Manuel Misa v Raikes Currie, G. Grenfell Glyn, and Ors., (1876) 1 App. Cas. 554

Mr. Misa purchased bills of exchange from Lizardi & Co., which were drawn upon a banking firm owned by Mr. Currie. Payment for the transaction was scheduled for the following day. At the relevant time, Lizardi & Co. was heavily indebted to Currie’s bank and was under pressure for repayment of outstanding liabilities.

Before the cheque could be honored, Misa discovered that Lizardi & Co. had suspended payments and faced serious financial difficulties. Consequently, Misa instructed his bankers not to honor the cheque. A dispute arose as to whether Currie could enforce the cheque on the basis that the pre-existing debt owed by Lizardi & Co. constituted valid consideration.

Meaning and Nature of Consideration: The Court of Exchequer examined the concept of consideration as an essential element of a valid contract. The Court observed that consideration involves either: A benefit accruing to one party; or A detriment, loss, or responsibility undertaken by the other. The Court famously defined consideration in the following terms: “Consideration must consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.”

Requirement of Valuable Consideration: The Court emphasized that a legally enforceable promise must be supported by real and valuable consideration. A mere pre-existing debt, without any additional consideration or fresh detriment, was held insufficient in the circumstances of the case to sustain the claim.

Absence of Enforceable Liability: The Court concluded that the cheque lacked valid consideration necessary to make it legally enforceable against Misa. Accordingly, Currie could not claim the status of a holder for value capable of enforcing payment.