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Consideration
July 8, 2022 by solicit_legal

WHAT IS CONSIDERATION?

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In contract law , a promise is said to be

part of a bargain if it is given “for
consideration”. A promise is given for
consideration when the promisor asks for
something in return for his promise and
gets what he asks for. Thus a promise is
generally not binding unless something
of value such as a return promise or an
act has been given in exchange for that
promise. This is why an offer to make a
contract is often described as a promise
with a price tag. The price tag is what is
termed the “consideration”.

At common law, an agreement is not

enforceable unless it is made by deed or
supported by consideration. In the case
of Marfo & Others v. Adusei, the first
appellant under the terms of a mortgage
agreement, attempted to sell a farm of
the respondent. The parties agreed to
postpone the sale for one year. However,
the first appellant sold the farm three
months later. The trial court accepted the
respondent’s evidence that the first
appellant had agreed to postpone the
sale for a year and held that the sale
which was made earlier than agreed was
unlawful. On appeal, it was held inter alia,
that the trial court’s finding that there
was an agreement to postpone the sale
could not be interpreted as an agreement
enforceable at law because there was no
evidence upon which he would be
justified in law in holding that there was a
contract between the first appellant and
the respondent, the performance of
which could be enforced against the first
appellant in a court of law. There was no
agreement by deed, and there was no
consideration moving from the
respondent to the appellant.

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Definition of Consideration
During the 19th century, consideration
was established in one of two ways : a
promissee either had to prove that he had
conferred a benefit on the defendant
(promisor) for which the defendant’s
promise was given ; or he had
established that he suffered or incurred a
detriment as a result of acting on the
defendant’s promise. This definition was
found to be limiting and so as the law
developed, a consideration was viewed
as the price of a bargain, referring to
whatever was given in exchange for the
promise of the other party. Thus, the
price paid by the plaintiff for the
defendant’s promise, such price
consisting either in the doing of some act
or the making of some promise in
exchange for the defendant’s promise.

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A more modern definition of

consideration is Pollock’s widely
accepted definition approved an adopted
by Lord Dunedin in the House of Lords
decision in Dunlop Pneumatic Ture Co
Ltd v. Selffridge & Co Ltd , which states
: An act or forbearance of one party , or a
promise thereof, is the price for which
the promise of the other is bought, an th
primes thus given for value is
enforceable.

Section 75 of the American Restatement

of Contract 2nd states : Consideration for
a promise is : (a) an act other than a
promise, or (b) a forbearance , or (c) the
creation, modification or destruction of a
legal relation, or (d) a return promise
bargained for and given in exchange for
the promise
Consideration may thus consist of the
performance of an ac, a counter promise
or a forbearance requested or given in
exchange for the other party’s promise.

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What are the Kinds of Consideration?

Consideration is usually classified

into three categories: executed,
executory or past consideration.

Consideration is said to be executory

when it consists of a promise (to be
performed in future), which is given in
return for a counter promise. This kind of
consideration arises in bilateral contracts
, where the contract is formed by the
mutual exchange of promises , a good
example of which is a contract for the
sale of goods to be performed in the
future.

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Consideration is said to be executed
when it consists of an act which is
performed in exchange for a promise.
Executed consideration arises in
unilateral contracts, which are typically
formed by the exchange of a promise for
the actual performance of an act, such as
reward contracts. The performance of
the act constitutes the acceptance as
well as the consideration.

Consideration is said to be past where

the act constituting the consideration is
wholly one or the detriment wholly
suffered before the promise is made.

WHAT ARE THE RULES GOVERNING

CONSIDERATION?

What is Past Consideration?

At common law, past consideration is not
sufficient to support the enforcement of
a contract. The rule on past
consideration is premised on the
fundamental principle that to constitute
consideration, the promise must be given
in exchange for the act.

The consideration is past if the promise

comes after the act has been fully
performed without any reference to the
promise, which is made later. The
promise is subsequent to and
independent of the act and, therefore,
the promise and the act do not constitute
one and the same transaction.

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In Roscorla v Thomas : The defendant

sold a horse to the plaintiff. After the sale
the plaintiff asked the defendant if the
horse was sound. The defendant
responded that it was. The horse turned
out to be unsound and the plaintiff
brought the action for breach of
warranty.
It was held that the sale itself created no
implied warranty that the horse was
sound. The warranty had to be regarded
as independent of an subsequent to the
contract of sale itself.

