Most agreements require consideration before they can be enforced by the Court, except for deeds, some equitable issues and many international contracts.

The most complete and effective definition of consideration was adopted by Lord Dunedin in his speech to the House of Lords in Dunlop Pneumatic Tyre Company, Limited v Selfridge and Company, Limited [1915] AC 847. His Lordship stated as follows.

  • My Lords, I am content to adopt from a work of Sir Frederick Pollock, to which I have often been under obligation, the following words as to consideration: “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” (Pollock on Contracts, 8th ed., p. 175.)

From this, the reader can discern the algebraic nature of a legal definition. Sir Frederick Pollock’s definition of consideration can be re-stated in mathematical form, as follows.

An (((act) or (forbearance)) of one party)), or (the promise thereof), is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.

The party may either (a) act, (b) forebear from action, (c) promise to act, or (d) forebear from promising to act. In each of these four instances, when it is the price for which the other party’s promise is bought, it makes the agreement enforceable.

To forebear means to hold oneself back from doing something, especially with an effort.

The Rules of Consideration

In any IRAC examination or assignment answer on consideration, the student should assess the relevance of each of the following rules of consideration.

  1. Consideration must be present in every simple contract.
  2. Consideration must be executor or executed, but it cannot be past. See Roscorla v Thomas (1842) 3 QB 234.
  3. Consideration must move from the promise, but it need not necessarily move to the promisor. See Dunlop Pneumatic Tyre Company, Limited v Selfridge and Company, Limited [1915] AC 847.
  4. Consideration need not be adequate. See Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87.
  5. Consideration must not be so vague as to be illusory. See White v Bluett (1853) 23 LJ Ex 36.
  6. Consideration must be sufficient in the eyes of the law. See, for example, Stilk v Myrick (1809) 2 Camp 317. There are several cases that explain different aspects of this rule.

Requirement for Consideration in Simple Contracts

Contracts may be wholly oral, wholly written, or partially oral and partially written. A formal contract is called a deed, for which no consideration is required. All other contracts require consideration before the courts will enforce them.

Executory, Executed and Past Consideration

Executory consideration is when the parties have only exchanged promises. Consideration is executed when the parties have performed their obligations under the contract. Both executor and executed consideration are effective consideration.

However, past consideration is not effective consideration. Past consideration is when the promise is made after an act has already been completed and independently of it.

Past consideration was discussed in Roscorla v Thomas (1842) 3 QB 234, digested as follows.

Roscorla purchased a horse from Thomas and after the sale had been concluded asked Thomas to give an assurance that the horse was sound. Thomas gave the assurance. However, the horse was vicious and Roscorla sued Thomas for breach of warranty. The court held that the assurance was made after the contract had been completed. Therefore the assurance was part of a new contract for which fresh consideration was needed. Thus the assurance could not be enforced.

Consideration Must be Sufficient in the Eyes of the Law

The court considered the matter of performance of an existing contractual duty owed to the promisor in Stilk v Myrick (1809) 2 Camp 317, digested as follows.

Pl, a seaman on a ship headed from London to the Baltic and back, was to be paid 5 pounds per month. Two sailors deserted the ship and the captain agreed to split their wages among the remaining 9 sailors, equally, if substitutes could not be found and the ship made it back to London.

The Court held that agreements stemming out of a pre-existing duty are void for lack of consideration. There was no consideration for the pay promised to the mariners who remained on the ship. Before they sailed from London they had undertaken to do all they could under all the emergencies of the voyage. They sold their services until the voyage should be completed. The desertion of the two crew-members was considered just as much an emergency of the voyage as death. Those who remained were bound by the terms of their original contract to exert themselves to the utmost to bring the ship in safely to port.

In Review

Consideration is the concept of legal value in contracts. It is anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, forebearance from a future action, and much more. Under the notion of “pre-existing duties,” if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense.

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