MZUMBE UNIVERSITY

MBEYA CAMPUS COLLEGE

DATE: Monday, 04th January 2021

COURSE BACHELOR OF ACCOUNTANCY AND FINANCE – BS – I

SUBJECT BUSINESS LAW

LECTURER Mr. NUHU SULEIMAN

SUBJECT CODE LAW 109

NATURE OF WORK INDIVIDUAL ASSIGNMENT

QUESTIONS:

Consideration as a law of contract principle is a self-sufficient rule which is made up

Do you agree with the foregoing statement? Substantiate your answer with relevant
provisions of the law and case authorities.
The classic definition of consideration as set down by Lush J in the case of Currie v Misa
(1875) is that, “A valuable consideration in the eyes of the law may consist either in some right,
interest, profit or benefit to one party, or some forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other”1. It is a benefit to one party or a detriment to the
other. This shows that there is an element of reciprocity. Something must be given by the
promisee in return for the promise of the other party. A benefit is something that a party was
not previously entitled to receive. A detriment is any loss suffered. For example, in a contract
where Asha is selling Juma 1 bag of potatoes for Tshs. 10,000, Asha is transferring the
ownership of the potatoes to Juma. In consideration of this, Juma is paying Asha Tshs. 10,000.
The existence of consideration is essential to the validity of every contract as supported by
section 10 of Law of Contract Act, 2019 that says, “all agreements are contracts if they are
made by the free consent of parties competent to contract, for a lawful consideration and with
a lawful object, and are not hereby expressly declared to be void…”2. The term Consideration
basically means “something in return” or Quid Pro Quo.

There are three (3) kinds of consideration as explained below:

Executory Consideration: This is a promise to do something in the future by either one or

Executed Consideration: This is an act that has been performed in exchange for a promise
made. The act herein was performed specifically for the promise that was made. For example,
payments that are made in advance for services to be provided.

Past Consideration: This involves an act that was performed before the parties entered into a
contract. The act was voluntarily performed by a party and not in exchange for a promise.
When a new contract is written, past consideration will not count as consideration for the
purposes of the contract. In Roscorla v Thomas (1842), the defendant promised the plaintiff
that a horse which had been bought by him was sound and free from vice. It was held that since
this promise was made after the sale had been completed, there was not consideration for it and
it could not be enforced.3

1
(1875-76) LR 1 App Cas 554
2
Section 10 of The Law of Contract Act Cap. 345 R.E. 2019
3
(1842) 3 QBR 234; 114 ER 496

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Consideration as a law of contract principle is a self-sufficient rule which is made up with a
number of principles and limitations. There are several key elements that must be considered
in determining whether there is a good consideration for a given promise. These elements must
be met so as to make consideration valid:

Value of consideration: There should be a legal value to what is provided in exchange for the
promise of the other party. The value does not have to be monetary as long as it is of some
benefit to one or both of the parties. This is asserted in the case of Williams v. Roffey Bros Ltd
(1991)4 where the court held that there were practical benefits earned by the defendants as the
early completion of the flats resulted into the defendants avoiding a penalty for delay. However,
the value of consideration need not be adequate as provided in Thomas v. Thomas (1842) where
it was argued that Mrs. Thomas provided inadequate consideration (£1) as rent. The court held
that by agreeing to pay the £1 rent, Mrs. Thomas had provided consideration even though it
was not economically adequate or up to the value of the actual rent of the building 5. Also,
section 25(3) of the Law of Contract Act 2019 provides that, “an agreement to which the
consent of the promisor is freely given is not void merely because the consideration is
inadequate…6”.

Legal Consideration: The benefits and detriments promised must be legal. Consideration must
consist of acts that when carried out will not violate the law or the enforcement of the promise
is not detrimental to public interest and policy. Section 23(1) of The Law of Contract Act 2019
states that, “the consideration or object of an agreement is lawful unless it is forbidden by law,
fraudulent, involves or implies injury to another person or property, the court regards it as
immoral or opposed to public policy”7. A party cannot do or agree to do something that he or
she doesn’t have the legal right to do or does not legally own.

