04/30/2026

 

Samuel Clifford

 

Introduction:

 

In my article on Ricketts v Scothorn I briefly touched on what consideration is in contract law. However, consideration is one of the foundational doctrines of contract law and requires more discussion and explanation than that which was given in the previous article. Contracts without consideration are not legally enforceable which is why a good understanding of consideration is necessary for those who study contract law or wish to navigate contractual relationships with confidence. 

 

What is Consideration?

 

Consideration refers to the mutual exchange of something of value, such as a service, product, money, or any other legally recognized benefit or detriment, that supports a promise and makes a contract enforceable. Both parties assume an obligation that binds them to their respective commitments and establishes the mutuality required for contractual enforcement.

 

Courts often apply the “bargain‑for‑exchange” test, which asks whether each party gave something in order to receive something in return. If the exchange was the reason each party made their promise, consideration is usually present.

 

Examples:

 

1. Service for Payment:

 

A person calls an electrician out to fix a problem with their bathroom lighting. 

 

Person: pays for service from electrician 

 

Electrician: services customer for payment

 

Here the payment from the customer is the value from the customer and it is exchanged with the services of the electrician.

 

2. Product for Money:

 

A person agrees to purchase a laptop from a seller for 200$.

 

Person: pays 200$ for laptop

 

Seller: gives the person ownership of the laptop 

 

Here the payment from the buyer is the value and the exchange of ownership from the seller is also value. There is a mutual exchange so there is consideration.

 

3. Promise for Promise:

 

Two businesses sign a contract where one will deliver 500 units of merchandise, and the other will pay upon delivery.

 

Supplier’s consideration: promise to deliver the goods

 

Buyer’s consideration: promise to pay the purchase price

 

Sufficient v Insufficient Consideration:

 

As long as each side exchanges something of value, judges typically treat the consideration as valid without questioning whether it was a fair trade. Only when the consideration is suspiciously small or the circumstances suggest pressure, deception, or incapacity will a court look more closely at the bargain. Consideration must also be part of the actual exchange, something already done or something a party was already obligated to do cannot support a new promise. For example, an employee cannot claim extra pay for continuing work they were already contractually required to perform unless new duties were added. 

 

A contract may be unenforceable if it lacks genuine consideration, such as when the promise is essentially a gift, the act has already been completed, or one party promises only what they were already bound to do. Although consideration is normally required, the law recognizes exceptions. Courts may enforce promises without consideration under doctrines like promissory estoppel, where someone reasonably relies on a promise to their detriment, or under specific rules such as the preexisting‑duty principle and the Uniform Commercial Code’s firm‑offer rule for merchants. Additionally, some agreements must be in writing under the statute of frauds before they can be enforced.