The issue of consideration in contracts
Consideration is one of the elements required to create a valid contract and it can be broadly described as “something of value to which a party is not already entitled, given to that party in exchange for contractual promises”. In Currie v Misa (1875) LR 10 Ex 153, 162, Lush LJ defined consideration as “some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other”. This is a useful definition, as it indicates the variety of burdens that can be undertaken by a party in a contractual context in exchange of receiving some form of benefit under the said contract.
Consideration comes in several forms. It can be “executed” – an act in return for a promise. For example, if a reward is offered for finding a lost pet (a promise), the person who finds and returns the pet (the act) gets the reward, but only when the act is complete. This is usual for unilateral contracts. On the other hand, consideration can also be “executory” – a promise for a promise. For example, a person orders a car and promises to pay for it. The car dealer in return promises to supply the car. This is a bilateral contract. The “executory” promise could involve a promise to make a monetary payment, a promise to perform an act or even a promise to refrain from doing something.
Consideration is an element critical to the formation of a contract and it must be legally “sufficient” for the contract to be enforceable. This essentially means that the consideration needs to have some value. The value might not be great compared to the promise or act undertaken in exchange of it, but the law will not concern itself as to whether the consideration provided is “adequate”. To put it simply, there must be some consideration of value, but the law will not assess whether the promissor has struck a good deal. For example, the payment of £1 as an annual rent, coupled with a promise to keep a property in good order, has been deemed to be sufficient consideration.
One more thing to note is that, for consideration to be effective in supporting an agreement, it must not happen after the contract or act is concluded. Past consideration is not good consideration. For example, a warranty which is promised after a sale is complete, or a reimbursement which is promised after the work work has been carried out, is unenforceable.
A promise, which already forms part of an existing contractual duty to the other party, will not likely amount to fresh consideration. However, if carrying out the said duty became substantially different from that which was firstly contracted or the party goes beyond performance of that duty, then that would be fresh consideration. Similarly, if there is an existing public duty imposed by law on a party, then the usual rule is that carrying out that existing duty would not provide good consideration for any other agreement, unless the claimant goes beyond the scope of the public duty.
In similarity to the rules for the formation of a contract, the basic rule for a variation of an existing contract is that any variation would also require fresh consideration. The consideration does not necessarily have to be monetary in nature. For instance, payment at an earlier date or a performance in a different place or under different terms could also amount to valid consideration for a variation of an existing contract.
