Consideration
Exchange of value required for simple contracts.
Consideration is a concept of English common law where a promise of something of value is given in exchange for something of value. It is a necessity for simple contracts but not for special contracts (contracts by deed). The concept has been adopted by other common law jurisdictions and is commonly referred to as one of the six or seven elements of a contract.
- field
- Contract law
- jurisdiction
- English common law and other common law jurisdictions
- known_for
- Prerequisite for simple contracts; exchange of value
- related_doctrines
- Quantum meruit, promissory estoppel, culpa in contrahendo
Lore & Background
The court in Currie v Misa declared consideration to be a 'Right, Interest, Profit, Benefit, or Forbearance, Detriment, Loss, Responsibility'. Typically the thing of value is goods, money, or an act. Forbearance to act, such as an adult promising to refrain from smoking, is enforceable only if one is thereby surrendering a legal right. Anything of value promised by one party to the other when making a contract can be treated as consideration. For example, if A contracts to buy a car from B for $5,000, A's consideration is the promise of $5,000, and B's consideration is the promise of the car.
Reader's Guide
Consideration is a foundational doctrine in common law contract systems, distinguishing simple contracts from special contracts (contracts by deed). It requires each party to give something of value, though courts generally do not inquire into the adequacy of that value. The doctrine has been adopted by other common law jurisdictions, but systems based on Roman law do not require consideration. Some commentators consider it unnecessary and have suggested it should be abandoned, with estoppel used to replace it. However, legislation has been touted as the only way to remove this entrenched common law doctrine. The reason for opposite holdings on the necessity of consideration in common law jurisdictions is thought to stem from 19th-century judges combining two distinct legal threads: the medieval action of assumpsit and the notion of agreement promoted by the 18th-century French writer Pothier. Under English law, consideration cannot be illusory, must move from the promisee, must be sufficient but not adequate, must be whole, must not be past, and moral consideration is not sufficient.
Did You Know?
- Consideration is a necessity for simple contracts but not for special contracts (contracts by deed).
- Under English law, consideration must be sufficient but need not be adequate.
- Systems based on Roman law do not require consideration.
Frequently Asked Questions
What is Consideration in contract law?
Consideration is the requirement that each party to a simple contract must give or promise something of value in return for what the other party offers. Think of it as the mutual 'bargain' element that turns a bare promise into a legally enforceable obligation.
Is Consideration required for every type of contract?
Not quite. It is a mandatory element for simple contracts, but it drops away entirely when the parties execute their agreement by deed. So whether you need it depends on which form of agreement you are dealing with.
Where does the doctrine of Consideration come from and where does it apply?
It originated in English common law and has since been adopted by a wide range of other common law jurisdictions around the world. In most of those systems it is listed as one of the six or seven core elements a valid contract must contain.
How does Consideration relate to doctrines like promissory estoppel or quantum meruit?
Those related doctrines often act as partial substitutes or safety valves when strict consideration is missing. For instance, promissory estoppel can sometimes enforce a promise without a traditional bargain, while quantum meruit compensates someone who rendered a service without a formal exchange of value.
Why is Consideration such a commonly searched and misunderstood concept?
Because many people assume a written or spoken promise alone is enough to bind the other party, but without a reciprocal exchange of value a simple contract simply will not hold up in court. Grasping this single element is what separates a legally enforceable deal from a mere unenforceable statement of intent.
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