BetterLawNotes-5 (2)

CONTRACT LAW

We have seen that generally a contract is an agreement and an agreement is established by the process of offer and acceptance. For an agreement to be legally enforceable, two further elements must be present. First, it must be supported by consideration, which we examine in this section. Second, there must be an intention to create legal relations, which is dealt with below.

Generally, in order that one party can enforce a contractual promise made by the other party, the first party must show that the promise is ‘supported’ by consideration. If X promises to pay £100 to Y, the promise, without more,* is unenforceable by Y because Y has given no consideration for it. But if X promises to pay £100 to Y if Y hands X his Cup Final ticket, Y can enforce X’s promise of payment (provided Y has handed over the ticket). By giving his cup final ticket to X, Y has provided consideration for X’s promise of £100.

* That is, unless the promise is set out in a deed. A deed is a written document which is executed in a particular way. The consideration rule does not extend to promises contained in deeds.

Consideration may be thought of as the ‘price’ fixed by one party and ‘paid’ by the other party (although the consideration does not have to be in the form of money). As such, consideration may be seen to be based on the idea of exchange or bargain: the claimant may only enforce the defendant’s promise if the defendant has requested some ‘thing’ as the price for his promise and the claimant has in response given the defendant that ‘thing’. A bare promise by D to pay C £100 lacks consideration and is unenforceable by C. A promise by D to pay C £100 given in return for C’s promise to sing at D’s birthday party is enforceable by C: C provides consideration for D’s promise by doing the ‘thing’ (promising to sing at D’s party) which D asked for as the price of his promise.

Bear in mind that the requirement of consideration applies only to the enforcement of promises. A gratuitous transaction, a gift, which has been carried out is enforceable without the need to show consideration. If X gives Y a mobile phone as a birthday present, X cannot change his mind and demand it back. But if X tells Y that he will give her a mobile phone on her birthday but changes his mind before the big day, Y cannot insist that X keep his promise.

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