non-deed) contract needs agreement + consideration + intention to create legal relations. This note covers the last two.

Consideration — the core rules

Consideration is the "price" of the promise: a benefit to the promisor or a detriment to the promisee (Currie v Misa). A bare promise is not binding unless made by deed.

Key principles:

• Must be sufficient but need not be adequate — the law won't police a bad bargain. Nominal/token consideration counts (Chappell v Nestlé — chocolate wrappers were part of the consideration).
• Must move from the promisee — but need not move to the promisor.
• Past consideration is no consideration — something already done before the promise is unenforceable (Re McArdle; Roscorla v Thomas). Exception: the act was done at the promisor's request, both understood it would be paid for, and payment would have been legally enforceable if promised in advance (Lampleigh v Braithwait; Pao On v Lau Yiu Long).

Existing duties (high-yield)

• Existing public duty — doing only what the law already requires is not consideration; exceeding it is (Collins v Godefroy; Glasbrook v Glamorgan).
• Existing contractual duty owed to the same party — traditionally no consideration (Stilk v Myrick). BUT performing an existing duty can be good consideration where the promisor gains a practical benefit and there is no duress (Williams v Roffey).
• Part payment of a debt — paying less does not discharge the whole (Pinnel's Case; Foakes v Beer). Equity may estop the creditor from going back on a promise to accept less: promissory estoppel (Central London Property v High Trees). It is a shield, not a sword (Combe v Combe), generally suspends rather than extinguishes rights, and requires reliance + that it be inequitable to renege.
• Existing duty owed to a third party is good consideration (Scotson v Pegg).

Intention to create legal relations

Two rebuttable presumptions:

• Domestic/social agreements — presumed NO intention (Balfour v Balfour; rebutted where spouses are separating — Merritt v Merritt).
• Commercial agreements — presumed intention to be bound (Esso v Commissioners). Rebut only by clear words, e.g. "binding in honour only" (Rose & Frank v Crompton) or "subject to contract".

Traps

• Don't confuse adequacy with sufficiency.
• Consideration ≠ motive.
• Promissory estoppel cannot found a cause of action; you still need consideration to create a contract.