In Eastwood v Kenyon, the plaintiff ,

Eastwood had been a guardian and an
agent of Mrs. Kenyon while she was a
minor and had voluntarily incurred
expenses in the improvement of her
property. When the infant came of age
she promised to pay the money that
Eastwood had borrowed for the
improvement of her property etc. The
plaintiff sued to enforce the defendant’s
promise. The court held that the moral
obligation of the defendant to fulfil the
promise was not sufficient consideration
and since the acts had been wholly done
before the promise was given , the
consideration was past and the promise
was therefore unenforceable.

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The fact that the parties have used the

word “consideration” has been found not
to be conclusive . In Re Mcardle : A
number of children by their father’s will
were entitled to a house after their
mother’s death. While their mother was
alive one of the children and his wife lived
in the house. The wife made various
improvements to the house and at a later
date all the children signed a document
addressed to her stating : “ In
consideration of your carrying out certain
alterations and improvement to the
property, we hereby agree that the
executors shall repay you from the estate
the sum of 488 in settlement of the
amounts spent by you on such
improvements. The wife sued to enforce
this promise. The court held that since all
the work on the house had in fact been
completed before the document was
signed , this was a case of past
consideration and it was not sufficient to
support the document signed as a
binding contract.

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WHAT ARE THE EXCEPTIONS TO PAST

CONSIDERATION RULE?

Act Specifically Requested by

Promisor : It has been established that
past consideration will be sufficient to
support a subsequent promise if the prior
act or service (which constitutes the
consideration) was done or rendered at
the express request of the promisor.

In Lampleigh v. Brathwaite : The

defendant had killed a man and had been
convicted of murder. he asked the
plaintiff to do all he could to obtain a
pardon for him from the king. The
plaintiff exerted himself to this end,
journeying to and from London at his own
expense and was able to obtain the
pardon for the defendant. Later the
defendant promised to pay the plaintiff
100 pounds for his trouble. He failed to
pay and the plaintiff sued. The court held
that even though the alleged
consideration was wholly given before
the promise of remuneration was made
the promise was enforceable because the
act constituting the consideration was
done at the express request of the
defendant.

Act Done by Way of business :

The second exception to the rule on past
consideration is that an act done before
the giving of a promise will constitute
consideration if the act was done by way
of business and the parties understood at
the time of performance that the act was
to be remunerated or paid for and the
payment , if promised in advance would
have been legally recoverable. This
exception applies where the act is done
or the services are rendered by way of
business and not as an act of friendship.
Here it is presumed that both parties
must have understood that the act would
ultimately be paid for.

In the case of Re Casey’s Patent,

Stewart v. Casey , A and B joint owners
of certain patent rights, wrote to C
stating that “in consideration of your
services as the practical manager in
working our patents, we hereby agree to
give you one third share of the patents”.
A and B subsequently refused to fulfil
this promise arguing that the promise
was made only in return for C’s past
services as Manager and, therefore was
no consideration to support it. the court
held that the nature of the past services
raised an implication that the services
would be paid for. The subsequent
promise to pay was therefore simply an
admission of the bargain and serve to fix
the amount of the remuneration that has
to be paid.

Consideration need not be adequate

It has been settle for centuries that the
common law courts will not inquire into
the adequacy of consideration. This
means that the courts will ordinarily not
seek to assess the value of the
defendant’s promise and compare it to
the value of the act or promise given by
the plaintiff in exchange for it to
determine whether the consideration is
adequate. In the absence of any vitiating
factor, as long as the promisor gets what
he asks for in return for his promise, he is
deemed to have received adequate
consideration and is bound by the
contract so made.

This principle is based on the doctrine of

freedom of contract which presumes that
the parties are capable of determine their
own interests and making their own
bargain. The courts will generally not
upset a bargain between two persons of
full age and understanding on the basis
that the bargain appears to be unfair or
unjust or that the consideration given is
in the view of the court inadequate.

In Bolton v Madden, it was noted that

“the adequacy of consideration is for the
parties to consider at the time of the
making of the contract, and not for the
court to consider when it is sought to be
enforced”.

