Do I have to provide something in return for a contract to work?

What is consideration?

In order for a contract to exist the basic elements required include the agreement, consideration and the intention to create legal relations. Agreement is the offer and acceptance and the intention to create legal relations distinguishes between legally binding contracts and the sort of agreements passively made in social and family situations. 

The consideration is the bargaining element of the contract and this is a vital requirement in creating the contract. Each party must provide some sort of benefit, a bargaining tool to initiate the negotiation process. 

Each party will have to provide something in return for the other party whether that be money or a service provided.

The courts have described consideration as follows;

‘A valuable consideration in the eyes of the law, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other’.

Past consideration

The basic rule is that past consideration is not consideration. The occurs where there is a promise to pay for an act done such as a service for example like fitting a kitchen, before the promise was made, then that act cannot constitute consideration for the promise.  

Sometimes difficulty arises where the act is done at the request of the person making the promise. In this case, consideration will occur as long as both parties understand that some form of payment will be made in return for the service/ goods provided.

Does the consideration need to be equal and adequate?

The law will not examine whether or not the consideration/ bargain element is a good one. The only requirement surrounding consideration is that the bargain element has to have some sort of money value regardless of how little.

Can performance of an existing promise be enough to satisfy consideration?

Public duty

Performance of an existing duty cannot amount to consideration unless the contract extends beyond the existing duty. Basically if the existing promise does not go beyond a mere public duty expected of that person then it is not enough to be classed as consideration.

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For more information on:

  • A duty owed to the person making the promise
  • Part payment of a debt