HOME

TheInfoList




In legal parlance, a peppercorn is a
metaphor A metaphor is a figure of speech A figure of speech or rhetorical figure is a word or phrase that entails an intentional deviation from ordinary language use in order to produce a rhetoric Rhetoric () is the Art (skill), art of ...
for a very small cash payment or other nominal consideration, used to satisfy the requirements for the creation of a legal
contract A contract is a legally binding agreement that defines and governs the rights and duties between or among its parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview ...

contract
. It is featured in ''
Chappell & Co Ltd v Nestle Co Ltd ''Chappell & Co Ltd v Nestle Co Ltd'' 959UKHL 1is an important English contract law case, where the House of Lords confirmed the traditional doctrine that Consideration_in_English_law">consideration Consideration is a concept of English commo ...
'' (
960 Year 960 ( CMLX) was a leap year starting on Sunday A leap year starting on Sunday is any year with 366 days (i.e. it includes 29 February) that begins on Sunday, 1 January, and ends on Monday, 31 December. Its dominical letters hence are AG. ...
AC 87), which stated that "a peppercorn does not cease to be good
consideration Consideration is a concept of English law, English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions. The court in ''Currie v Mis ...
if it is established that the promisee does not like pepper and will throw away the corn".


Function in contract law

In
English law English law is the common law In law, common law (also known as judicial precedent or judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions. ''Blac ...
, and other countries with similar
common law In law, common law (also known as judicial precedent or judge-made law, or case law Case law is the collection of past legal decisions written by courts and similar tribunal A tribunal, generally, is any person or institution with authority ...
systems, a legal contract requires that each side must provide
consideration Consideration is a concept of English law, English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions. The court in ''Currie v Mis ...
. In other words, each party will give something of value to the other party for the contract to be considered binding. The situation is different under contracts within
civil law Civil law may refer to: * Civil law (common law) Civil law is a major branch of the law.Glanville Williams. ''Learning the Law''. Eleventh Edition. Stevens. 1982. p. 2. In common law legal systems such as England and Wales and the law of the United ...
jurisdictions because such nominal consideration can be categorised as a disguised gift. However, courts will not generally inquire into the adequacy or relative value of the consideration provided by each party. So, if a contract calls for one party to give up something of great value, while the other party gives up something of much lesser value, then it will generally still be considered a valid contract, even though the exchange of value greatly favors one side. Courts, however, will reject "consideration" that was not truly bargained for. For example, in the 1904 case ''Fischer v. Union Trust Co.'', the
Michigan Supreme Court The Michigan Supreme Court is the highest court in the U.S. state of Michigan. It is Michigan's court of last resort and consists of seven justices. The Court is located in the Michigan Hall of Justice at 925 Capitol Loop, Ottawa Street in Lansing ...

Michigan Supreme Court
held that the one dollar paid for the sale of real property did not constitute valuable consideration since the transaction had not been bargained for—a dollar was handed to a mentally incompetent "buyer" who then dutifully handed it to the "seller". The dollar was not considered real consideration, not because the dollar was too small an amount, but because it did not induce the seller to part with the property. Such promises that are motivated by love and affection are insufficient to constitute consideration. So, in order for an essentially one-sided contract (such as a gift) to still be valid and binding, the contract will generally be written so that one side gives up something of value, while the other side gives a token sum—one pound, dollar, or literally one peppercorn. Peppercorn payments are sometimes used when selling a struggling company whose
net worth Net worth is the value of all the non-financial and financial asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and no ...
may be negative. If some party agrees to take it over and assume its
liabilities Liability may refer to: Law * Legal liability, in both civil and criminal law ** Public liability, part of the law of tort which focuses on civil wrongs ** Product liability, the area of law in which manufacturers, distributors, suppliers, reta ...
as well as its
assets In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such ...
, the seller may actually agree to make a large payment to the buyer. But the buyer must still make some payment, however small, for the company in order to establish that both sides have given consideration.


Concealing the value of consideration

A peppercorn is also used in more balanced contracts, where one side wishes to conceal the nature of their payment. For example, since real estate contracts are generally matters of
public record Public records are documents or pieces of information that are not considered confidential and generally pertain to the conduct of government. For example, in California, when a couple fills out a marriage license application, they have the option ...
, the purchaser of a house may not wish to list the exact amount of the payment on the contract. But there must be ''some'' specific payment listed in the contract, or the contract will be considered void for lack of consideration. So the contract may be written to reflect that the house is being sold in return for "ten dollars and other good and valuable consideration". The ten dollars is the "peppercorn" that provides concrete consideration and ensures that the contract is valid, while the actual amount paid for the house is hidden and referred to only as the "other good and valuable consideration."


In leases for real property

Another common example is the English practice of "peppercorn rent", the nominal rental sum for property, land or buildings. Where a rental contract is put in place and the owner of the property wishes it to be rent-free, it is normal to charge a small sum as "peppercorn rent", because if the owner wants to
lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (the Lessor (leasing), ''lessor'') for use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial o ...

lease
the property, he must charge some rent so that
consideration Consideration is a concept of English law, English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions. The court in ''Currie v Mis ...
exists for both parties. Furthermore, a peppercorn rent is often used as a form of nominal
ground rent Ground may refer to: * Soil Surface-water- gley developed in glacial till, Northern Ireland.">Northern_Ireland.html" ;"title="glacial till, Northern Ireland">glacial till, Northern Ireland. Soil is a mixture of organic matter, minerals, ga ...
where a (potentially substantial) premium has also been paid on commencement of a long lease of, say, 99 or 125 years (a "virtual freehold"). The notional collection of the annual peppercorn rent helps to maintain a formal landlord–tenant relationship between the two parties, precluding the risk of a claim for
adverse possession Adverse possession, sometimes colloquially described as "squatter's rights", is a legal principle under which a person who does not have title (property), legal title to a piece of property usually land (real property) may acquire legal owne ...
from the tenant arising, were no consideration to be paid for an extended period. The land on which the
Ontario Legislative Building The Ontario Legislative Building (french: L'édifice de l'Assemblée législative de l'Ontario) is a structure in central Toronto Toronto (, ) is the capital city of the Provinces and territories of Canada, Canadian province of Ontario. ...

