A Glossary Of Technical Terms Associated With Consideration

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ADEQUACY

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The economic equivalence of the consideration moving from each party. Although a consideration has to be SUFFICIENT it does not have to be ADEQUATE - hence a nominal consideration will make a promise enforceable, although inadequacy of consideration may be evidence of the unenforceability of the contract on other grounds, e.g. fraud, lack of capacity, duress, undue influence, etc.

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BARGAIN

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The notion that a contract must involve some contribution by both parties. The idea that a contract must be a "bargain" is not taken very seriously by English courts because of a recognition that not all cases where there is an enforceable obligation can be easily fitted into this idea (unilateral contracts, for example). This idea has been more influential in the United States.

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BENEFIT / DETRIMENT

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A good consideration must be either a benefit to the promisor or a detriment to the promisee. English courts generally take the view that it does not have to be both (but cf. BARGAIN). Note that a promise to provide a benefit or suffer a detriment is as good as actually doing so for the purposes of the doctrine of consideration. See also, EXECUTORY.

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CONSIDERATION

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(i) (Historically) a good reason for making a promise. (ii) (In modern legal usage) something of value given or promised by one party to a contract which makes the other party's promise enforceable.

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DEED

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See SEAL.

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EXECUTED CONSIDERATION

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Consideration consisting of an act by the promisee which has already been performed before the promise for which it is alleged to be a consideration has been made. Cases of this type are usually explained on the (fictitious) basis that the promisor made an implied promise to pay for the act before it was performed. (Cf. PAST CONSIDERATION). Re Casey's Patents is a leading example.

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EXECUTORY

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Not yet performed. Because of the doctrine that a promise to provide a good consideration is as good as actually doing so, English law recognises that an executory contract is enforceable. If a party indicates that he is not going to perform a contract which is wholly executory, or puts it out of his power to do so, he is said to commit an anticipatory breach.

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FORBEARANCE

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A kind of detriment consideration consisting of the promisee giving up, or promising to give up, something which he is presently entitled to do. A typical example would be a creditor agreeing to give a debtor more time to pay in return for some benefit promised by the debtor. The creditor's "forbearance" provides consideration for the debtor's promise and makes that promise enforceable

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PROMISE

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An obligation arising out of a contract. In English law, a promise is enforceable only if it is supported by consideration.

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PROMISOR / PROMISEE

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The parties to the contract from the point of view of the doctrine of consideration. The enforceability of the promisor's promise is the subject-matter of the dispute. The consideration for the promisor’s promise must move from the promisee. Note that the promisor and promisee do not always correspond to the defendant and plaintiff (claimant) in the litigation. Sometimes problems of consideration may arise in relation to the enforceability of a promise made by the plaintiff (see the New Zealand Shipping case, for example).

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RELIANCE (DETRIMENTAL RELIANCE)

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An act of the promisee in response to the promisor's promise. According to orthodox English contract theory, reliance by itself is not a sufficient consideration. The reliance must have been "requested" by the promisor. Professor Atiyah disputes this and argues that detrimental reliance can be a sufficient consideration, provided that the reliance was not an unreasonable response to the promisor's promise.

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SEAL

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A blob of sealing wax, or circle with the word "seal" through it, at the foot of a written contract. At common law "a seal imports a consideration", i.e. a contract under seal requires no further consideration to make it enforceable. In equity, a seal is not treated as a good consideration for all purposes. A document under seal is called a DEED. If it is executed by one person it is called a DEED POLL; if by more than one it may be called an INDENTURE. At common law a deed executed by an individual had to be signed, sealed and delivered. Provided that the document is expressed to be a deed and it is executed by an individual it is now no longer necessary for it actually to have a seal at the end (see, the Law of Property (Miscellaneous Provisions) Act 1989, s. 1(1)(a)). A deed which has been signed and sealed but not unconditionally delivered is said to be held in escrow.

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SUFFICIENCY

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The question of whether something is legally capable of being a good consideration. The general rule is that a consideration must be SUFFICIENT but does not have to be ADEQUATE.