Past Consideration is no consideration –
Consideration is the foundation of every contract. The law enforces only those promises which are made for consideration. Where one party promises to do something, it must get something in return. This ‘something in return’ is called consideration. Past consideration is defined as an act done before a contract is made.
A promise cannot be based upon the consideration that was provided before the promise was made. For example, If X promises to reward Y for an act that Y had already performed the performance of that act, while good consideration for the promise to be rewarded for it, is past consideration and therefore not good consideration.
In Eastwood v Kenyon, the guardian of a young girl raised a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the boat it was held that the guardian could not enforce the promise as taking out the loan to raise and educate the girl was past consideration because it was completed before the husband promised to repay it.
Furthermore, where a contract exists between two parties and one party, subsequent to formation, promises to confer an additional benefit on the other party to the contract, that promise is not binding because the promisee’s consideration, which is his entry into the original contract, had already been Completed (or “used”) at the time the next promise is made.
In Roscorla v Thomas, Roscorla and Thomas contracted to buy a horse for $30. After the sale, Thomas promised Roscorla that the horse was sound; the horse turned out to be vicious. It was held that Roscorla could not enforce the promise, as the consideration given for entering into the contract to buy the horse had been completed by the time the promise was made; in a sense, the consideration was “used up”.
The rule that past consideration is not good consideration is subject to the exception discussed by the Privy Council in Pau On v Lau Yiu Long. In that case, their Lordships held that past consideration can be good consideration where:
- The promisee performed the original act at the request of the promisor;
- It was clearly understood or implied between the parties that the promisee would be rewarded for the performance of the act;
The actual promise made, if Made before the promisee provided the consideration, must be capable of being enforced, in other words giving rise to a legally binding contract.