Total Failure of Consideration in UK Law

The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received. any part of the benefit bargained for under the contract or purported contract.

And delivery and possession were not what Rover had bargained for. The relevant bargain, at any rate for present purposes, was the opportunity to earn a substantial share of the gross receipts pursuant to Clause 6 of the Schedule, with the certainty of at least breaking even by recouping their Advance. Due to the invalidity of the Agreement Rover got nothing of what they had bargained for, and there was clearly a total failure of consideration.

I use the expression "fundamental to the basis" because it should not be thought that mere failure of an expectation which motivated a party to enter into a contract may give rise to a restitutionary claim. Most contracts are entered into with intentions or expectations which may not be fulfilled, and the allocation of the risk of their non-fulfilment is a function of the contract.

The confusion is caused by the fact that the term "consideration", when used in the phrase "total failure of consideration" as a reason for restitution, does not mean quite the same thing as it does when considering whether there is sufficient "consideration" to support the formation of a valid contract. Viscount Simon LC, explained this in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 48:

I do not see why a similar process of severance should not be applied where what has happened, in a purely financial matter, is that there has been a payment of money one way and a payment of smaller sums of money the other way. The effect of severance is that there has been a total failure of consideration in respect of the balance of the money which has not come back.

It follows that in Sinclair v. Brougham the depositors should have had a personal claim to recover the monies at law based on a total failure of consideration. The essence of the swap agreement is that, over the whole term of the agreement, each party thinks he will come out best: the consideration for one party making a payment is an obligation on the other party to make counter-payments over the whole term of the agreement.