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Woolworths v Kelly

Question :

Woolworths supermarket is a big chain in Australia that majorly deals in groceries. They have many chains in different locations in Australia. The case of Woolworth v Kelly deals with the adequacy of the consideration. This is the case were the worker of the company claims the amount of pension and other payments such as annuity.

  • What are the essentials of a valid contract?
  • What was the case of Woolworth v Kelly about?
  • What do you mean by adequacy of consideration with reference to Woolworths v Kelly.
Answer :

Woolworths Supermarket

Woolworths is chain of Australian Supermarket which was founded in the year 1924. it specialises in groceries but also sells many other items like health & beauty products, stationery, magazines, household products, etc.

Contract Law of Australia

The contract law of Australia is not a codified legislation rather it is overseen by the courts and is a common law. The main feature of the contract law is that there is freedom of contract which means that the parties are free to strike what ever bargain they wants to choose. There are five essentials of the valid contract under the Australian contract law which includes an agreement between the parties but not the unilateral contract then consideration is also present which means a requirement of bargain or the supply of service, property or money but does not involve undertaking any particular act in the exchange of anything. Third essential is capacity to enter into legal relations and fourth is intention of the parties to enter into legal relations. If any of the element is not present then it is meant that the agreement is not enforceable as the contract under the law. The law of contract to have binding force upon the parties must fulfil all the given essential conditions to the contract. Non compliance with any of the essential will make the contract invalid and it will not be enforced by the law.

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Consideration can be anything which is stipulated and is legal by a promiser. The consideration must have some value in the eyes of Law and it must be in existence.

Adequacy of Consideration means that to have the contract lawfully valid it is important that there exist some consideration at a fair value that can either be equivalent to or proportional to the offer made by the offeror.

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Sir Theo Kelly was a clerk at Woolworths Limited in 1928 and in 1940 he grabbed the position of leadership in a very less time. At the time of his retirement, the control of the company was passed to other directors who changed the policies of the company. A dispute arose which relates to the pension entitlement. Kelly was entitled to the amount of pension and also quarterly payments or annuity. He ordered the company and made declarations to claim the money from the company. This resulted in filing an appeal by the company to the court to claim the amount due from the company.

Legal Issues

  • Whether Kelly is entitle to claim pension and annuity?
  • Whether the adequacy of the consideration be determined?


It was held by the court that the amount of consideration varies in different situation and it cant easily be calculated. The amount may seems inadequate to the court but it may be different for the person claiming it. The claimant may have value for consideration or may also have sentimental reasons. It gets impossible for the court to indulge in such evaluation and promises that were made between the parties. The court further said that if these evaluations had to be made, they must be made by the lawyers trained for the same. This will further increase the disputes between the parties in case of non-agreement.

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The court also explained that there is generally no need for the enquiry into adequacy of the consideration. The doctrine of considerations needs that there must be something given in return for the promise so that the contract can be made binding and enforceable by the law.

Criticism of the Judgement

It is generally seen that different people places different values for the things and the judiciary are not trained in the subject economics and other things which helps them to decide on such issues. Different judges may offer different judgement on this same issues which may result in uncertainty.

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