What Is Consideration in Contract Law? Case Laws, Exceptions, and Examples

Last updated: August 14, 2025

1) Why Every Contract Needs Consideration

Consideration is the value—benefit or detriment—that turns a promise into an enforceable contract. It answers the question: what is each party giving or giving up? Modern common law applies the doctrine across jurisdictions with local variations.

It is the quid pro quo that turns a promise into a binding contract. This guide explains the concept of consideration under the Law of Contract, compares it with common-law principles, clarifies exceptions, and illustrates leading case law with practical examples.

The term "Consideration" is used in the sense of something in return. In other words, consideration is a reward accepted or given in return for the promise. It is doing or abstinence from an act.

2) Definition of Consideration

A classic UK formulation describes consideration as a benefit to the promisor or a detriment to the promisee (e.g., Currie v Misa, 1875). In South Asian jurisdictions, statutory language (e.g., Contract Act, s.2(d)) recognises acts, forbearance, or promises done at the promisor’s desire by the promisee or any other person, allowing third-party consideration. US courts emphasise bargained-for exchange (e.g., Hamer v Sidway, 1891).

• Contract Act (s.2(d): “When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act, abstinence, or promise is called the consideration for the promise.”
• Australian Law of Contract: Consideration is the price that is asked by the promisor in exchange for their promise. Consideration in contract law is simply the exchange of one thing of value for another. It is one of the main elements that must be present for a contract to be enforceable.
• Pollak: Consideration is the price for which a promise of another is bought.
• David: Consideration is some benefit received by the party who gives a promise or performance of an act.

3) Core rules (quick view)

• Real, not illusory: Must have legal value (even nominal).
• Adequacy not required: Courts rarely assess economic equivalence (e.g., Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87 (HL); Thomas v Thomas, 1842).
• At promisor’s request: Acts done voluntarily without request typically don’t count (subject to narrow exceptions/statutes).
• From whom? UK: typically must move from the promisee; US: consideration must be bargained-for; it may be furnished by the promisee or another person; intended third-party beneficiaries can enforce. South Asia: may move from a third party.
• Pre-existing duty problem: Doing what you already must do is usually not a fresh consideration (but see “practical benefit”).
• Past consideration: A promise after the act is usually invalid—limited exceptions apply.
• Part-payment of debt: Paying less rarely discharges the whole without additional consideration or equity.

4) Types of consideration

• Executory: promise for a promise (future performance on both sides).
• Executed: act for a promise (e.g., unilateral contracts).
• Forbearance: agreeing not to sue or to delay enforcement can be consideration if legally tenable.

5) Pre-existing duties & the “practical benefit” idea

Traditional rule (e.g., Stilk v Myrick, 1809): a promise to perform an existing contractual duty is not fresh consideration. However, modern UK law recognises that if the promisor obtains a practical benefit (e.g., avoiding delay penalties, securing reliable performance), an additional promise may be enforceable (Williams v Roffey Bros, [1991] 1 QB 1 (CA, 1990). For public/legal duties, merely doing what the law already requires is insufficient (Collins v Godefroy, 1831), but providing extra services beyond that duty can suffice (Glasbrook Bros v Glamorgan, 1925).

6) Past consideration: rule & exceptions

In classical English law, a promise made after an act is done (without prior request) is “past consideration” and generally invalid (Roscorla v Thomas). Exceptions include:

• At the promisor’s request: If the initial act was done at the promisor’s request and both parties understood it would be remunerated, a later promise is enforceable (Lampleigh v Brathwait; Re Casey’s Patent; clarified in Pao On v Lau Yiu Long).
• Statutory recognition: Section 25(2) of the Contract Act validates a promise to compensate a person who has already voluntarily done something for the promisor or something the promisor was legally compellable to do (subject to conditions).

7) General principle: Under Contract Act

Unlawful Consideration

• It is forbidden by law.
• Its nature, if permitted, would defeat the provisions of any law.
• It is fraudulent.
• It involves or implies injury to a person or property.
• It is opposed to public policy.

Any agreement based on unlawful consideration is void and cannot be enforced in a court of law.

8) Statutory exceptions under the Contract Act, 1872 (Section 25 & related)

• Natural love and affection (Section 25(1)): An agreement without consideration is valid if (i) it is in writing, (ii) registered, and (iii) made on account of natural love and affection between parties standing in near relation.
• Past voluntary services (Section 25(2)): A promise to compensate, wholly or in part, a person who has voluntarily done something for the promisor, or done something the promisor was legally compellable to do.
• Time-barred debt (Section 25(3)): A written and signed promise by a debtor (or authorized agent) to pay a debt barred by limitation is valid without consideration.
• Completed gifts (Explanation to Section 25): Gifts actually made are valid even without consideration.
• Agency (Section 185): No consideration is necessary to create an agency.

Two instructive Indian decisions frequently cited in South Asian jurisdictions:

• Abdul Aziz v. Masum Ali (Allahabad, 1914): a bare promise to subscribe to charity was unenforceable for want of consideration.
• Kedarnath v. Gorie Mohammad (Calcutta, 1886): where the promisee acted on the subscription and incurred liability (e.g., began construction), that reliance supplied consideration, rendering the promise enforceable.

General principle: Under contract law, an agreement without consideration is void, except in specific situations. Section 25 of the Contract Act 1872 (and similar provisions in many common-law jurisdictions) outlines important exceptions where a contract remains valid even without consideration.