Free consent of the promisor: The promise of consideration must be offered freely and not
under threat or duress. This was set in the case of Pao On v. Lau Yiu Long (1980) where there
was an issue on whether there was economic duress on the part of Pao. The privy council set
precedent that for economic duress it must be shown, “the victim’s consent to the contract was
not a voluntary act on his part… provided always that the basis of such recognition is that it

4
Lester Williams v. Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1
5
(1842) 2 QB 851
6
Section 25(3) of The Law of Contract Act Cap. 345 R.E. 2019
7
Section 23(1) of The Law of Contract Act Cap. 345 R.E. 2019

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must amount to a coercion of will, which vitiates consent 8”. The promisor’s actions must be
voluntary for the consideration to be valid.

Consideration must be at the request of the promisor: This construes that the act of doing
or abstaining from doing something must be at the behest of the offeror of the agreement. All
acts done voluntarily or at the desire of the other party will not be regarded as valid
consideration. Section 2(1)(d) of The Law of Contract Act 2019 states that, “In this Act, unless
the context otherwise requires when, at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abstains from doing, or promises to do or
to abstain from doing, something, such act or abstinence or promise is called a consideration
for the promise”9.

Reciprocity between the promisor and the promisee: There should be a give-and-take
relationship between the promisor and the promisee which involves either the conferment of a
benefit on the promisor or results in some detriment to the promisee. Both parties should do or
abstain from doing something in exchange for a promise from the other party as stipulated in
Section 2(1)(d) of the Law of Contract Act, 201910. If a promise is made in view of a benefit
to be received, and if something of possible value is promised in return, that is sufficient
consideration11.

Performing a duty previously bound or imposed by the law: A promise to perform a duty
you were already bound to either by general law or by prior obligation does not create good
consideration. For example, promising not to commit a crime or perform an existing contractual
duty. This was instigated in the case of Collins v. Godefroy (1831) where the defendant
promised to pay the plaintiff if he attended court to act as a witness in a case. Later, Collins,
the plaintiff was not paid and went to sue but the court held that there was no consideration
offered by Collins since he was bound by general law to attend court 12. However, if a person
performs more than is required by the law or contractual obligations, that can be deemed as
obligations as provided in the case of Glasbrook Bros v. Glamorgan CC (1925)13.

8
(1980) AC 614
9
Section 2(1)(d) of The Law of Contract Act Cap. 345 R.E. 2019
10
Ibis
11
Ballantine H. W., “Mutuality and Consideration I”, 1914, Harvard Law Review, Vol. 28, No. 2: pp 121 - 134
12
(1831) 1 B & AD 950; 109 ER 1040
13
(1925) AC 270

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Consideration may also be past, present or future as explained above in “kinds of consideration.
Executory consideration is future consideration while executed consideration is present
consideration14.

That said, there are agreements that are enforceable without the need for consideration. Section
25(1) of The Law of Contract Act 2019 provides that an agreement made without consideration
is void unless it is expressed in writing and registered under the law and is made on account of
natural love and affection between parties, it is a promise to compensate a person who has
already voluntarily done something for the promisor, or something which the promisor was
legally compellable to do OR it is a promise, made in writing and signed by the person to be
charged therewith to pay a debt of which the creditor might have enforced payment 15. It was
also provided in the case of Vasant Rajaram Narvekar v. Ankusha Rajaram Narvekar (1995),
where a mother offered a gift of a right to a property to her underage son until his life 16.

14
See page 1
15
Section 25(1) of The Law of Contract Act Cap. 345 R.E. 2019
16
(1995) 3 Bom. CR 196

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 REFERENCES:
BOOKS:

Ballantine, H. W. (1914, December). Mutuality and Consideration I. Harvard Law Review,

Brown, J.D., G. W., & Sukys, J.D., P. A. (2006). Understanding Business & Personal Law.
Columbus,OH: McGraw-Hill.

Brunner, P., & Salzedo, S. (1999). Briefcase on Contract Law (3rd ed.). London: Routledge-
Cavendish.

Routledge-Cavendish. (2012). Contract Lawcards (8th ed.). London: Routledge.

CASES:

Collins v. Godefroy (1831) 1 B & AD 950; 109 ER 1040

Currie v Misa (1875-76) LR 1 App Cas 554

Glasbrook Bros v. Glamorgan County Council (1925) AC 270

Lester Williams v. Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1

Pao On v. Lau Yiu Long (1980) AC 614

Roscorla v Thomas (1842) 3 QBR 234; 114 ER 496

Thomas v. Thomas (1842) 2 QB 851

Vasant Rajaram Narvekar v. Ankusha Rajaram Narvekar (1995) 3 Bom. CR 196

STATUTES:

The Law of Contract Act Chapter 345, Revised Edition of 2019