Ontario Legislative Building
resides was leased by the
University of Toronto The University of Toronto (U of T or UToronto) is a public In public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization An organization, or organ ...

University of Toronto
for a peppercorn lease of 999 years. It is not uncommon, even in the modern day, for a peppercorn rent to be denominated in (sometimes whimsical) physical goods rather than currency. For example, many of the buildings in London's Covent Garden are leased at a peppercorn rent of "one red apple and a posy of flowers", the National Coastwatch station at St Albans Head occupies buildings owned by the Encombe Estate in exchange for "one crab per annum if demanded" while the
Isles of Scilly Wildlife Trust The Isles of Scilly Wildlife Trust, formed in 1985, is a Wildlife Trust covering the Isles of Scilly The Isles of Scilly (; kw, Syllan or ') is an archipelago An archipelago ( ), sometimes called an island group or island chain, is a c ...
leases untenanted land on the
Isles of Scilly The Isles of Scilly (; kw, Syllan or ') is an archipelago off the southwestern tip of Cornwall, England. One of the islands, St Agnes, Isles of Scilly, St Agnes, is the most southerly point in Great Britain, Britain, being over further south ...
from the
Duchy of Cornwall The Duchy of Cornwall ( kw, Duketh Kernow) is one of two royal duchies in England Currently, there are two duchies in England; the royal Duchy of Lancaster and the royal Duchy of Cornwall. Unlike historic duchy, duchies in England, these are no ...

Duchy of Cornwall
for one
daffodil ''Narcissus'' is a genus Genus /ˈdʒiː.nəs/ (plural genera /ˈdʒen.ər.ə/) is a taxonomic rank In biological classification In biology Biology is the natural science that studies life and living organisms, including ...

daffodil
per year.


Transactions involving actual peppercorns

The
Masonic Lodge
Masonic Lodge
of St. George's,
Bermuda ) , anthem = "God Save the Queen "God Save the Queen", alternatively "God Save the King" (dependent on the gender of the reigning monarch), is the or in most s, their territories, and the British . The author of the tune is unknown, ...

Bermuda
, rents the Old State House as its lodge for the annual sum of a single
peppercorn Black pepper (''Piper nigrum'') is a flowering A flower, sometimes known as a bloom or blossom, is the reproductive Reproduction (or procreation or breeding) is the biological process by which new individual organisms – "offs ...

peppercorn
, presented to the
Governor of Bermuda The Governor of Bermuda (fully the ''Governor and Commander-in-Chief of the Somers Isles (alias the Islands of Bermuda)'') is the representative of the British monarch The monarchy of the United Kingdom, commonly referred to as the Briti ...
on a velvet cushion atop a silver platter, in an annual ceremony performed since 1816 on or about 23 April. The Sevenoaks Vine Cricket Club in
Sevenoaks Sevenoaks is a town in Kent with a population of 29,506 situated south-east of London, England. Also classified as a civil parishes in England, civil parish, Sevenoaks is served by a commuter South Eastern Main Line, main line railway into L ...
,
England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest of England and the Celtic Sea to the southwest. E ...

England
, rents the Vine Cricket Ground from Sevenoaks Town Council at a yearly rent of one peppercorn. It is many years since the club paid only one peppercorn for the rent of the pavilion. The council, in return, gives a new
cricket ball A cricket ball is a hard, solid ball A ball is a round object (usually spherical of a sphere A sphere (from Greek language, Greek —, "globe, ball") is a geometrical object in three-dimensional space Three-dimensional space (a ...

cricket ball
to
Baron Sackville Baron Sackville, of Knole in the County of Kent, is a title in the Peerage of the United Kingdom The Peerage of the United Kingdom comprises most peerages created in the United Kingdom of Great Britain and Ireland after the Acts of Union 1800, ...
every year if requested. The
University of Bath A university ( la, universitas, 'a whole') is an educational institution, institution of higher education, higher (or Tertiary education, tertiary) education and research which awards academic degrees in various Discipline (academia), academic d ...

University of Bath
's main campus is on a 999-year lease from the then Bath City Council. Each year a peppercorn is presented by the Treasurer of the University to the Chairman of the
Bath and North East Somerset Bath and North East Somerset (commonly referred to as BANES or B&NES) is the district of the unitary authority A unitary authority is a local authority Local government is a generic term for the lowest tiers of public administration Publ ...
Council as rent (but also to further the relationships between "
town and gown Town and Gown are two distinct communities of a university town; 'town' being the non-academic population and 'gown' metonymically being the university community, especially in ancient seats of learning such as Oxford Oxford () is a city ...
").


See also

*
One-dollar salary A number of top executives in large businesses and governments have worked for a one-dollar salary. One-dollar salaries are used in situations where an executive wishes to work without direct compensation, but for legal reasons must receive a pay ...


References

{{Reflist Contract law Legal fictions