Consideration is an important part of making a contract legally binding. It means that both people or businesses involved in the contract must give or promise to give something of value. This could be money, goods, services, or even a promise to do (or not do) something.
Without consideration, a contract usually won’t be legally enforceable. Let’s explore what it means and why it matters.
Why Is Consideration in Contracts Important?
Consideration is what makes a contract fair and balanced. Both sides need to give or promise something for the contract to work. If only one person benefits, it’s usually not considered a contract—it might just be a gift or favor.
For example:
If you promise to pay someone £50 to mow your lawn, the consideration is the £50 from you and the lawn-mowing service from them.
If you give a friend £50 without expecting anything in return, that’s a gift, not a contract.
What Can Be Consideration?
Consideration doesn’t always have to be money. It can include:
Money:
Paying for a product or service.
Repaying a debt.
Goods or Services:
Providing a product, like selling a car.
Offering services, like fixing someone’s plumbing.
A Promise to Do Something:
Agreeing to work for someone in exchange for a salary.
Promising to deliver goods by a certain date.
A Promise Not to Do Something:
Agreeing not to compete with someone’s business.
Promising not to sue in exchange for a settlement.
As long as both sides give something of value, it counts as consideration.
What Is NOT Consideration?
Not everything counts as consideration. For example:
Past Actions:
If someone helps you in the past without expecting payment, you can’t make a contract later to pay them. Consideration must be part of the agreement when it’s made.
Illegal Activities:
Promises involving illegal actions (like selling stolen goods) are not valid consideration.
A Gift or Favor:
If one side doesn’t expect anything in return, it’s not consideration—it’s a gift.
Something You’re Already Legally Required to Do:
If a police officer promises to protect your house in exchange for money, that’s not valid consideration because it’s already their job.
Examples of Consideration
Here are some examples of consideration in action:
Buying a Car:
You pay £5,000 (your consideration).
The seller gives you the car (their consideration).
Employment Contract:
You agree to work for a company (your consideration).
The company agrees to pay you a salary (their consideration).
Settlement Agreement:
One person agrees to drop a lawsuit (their consideration).
The other person agrees to pay them money (their consideration).
How Courts Look at Consideration
Courts don’t usually care if the consideration is equal in value. For example, if you agree to sell a car worth £1,000 for just £100, the court won’t stop you. What matters is that something of value was exchanged, even if the deal seems unfair.
However, the court will step in if:
There was no consideration at all.
The agreement involves fraud, misrepresentation, or illegal activities.
How Canko Law Firm Can Help
At Canko Law Firm, we help individuals and businesses make sure their contracts are clear, fair, and legally binding. We can assist with:
Drafting contracts that include valid consideration.
Reviewing contracts to ensure they meet legal requirements.
Resolving disputes about whether a contract is enforceable.
Consideration is a key part of any contract. It ensures both sides give or promise something of value, making the agreement fair and enforceable. Whether you’re entering a business deal, hiring someone, or settling a dispute, understanding consideration is essential.
If you need help with contracts, contact Canko Law Firm today for expert advice and support. We’ll make sure your agreements are strong and legally sound.
