Consideration

The requirement of consideration is fundamental to the creation of an enforceable contract — a price paid for a promise before the promise can be enforced. A bare or gratuitous promise cannot impose contractual liability on its maker, unless it is executed in the form of a deed. In a typical bilateral contract, consideration is provided by way of the offer and acceptance (because they amount to an exchange of promises). In a unilateral contract, consideration is evident in the act given in exchange for the offer.

However, consideration must satisfy certain rules to be valid. They include that consideration must be bargained for in the sense that it must be given in reliance on the promise. Consideration must move from the party to whom the promise is made and it cannot be in the past, in the sense that it precedes the promise, unless it falls into an exceptional category. Other rules of consideration should also be noted.

Importantly, consideration must have a legal value although its commercial value need not be equal or comparable to the value of the promise. Whereas consideration cannot in principle be something that the promisee is already contractually bound to give, this rule may be circumvented where a benefit over and above the contractual commitment is provided.

See Consideration.