7 Consideration
Learning objectives
On completion of this Chapter, you should be able to:
- Define consideration.
- Identify when consideration must be present.
- Explain the rules for consideration.
- Explain the distinction between past, present and future consideration.
- Explain what is promissory estoppel.
Key terms
You will notice these key terms, which are listed throughout the chapter to help you understand and remember the material:
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- Consideration: the ‘price’ paid to buy the other person’s promise; it must be in every simple contract.
- Formal contract or deed: a contract that has been signed, sealed and delivered, and does not require consideration to be valid.
- Gratuitous promise: a promise undertaken voluntarily and lacking consideration, so is not enforceable in court.
- Joint promises: where two or more persons jointly agree to provide consideration jointly and both can be sued, that is, A and B promise to pay C K100.
- Joint and several liability: where two or more persons agree together, as well as having made separate agreements to repay the loan individually. You then have one joint and several separate obligations, which can mean performance by one person can discharge all the others of their obligations or they can be sued separately. For example, A and B jointly promise to pay K100 to C and separately you promise to pay K100 to C and B also separately promises to pay C K100.
- Promisee: the person who is receiving, or the recipient of, the promise
- Promisor: the person giving the promise
- Several liability: where two or more persons agree to provide consideration but each promises separately, that is, A promises to pay K50 to C and B promises to pay K50 to C.
- Simple contract: a contract that is made orally or in writing (or both) involving an agreement between parties with the intention of creating legally enforceable obligations and which requires consideration to be valid.
- Variation clause: often a clause within a contract (but can be oral) where both parties agree to change part of a contract from the way they originally agreed to while the remainder of the contract remains unchanged.
Introduction
In this chapter we begin by considering what is consideration and then look at the rules for consideration and we finish by looking the principle of promissory estoppel (an equitable remedy that provides an exception to the rule that in a simple contract there must be consideration).
In the last two chapters we looked at agreement or the offer and acceptance components of agreement (Chapter 5) and intention to create legal relations (Chapter 6). In this chapter we look at the third element needed for the creation of a simple contract: consideration.
Consideration is the last element that we need to consider for the creation of a simple contract. Remember that we need three elements to be present: agreement, intention and consideration. Also remember that at this stage, we are not considering whether what we created is