Anaya Nolan
In Australian contract law, consideration is an essential element in the formation of a contract. It is the price paid for the promisor's promise and is given in exchange for the promise (as a 'quid pro quo'). This requires a benefit to the promisor or a detriment to the promisee. The benefit or detriment requirement, along with the bargain requirement, are the two legal elements that constitute the modern definition of consideration in Australia.
| Characteristics | Values |
|---|---|
| Definition | Consideration is a legal term used to describe the benefit each party to a contract receives. |
| Binding | A contract is not legally binding without consideration. |
| Essential | Consideration is an essential element in the formation of a contract. |
| Price | Consideration is the price paid for the promisor's promise. |
| Payment | Payment need not be monetary or even of monetary value. |
| Benefit | Consideration may consist of some right, profit, or benefit accruing to one party. |
| Detriment | Consideration may consist of some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. |
| Bargain | The promisee's undertaking to incur a detriment or confer a benefit must correspond to the promise made by the promisor. |
| Movement | Movement of consideration must be from the promisee. |
| Value | The law does not intervene with respect to the value of the consideration exchanged unless the two promises are so disproportionate in value as to demonstrate unconscionability in the bargaining process. |
| Legally sufficient | Consideration must be legally sufficient. |
| Enforceability | Without valid consideration, a contract cannot be enforced in court. |
| Executory | Executory consideration is when promises are exchanged between both parties. |
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What You'll Learn
Consideration is a key element of a contract
The classical definition of consideration, as captured in Currie v Misa (1875), is:
> A valuable consideration, in the sense of the law, may consist either in 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.
In Australia, the modern definition of consideration has two legal elements: the benefit or detriment requirement, and the bargain requirement. The benefit or detriment requirement means that consideration may consist of a benefit accruing to one party, or a detriment, loss or responsibility suffered by the other party. The bargain requirement, as demonstrated in Australian Woollen Mills Pty Ltd v Commonwealth (1954), means that there must be a crucial difference between an act performed by a promisee as part of the bargain for the promisor’s promise, and an act that is merely done in reliance on some vague promise.
Consideration need not be adequate, but it must be legally sufficient. This means that consideration must have value in the eyes of the law, even if it is not equal in value to the promisor's promise. For example, in Chappell v Nestle, it was expressed that a 'peppercorn' could constitute valuable consideration if stipulated by the promisor. Consideration can be executed or executory. If it is executed, one party has already performed their part of the contract, while the other has yet to do so. If it is executory, promises are exchanged between both parties.
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Consideration need not be monetary
In Australian contract law, consideration is an essential element in the formation of a contract. It is the price stipulated by the promisor (the person making the promise) for the promise made. This requires two things: first, that there be some 'price' (in the form of a benefit to the promisor or detriment to the promisee); and second, that this price be given in exchange for the promise (as a ''quid pro quo' for the promise to which it relates).
The price is used in a broad sense; it need not be monetary or even of monetary value. It may involve a 'detriment' on the part of the promisee in the form of giving up a freedom otherwise enjoyed (such as promising to stop smoking or to study every Saturday night). It is not necessary that the promisor receive any tangible benefit.
The classical definition of consideration is:
> A valuable consideration, in the sense of the law, may consist either in 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.
In Australia, the modern definition of consideration has two legal elements: the benefit or detriment requirement, and the bargain requirement. The benefit or detriment requirement means that the promisee's undertaking to incur a detriment or confer a benefit must correspond to the promise made by the promisor. The bargain requirement was adopted in the High Court decision of Australian Woollen Mills Pty Ltd v Commonwealth (1954), which held that the plaintiff could not enforce statements of policy as a promise.
Consideration can take many forms, such as the abandonment of an existing legal right, the granting of new benefits, or the assumption of additional obligations in the event of a breach. For example, in Dunton v Dunton, giving up a freedom constituted good consideration, and in Wigan v Edwards, giving up a legal right was held to be good consideration.
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Consideration as a distinguishing feature
In Australian contract law, consideration is an essential element in the formation of a contract. It is a distinguishing feature between a gratuitous promise and a promise that can be enforced, such as a contract.
Consideration is the price paid for the promisor's promise. It is the mutual exchange of promises, which need not be monetary or even of monetary value. It can be anything stipulated by the promisor, as long as it is valuable in the eyes of the law. For example, in the famous case of Chappell v Nestle, it was expressed that a 'peppercorn' could constitute valuable consideration.
The classical definition of consideration, as captured in Currie v Misa (1875), is:
> "A valuable consideration, in the sense of the law, may consist either in 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."
In Australia, the modern definition of consideration has two legal elements: the benefit or detriment requirement, and the bargain requirement. The benefit or detriment requirement refers to either a benefit accruing to one party or a detriment suffered by the other. The bargain requirement refers to the promisee incurring a detriment or conferring a benefit that corresponds to the promise made by the promisor.
Consideration is what makes a promise legally enforceable. Without valid consideration, a contract is not legally binding, and it cannot be enforced in court.
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Benefit/detriment requirement
In Australia, the modern definition of consideration has two legal elements: the benefit or detriment requirement, and the bargain requirement.
The benefit or detriment requirement is the classical definition of consideration, as captured in the English decision of Currie v Misa (1875). In this case, Lush J defined consideration as:
> "A valuable consideration, in the sense of the law, may consist either in 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."
This definition was reiterated in Dunlop v Selfridge (1915), where Lord Dunedin wrote:
> "An act or forbearance of one party, or the promise thereof."
The benefit or detriment requirement means that for a contract to be legally enforceable, there must be some form of payment or exchange. This can be a benefit to the promisor or a detriment to the promisee, and it need not be monetary or have monetary value. For example, in Chappel v Nestle, it was observed that a 'peppercorn' could be good consideration.
The benefit or detriment must be incurred as a direct result of the promise. It is not sufficient for the promisee to merely act in reliance on a promise if that act was not part of a bargained-for exchange.
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Bargain requirement
The bargain requirement is one of the two legal elements of the modern definition of consideration in Australian contract law. The other element is the benefit or detriment requirement.
The bargain requirement was adopted in the High Court decision of Australian Woollen Mills Pty Ltd v The Commonwealth (1954). In this case, the Court held that the plaintiff could not enforce statements of policy as a promise. This demonstrates the distinction between an act performed by a promisee as part of the bargain for the promisor's promise and an act that is merely done in reliance on some vague promise.
The bargain requirement is satisfied if the promisee confers a benefit upon a third party at the behest of the promisor. The law does not generally intervene with respect to the value of the consideration exchanged unless the two promises are so disproportionate in value as to demonstrate unconscionability in the bargaining process.
In classical contract law, the Court's role is limited to ensuring "a bargain has been struck and an exchange made". This reflects the commercial nature of contract-making and the exchange of bargains between private parties.
In summary, the bargain requirement in Australian contract law refers to the mutual exchange of promises between the promisor and the promisee.
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