In the law of contract, it is a fundamental principle that for a promise to be enforceable, it must be supported by consideration. Consideration is something of value given by a promisee in return for a promise. The statement that ‘past consideration is never good consideration’ expresses the general rule that an act which has already been completed before a promise is made cannot be valid consideration for that promise. This essay will discuss this general rule and its rationale, before examining the important exceptions which show that the word ‘never’ is an overstatement.
The general rule is that consideration must not be past. If one party performs an act, and the other party then makes a promise, that promise is generally unenforceable because the act was not done in return for the promise. The act is ‘past consideration’. It is seen as a gratuitous act, and the subsequent promise is merely an expression of thanks rather than a part of a bargain. The courts have upheld this rule on the basis that it prevents a person from being bound by a promise they made out of gratitude or moral obligation for a benefit they did not request. Two key cases illustrate this principle clearly. In Re McArdle [1951] Ch 669, a woman made improvements to a house which was part of her deceased husband’s father’s estate, in which her husband and his siblings had an interest. After she had carried out the work, the siblings signed a document promising to pay her £488 for the alterations. They later refused to pay. The Court of Appeal held that this promise was unenforceable. The consideration for the promise was the work she had done, but since this work was completed before the promise to pay was made, it was past consideration and therefore not valid.
Similarly, the case of Roscorla v Thomas (1842) 3 QB 234 shows the strict application of this rule. After the claimant had bought a horse from the defendant, the defendant promised that the horse was ‘sound and free from vice’. The horse was in fact not sound, and the claimant sued. The court held that the promise was not enforceable. The claimant had given no new consideration for this new promise. The payment of the purchase price was past consideration because the contract for the sale of the horse was already complete at the time the promise about its condition was made. These cases show that if the promise comes after the act, the act cannot be good consideration.
However, the statement that past consideration is ‘never’ good consideration is not entirely accurate. An important exception exists which was developed to deal with situations where it would be unjust to ignore a subsequent promise to pay. This exception applies where an act is done at the promisor's request. The modern test for this exception was set out by Lord Scarman in the Privy Council case of Pao On v Lau Yiu Long [1980] AC 614. Lord Scarman explained that an act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. He stated three conditions that must be satisfied for this to be the case:
- The act must have been done at the promisor’s request.
- The parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit.
- The payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance.
Where these three conditions are met, the act done in the past is not treated as invalid past consideration. The later promise is seen as part of the same overall transaction. The original request implies a promise to pay, and the later express promise simply fixes the amount of that payment. This principle originates from the much older case of Lampleigh v Brathwait (1615) Hob 105, where the defendant, having killed a man, asked the claimant to obtain a pardon from the King. The claimant did so at considerable expense, and the defendant later promised to pay him £100 but failed to do so. The court held that the defendant’s prior request meant the claimant’s services were not merely gratuitous, and the subsequent promise to pay was enforceable.
In conclusion, the proposition that ‘past consideration is never good consideration’ correctly states the general rule that applies in most situations. As shown in cases like Re McArdle and Roscorla v Thomas, a promise made after an act has been performed is not typically binding. Nevertheless, the word ‘never’ makes the statement too absolute. The significant exception outlined in Pao On v Lau Yiu Long, where an act is performed at the promisor's request with a mutual understanding that it would be rewarded, ensures that the law does not always prevent the enforcement of a subsequent promise. This exception is crucial, particularly in commercial contexts where it is common for services to be rendered before the details of payment are formally agreed. Therefore, while the past consideration rule is a core part of contract law, it is subject to a clear and well-established exception.
References
Lampleigh v Brathwait (1615) Hob 105
Pao On v Lau Yiu Long [1980] AC 614
Re McArdle [1951] Ch 669
Roscorla v Thomas (1842) 3 QB 234
