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Understanding Consideration in Contract Law

Question from jyfuyuj, Understanding Consideration in Contract Law

Answer from AI:

Consideration is a fundamental concept in contract law, particularly within the jurisdiction of the United Kingdom. It refers to something of value that is exchanged between parties within a contract. This exchange is what differentiates a legally binding contract from a mere agreement or promise. Below, we delve into the definition, types, rules, and relevant cases surrounding consideration, providing a comprehensive overview for those studying or interested in this crucial legal principle.

Definition of Consideration

Consideration in contract law is defined as something of value that is given in exchange for a promise or performance. It is one of the essential elements required for the formation of a legally binding contract, alongside offer, acceptance, and intention to create legal relations. The principle is that both parties must give and receive something of value for a contract to be enforceable.

Types of Consideration

Consideration can be classified into two main types:

  1. Executed Consideration: This occurs when the promise is made in exchange for an act. For example, payment for receiving goods or services.
  2. Executory Consideration: This involves a promise made in exchange for another promise. For example, a promise to deliver goods in the future in exchange for a promise to pay for these goods in the future.

Rules Governing Consideration

Several key rules outline the application and limitations of consideration in contract law:

  • Adequacy: The law does not typically concern itself with the adequacy of consideration, meaning it does not have to be of equal value to what is received. However, consideration must be sufficient, meaning it must have some value in the eyes of the law.
  • Present or Future Consideration: Consideration must be provided at the time of the contract or in the future. Past consideration (something given or promised before the contract was made) is generally not valid.
  • Performance of Existing Duties: Doing something you are already legally obligated to do, either by general law or under the terms of another contract, is not good consideration.

Relevant Cases

Several landmark cases illustrate the application of consideration in contract law:

  • Currie v Misa (1875): This case provided a classic definition of consideration as a benefit to one party or a detriment to the other.
  • Thomas v Thomas (1842): This case established that consideration must be sufficient but need not be adequate. Here, a nominal consideration of £1 per year was deemed sufficient to support a contract.
  • Collins v Godefroy (1831): It was held that a promise to perform an existing public duty does not constitute good consideration.

Exceptions to the Rule of Consideration

There are notable exceptions where a contract may be enforceable without consideration:

  • Promissory Estoppel: This doctrine can prevent a party from going back on a promise even if there is no consideration, provided the promisee has relied on the promise to their detriment.
  • Contracts under Seal: Traditionally, contracts made under seal (deeds) do not require consideration to be binding.


Consideration is a cornerstone of contract law in the UK, ensuring that contracts are based on a mutual exchange of value. While the concept may seem straightforward, its application involves various rules and exceptions. Understanding landmark cases and the principles they establish is crucial for anyone studying or engaging with contract law.

For those preparing for exams or seeking to understand contract law more deeply, it’s important to consult legal texts, case law, and academic commentary for a comprehensive understanding. Additionally, consider discussing complex topics with professors or legal professionals to gain further insights.

Remember, this overview provides a general understanding of consideration in contract law and should not be construed as legal advice. For specific legal inquiries or situations, consulting with a legal professional is recommended.

For more detailed information on contract law, the UK Legislation website and the British and Irish Legal Information Institute (BAILII) website are excellent resources for accessing statutes and case law.

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