3.4 - Consideration, privity and bargain theory

The Bargain Function

Consideration is one of the essential requirements of a simple contract in England and Wales. In ordinary formation analysis, a claimant must usually prove agreement, intention to create legal relations and consideration. Consideration asks whether the promise the claimant wants to enforce was part of a legal exchange rather than a bare gift promise.

For AQA, the key is not to memorise the wording as decoration. Use it as a tool:

Consideration fits bargain theory because the law is usually more willing to enforce exchanges than one-sided promises. If A promises B 500 pounds simply because A is feeling generous, that is normally a gift promise and, without a deed, B has no contractual claim. If A promises B 500 pounds in return for B painting A's office, B's work or promise to work is consideration.

The doctrine also supports the wider AQA theory point about the voluntary nature of contract. Contract law assumes that parties choose to exchange obligations. Consideration is one way of showing that exchange. However, it can also produce harsh results: a promise may be seriously meant, relied on and morally attractive, yet fail because the law cannot identify a legally recognised bargain.

Common confusion: consideration is not the same as the reason why someone makes a promise. A motive may explain the promise, but consideration must be the legal price requested for that promise.

Sufficient Not Adequate

The central rule is that consideration must be sufficient but need not be adequate. The court does not normally ask whether the exchange was a good bargain.

This distinction is vital in AQA answers because examiners repeatedly reward students who avoid saying that consideration must be roughly equal. A one-sided-looking exchange can still be binding if each side gives something legally recognised.

Use these authorities as legal tools:

Consideration can be an act, a promise, a forbearance, or accepting a legal responsibility. It does not need to move directly to the promisor, but it must move from the person seeking to enforce the promise, unless a statutory third-party route applies. For example, if A asks B to deliver goods to C and promises to pay B, B's delivery to C can still be consideration for A's promise because B has supplied the requested act.

A careful AO1 paragraph should therefore include:

1. consideration is the bargain element of a simple contract
2. it must move from the promisee
3. it must be sufficient in law
4. it need not be adequate in economic value
5. if there is no valid consideration, the promise is generally unenforceable as a contract

Common confusion: "not adequate" does not mean "anything at all will do". Empty gestures, vague moral duties, gratitude, natural love and affection, or conduct unrelated to the promise may still fail because they are not legally sufficient.

Past Consideration

Consideration must be given in return for the promise. If the act was already completed before the promise was made, it cannot usually support the promise.

The rule is operational:

Re McArdle is the basic past consideration authority. Work had already been done before the promise to pay was made, so the later promise was not supported by consideration. Roscorla v Thomas illustrates the same logic: a promise made only after the original transaction could not be supported by the earlier consideration.

There is a narrow but important exception. In Lampleigh v Braithwait, a service performed at the promisor's request could support a later promise to pay. Re Casey's Patents develops the same idea where a prior request and an implied expectation of payment meant the later promise made the payment obligation concrete. The modern way to state the exception is:

1. the act was done at the promisor's request, express or implied
2. both parties understood that payment or reward would be due
3. the later promise would have been enforceable if made before the act

This is not really an exception in spirit. It treats the later promise as evidence of an earlier bargain rather than as a brand-new promise after the event.

AQA trap: do not call consideration "past" merely because one party performs before the other pays. In a bilateral contract, A may promise work now and B may promise payment later. That is still exchange of promises at formation. It becomes a past consideration problem only where the relevant act was not done in return for the later promise.

Existing Duties And Variation

A difficult consideration issue arises when a party promises to do what they are already legally bound to do. The question is whether the promisee has supplied anything new in return for the extra promise.

Use this structure:

Williams v Roffey Bros is especially important for AQA because it shows a more flexible approach to consideration in contract variation. A contractor promised extra payment so that subcontracted work would be completed on time. The promisor gained practical benefits, such as avoiding delay penalties and avoiding the trouble of finding another worker. That practical benefit could be sufficient consideration.

The rule should not be overstated. Williams v Roffey Bros does not mean every demand for more money is enforceable. If the extra promise is extracted by illegitimate pressure, economic duress may make the promise voidable. This is why AQA links consideration with economic duress: consideration may identify a bargain or practical benefit, while duress asks whether the apparent bargain was produced by unacceptable pressure.

Part-payment of debt is a related boundary. Under Foakes v Beer, payment of a smaller sum on the due date is not generally good consideration for a promise to release the whole debt. A debtor must usually provide something different, such as earlier payment, payment in a different form, or some other fresh consideration. This rule is technical, so only use it when the facts are actually about a creditor promising to waive the balance of a debt.

Common confusion: "existing duty" is not a conclusion. You must identify the source of the duty, whether anything extra was supplied, whether a practical benefit was gained, and whether pressure undermines the variation.