Consideration in law is the value which a party to a contract gives in exchange for the benefit he has received under it, it is the price for which a contractual promise is brought.
Consideration means something which is of value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant. For a simple contract, it is only a party that can show that he has provided a valuable consideration under it that can sue to claim his rights or benefits. It has, therefore, been defined as “some rights, interests, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”.
Types of consideration in contract law
- Executory: Consideration is termed executory when the offer and acceptance consist of promises-the offeree making a promise in return for the offeror’s promise. This happens very often in commercial transactions, e.g., in a contract for the sale of goods, where the delivery and payment are to be made in the future. This also happens when a contractor’s tender for the building of a house is accepted by the person who wishes to have a house built. Both parties become bound in the contract prior to actual performance. It is the exchange of promises that constitutes the contract. “The whole transaction remains in the future”. Actual performance will take place at a later date.
- Executed Consideration: However, an act is performed in return for a promise, then the consideration is referred to as executed consideration. The most common examples of this are offers of reward by the owner of a lost article to anyone who finds and returns it to him, or offers of reward by the police or anyone else for information leading to the arrest and conviction of a criminal. The offer of €100 pounds by the Carbolic Smoke Ball Company to anyone using their smoke ball and still succumbed to influenza, was an excellent example of this phenomenon. The finder of the article is taken to both accept the offer and to furnish consideration for the offeror’s promise by the single act of returning it to the offeror. Where consideration is executed, liability is outstanding on one side only-on that of the offeror. The offeree is never under any obligation whatsoever where the consideration is executory, both parties are liable under the contract.
Elements of consideration
- Consideration must be legal: As a general rule, a contract is unenforceable if the consideration furnished or promised under it is illegal, immoral or contrary to public policy. it has been stated by the Supreme Court that: “No court of law or judge has the jurisdiction to enforce an illegal contract…None of the parties to an illegal contract is entitled to any remedy or relief from a court of law and once a court or judge becomes aware of illegality, it is the duty of the court or judge to stop the case and dismiss the claim for being void and unenforceable.
- Consideration must not be past: This means that it must not be in support of an act already done before the promise of consideration was made. in other words, a promise made in return for some past service is unenforceable. In re McArdle, the occupants of a house carried out certain improvements and decorations in it, at the cost of $488. Later, the landlords agreed in writing to refund the amount. It was held that since the work had been completed before the promise of refund was made, the action to recover it must fail. But if the past service was rendered at the request of the defendant, in such a circumstance as it was understood that payment would be made, and that payment if made at that time would not have been illegal, then the consideration is good and enforceable.
Rules of consideration
- Adequacy of Consideration: As is commonly stated, in the Absence of fraud, duress or misrepresentation, the courts will not question the adequacy of consideration. This means that they do not measure the comparative values of the considerations furnished by the plaintiff and the defendants respectively nor will they declare a contract to be invalid simply because one party has got a much better bargain than the other. As Lord Somervell stated in chapel V. Nestle (1959) 2 All E.R. 701, H.L.,
“…a contracting party can stipulate for what consideration he chooses.
A peppercorn does not cease to be good consideration if it is established that the promise does not like the pepper and will throw away the corn.
Example of consideration
In Bainbridge V. Firmstone (1838) 8 A.&E. 743.
Bainbridge owned two boilers, and at the request of Firmstone allowed him to weigh them on condition that they were restored in as good a condition as they were lent. Firmstone took the boilers to pieces in order to weigh them and returned them in this state. Bainbridge furnished no consideration for his promise to return the boilers intact. The court rejected this contention. According to Patterson, J.;
“…the consideration is that the plaintiff, at the defendant’s request, had consented to allow the defendant to weigh the boilers. I suppose the defendant thought he had some benefit; at any rate, there is a detriment to the plaintiff from his parting with the possession for even so short a time.
Bainbridge has parted with something he might have kept. That was a sufficient consideration.
In Chappel & co. Ltd. V. Nestle,
Facts of the case:
The plaintiffs owned the copyright of a popular tune which had been made into records. In order to promote the sales of their chocolates, the defendant company bought a large number of the records which they retailed to the public at 1 shilling 6 pence plus three empty wrappings of their chocolate. The plaintiffs brought a claim that the royalty they were entitled to, which by law was 61/4 percent of the ordinary retail price of the goods, was in this case 61/4 % of 1 shilling 6pence and the three wrappings, which had no apparent economic value, formed part of the consideration for the record.
It was held that the chocolate wrappings formed part of the consideration. They formed part of the price for each record as stipulated by the defendants, and their acquisition by the record buyers was of direct benefit to the defendants.