Introduction
For a simple contract to be legally binding under the law of England and Wales, several key elements must be present. These are an offer, acceptance of that offer, an intention to create legal relations, and consideration. While all elements are essential, consideration is often described as the ‘badge of enforceability’ for promises. It is the core concept that distinguishes a legally enforceable bargain from a gratuitous or informal promise that the law will not uphold. The classic definition provided in the case of Currie v Misa (1875) describes consideration as a benefit to one party or a detriment to the other. This essay will explain the principle of consideration in English contract law. It will first define the concept and its importance, before examining the main types of consideration: executory, executed, and past consideration. Key case law will be used to illustrate each type and the rules that govern them, demonstrating how this doctrine operates in practice.
The Principle of Consideration
At its heart, consideration is what each party gives to the other as part of the contractual agreement. It is the price for which the promise of the other is bought (Pollock, 1950, cited in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847). This ‘price’ does not have to be money; it can be a promise, an act, or even a forbearance (refraining from doing something one has a legal right to do). The definition from Currie v Misa (1875) LR 10 Ex 153 states: "A valuable consideration, in the sense of the law, may consist either in 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 means that for a promise to be enforceable, the person receiving the promise (the promisee) must have given something of value in return to the person making the promise (the promisor).
One of the fundamental rules of consideration is that it must be ‘sufficient’ but need not be ‘adequate’. Sufficiency means that the consideration must have some value in the eyes of the law, no matter how small. Adequacy, on the other hand, refers to the commercial fairness of the exchange. The courts are not concerned with whether a party has made a good or bad bargain. This principle was clearly articulated in Thomas v Thomas (1842) 2 QB 851, where a widow’s promise to pay £1 per year in rent was held to be sufficient consideration for the promise to allow her to occupy her late husband’s house. Although £1 was clearly not an adequate commercial rent, it was of some legal value. Similarly, in Chappell & Co v Nestle Co Ltd [1960] AC 87, the House of Lords held that chocolate bar wrappers, which were sent in to obtain a discounted record, formed part of the consideration. Even though the wrappers were of trivial value and were thrown away by Nestle, they were a condition of the offer and represented a commercial benefit to Nestle by promoting chocolate sales.
Executory and Executed Consideration
Consideration is often categorised based on the timing of the performance. The two main valid types are executory and executed consideration.
Executory consideration is found in bilateral contracts, where the parties exchange promises to perform acts in the future. At the time the agreement is made, neither party has yet performed their side of the bargain. For example, if a business agrees to supply 100 widgets to a customer in 30 days, and the customer promises to pay £1,000 upon delivery, the contract is formed with executory consideration on both sides. The business’s promise to supply the widgets is the consideration for the customer’s promise to pay, and vice versa. The contract is legally binding from the moment the mutual promises are made, even before any action is taken. This exchange of promises is the most common form of consideration in commercial agreements, providing certainty and allowing businesses to plan for the future based on legally enforceable commitments.
Executed consideration, by contrast, is found in unilateral contracts. This is where one party makes a promise in exchange for an act by the other party. The consideration is ‘executed’ when the other party performs the requested act. A classic illustration is a reward case. If someone offers a £50 reward for the return of a lost cat, the promise to pay is made to the world at large. The contract is formed and the consideration is executed when another person performs the act of finding and returning the cat. The leading authority on executed consideration is Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. The company placed an advertisement promising to pay £100 to anyone who contracted influenza after using their smoke ball product as directed. Mrs Carlill bought and used the smoke ball but still caught the flu. She claimed the £100. The company argued there was no contract. The Court of Appeal held that the company’s advertisement was a unilateral offer to the world, and Mrs Carlill had accepted the offer and provided executed consideration by performing the specified conditions – buying and using the smoke ball. Her actions were the price she paid for the company's promise.
Past Consideration
The third category, past consideration, is fundamentally different because it is generally not recognised as valid consideration. The rule is that past consideration is no consideration. This occurs when a promise is made after an act has already been performed voluntarily. Because the act was not done in return for the promise, the promise is seen as a gratuitous one, motivated by gratitude or a moral duty, which the law does not enforce.
A clear example is the case of Re McArdle [1951] Ch 669. A woman carried out repairs and improvements to a house which was part of her deceased husband's estate, in which their children had a beneficial interest. After the work was completed, the children signed a document promising to pay her £488 from the estate in consideration of her carrying out the work. When the estate was later distributed, the children refused to pay. The Court of Appeal held that the promise was unenforceable. The work had been completed before the promise to pay was made, so the consideration was past.
Another key case is Roscorla v Thomas (1842) 3 QB 234. After the claimant had purchased a horse from the defendant, the defendant gave a subsequent promise that the horse was "sound and free from vice". The horse turned out to be vicious. The court found that the claimant could not enforce this promise, as the payment he had made was past consideration for the original sale of the horse. There was no new consideration given for the later promise about the horse’s temperament.
However, there is an important exception to the past consideration rule, known as the doctrine of previous request or implied assumpsit. Where an act is performed at the promisor's request, and it was understood that the act would be remunerated, a later promise to pay for that act can be legally binding. The conditions for this exception were summarised by the Privy Council in Pao On v Lau Yiu Long [1980] AC 614. Lord Scarman stated that three conditions must be met:
- The act must have been done at the promisor’s request.
- The parties must have understood that the act was to be remunerated, either by payment or the conferment of some other benefit.
- The payment or benefit must have been legally enforceable had it been promised in advance.
This exception is based on the older case of Lampleigh v Brathwait (1615) Hob 105, where the defendant, having killed a man, asked the claimant to obtain a royal pardon for him. The claimant went to considerable effort and expense to do so. The defendant subsequently promised to pay him £100 but failed to do so. The court enforced the promise, holding that the act was performed at the defendant's request, creating an implied understanding that it would be paid for. The later promise merely fixed the amount of that payment.
Conclusion
In conclusion, consideration remains a cornerstone of the English law of contract, acting as the essential element that validates a bargain. It ensures that promises are not given for nothing and provides a clear test for enforceability. The distinction between executory consideration (a promise for a promise) and executed consideration (an act for a promise) covers the formation of bilateral and unilateral contracts, respectively. Both are valid forms of consideration. By contrast, the general rule that past consideration is not valid consideration prevents promises made out of moral obligation or gratitude from being legally binding. However, the law provides a crucial exception for acts done at the promisor’s request, which acknowledges commercial realities where a price is often agreed after a service has been rendered. By understanding these types and the rules that govern them, businesses and individuals can better appreciate what makes an agreement a legally enforceable contract.
References
Cases:
- Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
- Chappell & Co v Nestle Co Ltd [1960] AC 87
- Currie v Misa (1875) LR 10 Ex 153
- Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847
- Lampleigh v Brathwait (1615) Hob 105
- Pao On v Lau Yiu Long [1980] AC 614
- Re McArdle [1951] Ch 669
- Roscorla v Thomas (1842) 3 QB 234
- Thomas v Thomas (1842) 2 QB 851
Books:
- McKendrick, E. (2020) Contract Law: Text, Cases, and Materials. 9th edn. Oxford University Press.
- Pollock, F. (1950) Principles of Contract. 13th edn. Stevens.
- Poole, J. (2021) Textbook on Contract Law. 15th edn. Oxford University Press.
