H418/04 - Consideration

The required exchange

Consideration is what a person gives or promises in exchange for the other person's promise, rather than merely their reason for wanting the deal.

The person making a promise is the promisor; the person to whom it is made is the promisee. In an ordinary two-sided contract, each occupies both roles. A bicycle seller's promise to transfer the bicycle supports the buyer's promise to pay, and the buyer's payment promise supports the seller's promise. Actual performance need not already have occurred.

Consideration may be a legally recognised benefit to the promisor or detriment undertaken by the promisee: money, an act, a promise or giving up an entitlement can qualify. It must be part of the exchange for the promise. Executory consideration is a promise of future performance, such as delivery tomorrow in return for payment next week. Executed consideration is an act accepting a unilateral offer, such as returning an item for an advertised reward. Do not confuse an act done in response to a promise with an act already finished independently before the promise.

At common law, consideration must move from the promisee who seeks to enforce the promise, though it need not benefit the promisor personally. Tweddle v Atkinson (1861) illustrates the barrier faced by a son seeking to enforce payments promised by the fathers of a marrying couple: he had supplied no consideration. Modern statutory third-party rights, taught in the next lesson, create a distinct enforcement route. They do not mean that consideration has disappeared from ordinary contract formation.

A genuine gift promise lacks the exchange needed for an ordinary simple contract. A deed, a formally executed legal instrument, can bind without consideration, but simply calling a message a deed does not satisfy its formal requirements. Most everyday bargains are simple contracts and require consideration.

Sufficiency and adequacy

Consideration must be sufficient in law but need not be adequate in economic value.

Sufficiency asks whether the promised exchange is of a legally recognised kind. Adequacy asks whether its value is a fair match for the return promise. Courts ordinarily do not measure the fairness of the price under consideration doctrine. A small sum can support a valuable promise, while a sincerely expressed affection is not itself a bargained legal exchange. Other rules may address improper pressure or unfair terms; inadequacy alone does not establish those rules.

In Thomas v Thomas (1842), a widow was allowed to occupy a house on terms including £1 annual rent and keeping it in repair. The deceased husband's wish that she should live there was the motive; the rent and obligations supplied consideration. The small rent did not make the bargain unenforceable through lack of adequacy.

In Chappell v Nestlé (1960), customers had to supply money and chocolate wrappers to obtain a record. The House of Lords majority treated the wrappers as part of the consideration despite their being discarded after receipt. They were stipulated as part of the promotional exchange. Something need not have a resale price to count; describing every sufficient consideration as economically valuable to its recipient is too narrow.

Original comparison: a seller accepts £1 in exchange for a used book normally worth £20. The money is legally sufficient despite the uneven price. “I will give you the book because I like you” identifies a motive for a gift, not a return exchange. “I will give it if you deliver a parcel for me” supplies a requested act capable of being consideration. Ask what was bargained for, rather than whether the court would have chosen the same price.

Past acts and requested work

An act already completed independently of a later promise is normally past consideration and cannot support that promise.

In Re McArdle (1951), improvements to a house had been carried out and paid for by a family member before the beneficiaries signed a promise to repay the expense. The Court of Appeal held that the completed work was past consideration. A substantial benefit and a later written promise did not retrospectively create the required exchange.

An earlier requested act can be treated differently. Pao On v Lau Yiu Long (1980) concerned a share transaction and an indemnity connected with a requested undertaking not to sell shares for a period. The Privy Council identified three conditions for an act preceding the express promise to support it: the act was done at the promisor's request; both sides understood that it would be remunerated by payment or another benefit; and the remuneration would have been legally enforceable if promised in advance. The earlier request and understood exchange connect the act and payment, rather than creating payment from generosity after the event. As a Privy Council decision, it is influential persuasive authority in England and Wales.

Original application: a repairer fixes a neighbour's gate without being asked or expecting payment. The grateful neighbour later promises £50. The past-consideration problem is strong. Change the facts: the neighbour requests the repairer's professional work, both understand it is paid work and the ordinary agreement would have been enforceable if the amount had been settled first. A later agreed price can then fall within the requested-work principle. A request alone is insufficient if the work was mutually understood to be a gift.

Build the argument chronologically: who requested what, what each understood about payment at that time, and whether an advance remuneration promise would have been enforceable. Do not infer an obligation to pay merely from receiving a benefit.

Existing duty categories

Whether an existing duty supplies consideration depends on whom it is owed to, what it requires and whether the new bargain supplies a further recognised benefit.

Public duties and duties owed to others

Merely performing a duty already imposed by law generally supplies no consideration for an extra payment. In Collins v Godefroy (1831), a witness under a legal duty to attend court could not enforce a promise of payment merely for attending. Going beyond the duty can differ. In Glasbrook Brothers v Glamorgan County Council (1925), mine owners requested police protection beyond what the police considered necessary to discharge their public duty; the additional service supported payment. This does not mean police may charge people merely for ordinary protection. Current section 25 of the Police Act 1996 permits requested special police services, subject to the provision's conditions; statutory power and the distinction from public-duty work matter.