In Adjabeng v. Kwabla, the defendant

bought land from the father of the
plaintiff for 40 pounds. The plaintiff
brought an action alleging that , inter alia,
that the consideration for the sale was
inadequate (he thought the land was
worth about 200 pounds).
The court held that in the absence of
fraud or misrepresentation, inadequacy
of consideration cannot be a ground for
avoiding a sale validly made.
The principle on adequacy of
consideration is also clearly illustrate n
the case of Chappell & Co. Ltd v. Nestle
Co. Ltd.

WHAT IS FORBEARANCE AS
CONSIDERATION

As noted earlier, consideration may

consist of an act , promise or
forbearance. Forbearance simply refers
to from doing what one has a right to do.
Generally, forbearing from doing or
promising to forbear from doing what one
has a right to do amounts to good
consideration for another promise.

DELLE & DELLE VRS OWUSU AFRIYIE

[2005-20066] SCGLR 60: In this case,
the defendant admitted taking money
from the plaintiff. Upon request of the
payment of the amount remaining, the
plaintiffs claimed the defendant executed
a statutory declaration affirming the
indebtedness in which he promised to
repay the money before the 31st of
December 1995. The defendant however
failed to settle the debt. Thereupon the
plaintiff brought the action. The
defendant however denied ever
executing the statutory declaration
contending that it had been made by
fraud. This however was dismissed by
the trial judge who entered judgement for
the plaintiff. On appeal, the court of
appeal reversed the decision of the trial
high court. Whereupon the plaintiffs
proceed to the Supreme Court. The SC
held that a statutory declaration is not, in
itself a cause of action. But the statement
of fact made in it may be used to found a
cause of action. In the instant case, the
defendant made a statement in the
declaration acknowledging the debt. The
said statutory declaration however
contained a fresh contractual promise for
which there is consideration that is, if the
defendant failed to honour his promise
then the plaintiffs would be free to sue
after the stipulated time. This could be
reasonably interpreted as an implied
request for the plaintiffs to forbear from
suit before the 31st of December 1995, in
exchange for the promise to pay off his
indebtedness before the date. The
plaintiffs actual forbearance in the
instant case would amount to
consideration.

Hammer v Sidway : An uncle promised

a nephew who was an infant at the time :
“If you would refrain from drinking liquor
, using tobacco ,swearing , playing cards
for money until you are 21 years I will give
you 5, 000 pounds on your 21st
birthday”. The nephew complied and later
sued to enforce the promise. It was
argued that the nephew provided no
consideration since what he did was not
a detriment to him but was in fact a
benefit to him, not to the uncle. The court
held that the nephew’s forbearance
amounted to good consideration. It was
sufficient that the nephew had restricted
his lawful freedom of action within
certain prescribed limits upon the faith of
the uncle’s promise.

WHAT IS SUFFICIENCY OF
CONSIDERATION?

It is often sated that consideration need

not be adequate, but it must be
sufficient. The term “adequacy of
consideration” is used in connection with
the assessment of the value or relative
worth of the consideration being offered
by one party for the promise of the other.
The courts generally refrain from making
this kind of assessment to determine the
adequacy of the consideration because
the parties are considered to be the best
judges of their own interests. Thus the
principle that consideration need not be
adequate.

However, the courts have shown great

interest in ensuring the “sufficiency” of
consideration, that is , the validity of the
acts or promises which should qualify as
consideration for a contract. In this
regard, the common law courts
developed a number of rules to ensure
that the consideration is sufficient, that
is, the act or promise itself satisfies the
definition of consideration and is capable
in law of supporting an enforceable
contract. In determining the sufficiency
of consideration, the courts are
conserved with ensuring that the
promises or acts qualify as consideration
in the true sense and are therefore
deemed sufficient.

Over the years, the common law has

identified certain kinds of promises or
actions which are not considered as
sufficient consideration. These include
promises to keep an offer open for a
specified period to perform pre-existing
legal obligations and part payment of
debts. It must be note that these
common law rules have however been
heavily modified by statuary law in
Ghana, in particular by the Contracts Act,
1960 (Act 25).

REFORM OF SPECIFIC RULES ON

CONSIDERATION BY THE GHANA
COTNRACTS ACT, 1960 (ACT 25)

Promise to keep an Offer Open for

Specified Period of Time-section 8(1)
of Act 25

At common law, a promise to keep an