Introduction

Something of value must be provided by each party to the contract in order to induce the other to sign the contract. This exchange of value can be called consideration in the field of Law. The value exchanged can take the form of money, physical objects, services, promised actions, endurance from a future action, and much more(Beatson, 2002, p88). The purpose of this essay is to find out why consideration is important in contract and whether there is any alternative for it. The essay is organised as follows: the definition of consideration, the rules of consideration, the importance of consideration and its relationship with the promissory estoppel. What is mainly argued in this essay is that consideration plays an indispensable role in contract despite some problems it has and it cannot be replaced by other doctrines like promissory estoppel (Mayne, 2009, p4).

Main Body

1. Definition

According to Currie v Misa (1875), consideration was defined as: a valid consideration is consisted of either a loss to the promisee or a benefit to the promisor. However, this definition has some deficiencies when contracts are based just on an exchange of promises. For instance, if A promises to buy a car from B for £2000 and B promises to sell the car to A for £2000, the consideration in this contract presents itself by the exchange of promises. The definition thus becomes meaningless. Therefore, a preferable definition was summed up by S ir Frederick Pollock(1950): “An act or forbearance of one party, or the promise thereof, is the price for which the promises of the other is bought, and the promises thus g iven for value is enforceable.”This definition was approved to be more representative than the concept of benefit and loss by the House of Lords(cited in Richards, 2011, p.61-62).

2. The rules of consideration

Although the definition of consideration is direct and simple, it is wrong to regard it as a single coherent principle. Actually the doctrine of consideration as we know today is made up of a series of sub-principles and their exceptions (Richards, 2011, p.62). The sub-principles can be divided into three main categories as below (McKendrick, 1998, p.86).

(1). Consideration can be executed or executory but it cannot be past(Richards, 2011, p62).

(2). “Considerat ion must move from the promisee” (Beatson, 2002, p95).

(3). Consideration must be sufficient but it need not be adequate(Lilienthal, 2011).

When it comes to exceptions, it can be concluded that if either the promisor or the promisee already had a legal duty to pay such payment, it cannot be seen as consideration in the legal perspective(Lilienthal, 2011).

3. Why consideration is important?

Consideration is one of the primary constituent parts of an “enforceable contract” in English Law(Richards, 2011, p.60). It has many functions which make it indispensable in contract.

Firstly, the doctrine of consideration has many functions. The most important function of consideration is to connect the two promises. This main function is less being talked about because consideration has already been regarded as a precondition of a valid contract(Bucher, no date, p21).

Secondly, the reason why consideration is so important is its openness and elasticity. It gives the judge “room for discretion” when being used in specific cases. That is also the reason why consideration must be contained in every valid contract. (Bucher, no date, p22)