Consideration is usually said to be something that represents either some benefit to the person making a promise (the promisor) or some detriment to the person to whom the promise is made (the promise), or both. In Currie v Misa (1875) it was stated that consideration existed when there was 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.
In Dunlop v Selfridge (1915) the House of Lords explained consideration in terms of purchase and sale. The plaintiff must show that he or she has bought the defendant’s promise, by doing, giving, or promising something in return for it.
The following aspects determine the existence of consideration;
- Promisor and Promisee: In most contracts, two promises will be exchanged, so each party is both a promisor and a promisee. In a contract case, the claimant will often be argued that the defendant has broken the promise made to the claimant and therefore the claimant will usually be the promisee, and the defendant will be the promisor.
- Executory and executed consideration: Consideration is often divided into two categories: executory and executed. Executed consideration is the performance of an act in return for a promise.
Consideration is executory when the defendant makes a promise, and the plaintiff offers a counter-promise. The promise is executory because it is something to be done in the future. - Consideration must not be past: Consideration must be given in return for the promise or act of the other party; something done, given, or promised beforehand will not count as consideration. Whether or not consideration is past is a question of fact, and the wording of an agreement will not necessarily be conclusive.
The two exceptions to the rule of past consideration are no consideration is;
- Where the past consideration was provided at the promisor’s request, and
- It was understood that payment will be made.
- Consideration must be sufficient: Although consideration must provide some benefit to the promisor or detriment to the promisee, these do not have to amount to a great deal. This principle is usually described in the rather confusing phrase ‘ consideration must be sufficient but need not be adequate’, which effectively means that the courts will not inquire into the adequacy of consideration, so long as there is some.
- Consideration must be of economic value: What this principle basically seems to mean is that there must be some physical value, rather than just an emotional or sentimental one.
- Consideration can be a promise not to sue: If one party has a possible civil claim against the other, a promise not to enforce that claim is a good consideration for a promise given in return. Where forbearing to enforce a legal claim is offered as consideration, there must have been some intention actually to bring proceedings as was illustrated in the case of Miles v New Zealand Alford Estate Co (1886).
One party’s promise not to enforce an existing claim can only provide consideration if the promise given in return was actually induced by the promise not to enforce the claim. - Consideration must move from the promisee: This means that the person who wants to enforce the promise must have given consideration for it.
- Consideration need not move to the promisor: Although consideration must move from the promisee, it does not need to move to the promisor – so there can be considered where the promisee suffers some detriment at the promisor’s request, but this gives no particular benefit to the promisor.