This paper examines the doctrine of consideration as a foundational element of English contract law, which also governs Australian contracts. It defines consideration as the requirement that each party to a contract must offer something of value in exchange for the other's promise — the principle of "quid pro quo." The paper outlines the key rules governing consideration, analyzes landmark cases such as White v. Bluett, Ward v. Byham, and Hubbs v. Black, and explores the ongoing debate over whether the doctrine remains relevant in modern legal practice. The author argues that while consideration has theoretical merit, its subjective and often arbitrary application makes it a source of persistent confusion in common law.
The term "contract law" has the ability to almost immediately make someone think of lawsuits and litigation. For the most part, contracts are thought of as very formal documents written in language that is difficult for the average person to read, much less understand. However we may feel about contracts, we cannot deny that they are a part of our everyday lives. Almost every aspect of what we do in modern life involves a contract. Take, for example, eating at a restaurant — you look at the menu, eat, and then receive the bill; even the credit card you use to pay for that meal is itself a contract. Similarly, purchasing a plane ticket to visit relatives is a contractual act as well. These are both examples of common, everyday contracts that ordinary people enter into without even realizing it — unless, of course, they fail to pay for the meal, the ticket, or the credit card bill. Most people do not think twice about it. They do not consider the ramifications of failing to live up to their end of the bargain.
There is an old adage that states something to the effect of: "All contracts are agreements, but not all agreements are contracts." This is exactly correct — especially when it comes to the doctrine of consideration, which is the central subject of this paper.
To be bound to an agreement or a promise normally means that some kind of consequence will follow if the promise is not kept. While the breach of a moral promise can result in general disapproval — whether from friends, family, or employers — the breach of a legal promise can result in imprisonment, a fine, community service, and/or damages, depending on the severity of the breach and who is judging it. Knowing that some broken promises can carry harsh consequences, the question therefore arises: what promises should the law enforce? And how should one know when breaking a promise constitutes breaking the law? This is where the doctrine of consideration comes in. The doctrine of consideration was created with the purpose of allowing two parties to know — without doubt — that they were entering into a legally binding promise, and that, with that legal promise, they were allowing the law to ensure that the contract would not be breached.
In a perfect world, we would not need the complexity of the doctrine of consideration. After all, it may confuse some people, who question how the law can enforce certain promises while ignoring others. The answer seems clear at first. We would not sue someone for not bringing a dish to a potluck dinner when they stayed and ate anyway; there would be nothing meaningful to gain from such a lawsuit. However, when more is at stake, the doctrine of consideration becomes relevant. The law must enforce those promises that are worth something, as opposed to those that are not worth anyone's time.
In English contract law — the system also followed in Australia — consideration is one of the three main components of a valid contract. Consideration can be anything of worth, whether a physical item or a service, that each side agrees to exchange for the contract to be considered valid and legal. If only one side of the agreement offers something for consideration, the agreement is not a legally binding contract; it is invalid.
To understand the doctrine of consideration in its more traditional form, consideration is expressed as the requirement that, in order for each party to enforce a promise, they must have given something in exchange for it. This is known as quid pro quo — in other words, everyone must bring something to the table; something must be given or promised in exchange for the other party's promise. A contract must be "met with" or "supported by" consideration in order to be enforceable. Furthermore, only an individual who has given consideration can enforce a contract. An agreement consisting of a promise that is not supported by consideration will not constitute a legally enforceable contract. The lack of consideration is one reason a court will not recognize a promise. This principle is particular to English common law (Khouri & Yamouni 2006) and is a source of considerable confusion among both professors and law students alike.
Many believe that the doctrine of consideration still has its place in law today, while others do not. The main argument in favor of consideration is that it provides a valuable service to the law by helping to determine which promises should be imposed and which should be deemed unnecessary. Historically, consideration was used to distinguish between binding promises and those viewed as merely gratuitous, on the basis of bargain-style relationships, and to protect individuals from entering into legally binding promises made in thoughtless or unintended ways. For example, if one person is joking while the other is not, the absence of mutual valuable exchange would mean the contract is not legally viable.
The case of Currie v. Misa establishes the definition of consideration that is still used today: "Valuable consideration…is…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" (Yamouni & Khoury 2006). The term "consideration" simply means what a person must give in exchange for the other party's obligation. It is entirely based on the idea of reciprocity.
Because not all contracts can be enforced by a legal system, rules must exist to govern contracts and the parties entering into them. These rules help to identify which contracts are enforceable by law and which are not. Consideration is the primary element that distinguishes gifts — gratuitous legal acts — from contracts. Consideration is governed by four rules:
1) Consideration must be sufficient, though it does not need to be adequate. "Adequate" here means having economic value, although this has not been fully defined, which is part of the difficulty surrounding consideration. 2) Consideration cannot be past consideration. 3) Consideration must move from the promisee. 4) Only a party who has provided consideration may enforce the contract.
We should also recognize that the law appears to lack a strict requirement for adequate consideration. Some argue that other means exist to distinguish between enforceable and unenforceable promises — contractual intention being one commonly cited example — but contractual intention can itself be difficult to determine with certainty.
"White v Bluett, Ward v Byham, Hubbs v Black"
"Subjectivity, historical origins, and modern critiques"
Law cannot enforce every single promise a person makes. Any promise, whether spoken or written, cannot be legally binding unless each party offers consideration. Should the doctrine of consideration be removed from the common law? Is it relevant in the modern age? The consideration doctrine seems to be protected largely by the fact that it is old. While there are obvious merits to the law, much of its application remains arbitrary.
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