A. Love and Affection

A written and registered agreement made on account of natural love and affection between parties in a near relationship is valid without consideration.
Example: A father gifts property to his son through a registered deed purely out of love and affection. This is enforceable even without monetary exchange.

B. Contract of Agency

Section 185 states that no consideration is necessary to create an agency relationship.
Example: Appointing a friend as your agent to purchase goods on your behalf without paying them a fee.

C. Voluntary Services

A promise to compensate someone who has voluntarily done something for the promisor, or something the promisor was legally bound to do, is valid without consideration.
Illustration: A finds B’s lost wallet and returns it. B promises to pay A $10 for the good deed. This promise is enforceable.

D. Time-Barred Debt

A written and signed promise to pay a debt that has become unenforceable due to the expiration of the limitation period is valid without consideration.
Explanation: If the statute of limitations has expired on a debt, a debtor’s new written promise to pay part or all of that debt revives the obligation.

Where a promise is made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for limitation of suits. (where a person is bound to pay some debt but creditor cannot force him to pay such debt because debt is barred by the time limit under limitation act, that person promises to pay such debt wholly or in part so in such situation consideration is not required)

Explanation of Time barred debt: If you have old debts, Collectors may not be able to sue you to collect their debts, because they have a limited number of years (Statute of limitation) to sue you. After it your unpaid debts considered time barred.

E. Contract Under Seal (Deed)

E. Contract under seal (deed) — what it means (plain English)

A deed is a specially formal, signed document that says it is “executed as a deed,” is properly witnessed, and is delivered with the intention to be bound. In England & Wales, a promise in a deed can be legally binding even if no consideration is given.

England & Wales — why a deed works without consideration

The law treats the formalities of a deed as a substitute for consideration. If the document is correctly executed as a deed (see LP(MP)A 1989, s.1), the promise is enforceable without money or anything else changing hands. This is why deeds are commonly used for gifts, guarantees, property transfers, releases, and for contract variations where no new consideration exists.

Simple UK examples

United States — do not assume a deed replaces consideration

Historically, a wax or printed “seal” could make a promise binding. Today, most U.S. states have abolished or limited any special effect of seals. A property “deed” transfers title to land, but that does not mean U.S. contract promises are enforceable without consideration. As a practical rule: a seal/deed rarely substitutes for consideration in the U.S.; check local state law.

Practical U.S. guidance

For ordinary contracts, keep consideration (even nominal) or rely on a statute that allows no-consideration modification (e.g., UCC §2-209 for goods, good-faith modifications). For property conveyances, use the state’s deed formalities to transfer title, but still treat contract promises as requiring consideration unless your state says otherwise.

F. Extension of Time

F. Extensions of time / contract variations (not a free-standing “exception”)

An extension of time changes the original bargain, so it is a variation of the contract. Whether that variation is enforceable without fresh consideration depends on the governing law.

England & Wales:

A variation (including an extension of time) generally needs consideration or must be executed as a deed. The Supreme Court in MWB v Rock (2018) did not overrule Foakes v Beer (which says a promise to accept less still needs consideration) and left open whether “practical benefit” can validate such promises. Safe route: supply fresh consideration (even nominal) or use a deed.

United States:

For sales of goods, UCC §2-209(1) allows a good-faith modification (e.g., extending deadlines) without consideration. For non-goods contracts, Restatement (Second) of Contracts §89 can enforce fair, equitable modifications made before full performance when circumstances were unanticipated (classic example: Angel v. Murray). Check your state’s version and case law.

International instruments:

Under the UNIDROIT Principles, a contract modification recorded in writing may be effective without consideration. This approach is common in cross-border deals that choose modern “soft law” principles.

Quick examples:

• (1) UK building contract deadline extended: make a small reciprocal concession (e.g., earlier interim payment) or sign a deed of variation.
• (2) US sale of machinery: parties sign a written change order under UCC §2-209—no consideration needed if made in good faith.
• (3) Cross-border supply using UNIDROIT: written extension is effective without consideration per the chosen rules.

9) Should Consideration Be Adequate?

In contract law, consideration does not need to be economically adequate for an agreement to be valid. If the promisor’s consent is freely given, the contract will not be void simply because the value of the consideration is unequal (peppercorn principle, as seen in Chappell v Nestlé). However, the inadequacy of consideration may still be relevant in court when assessing whether the consent of the promisor was truly free or whether it was influenced by fraud, undue influence, coercion, or misrepresentation.

For example, if someone sells property worth $100,000 for only $1,000, the contract can still be valid if both parties agreed voluntarily. But such a large disparity in value might lead the court to question whether the seller’s consent was obtained fairly. This balance between freedom of contract and protection from exploitation is a key part of the law of consideration.

10) Leading case law (quick table)

11) Clear, Real-World Examples

12) Conclusion

Consideration is one of the essential pillars of contract law across common-law jurisdictions. Whether you are drafting a simple personal agreement or a complex commercial deal, understanding the definition, rules, exceptions, and case law relating to consideration can mean the difference between an enforceable contract and an empty promise. From everyday examples to landmark decisions like Currie v Misa, Williams v Roffey Bros, and Hamer v Sidway, the principles remain consistent: consideration must be real, lawful, and move at the promisor’s request—unless it falls under a recognised statutory or equitable exception.

For a complete grasp of contract formation, it is equally important to explore related topics such as the Essentials of a Valid Contract, the principles of Acceptance in Contract Law, the requirements for a Valid Proposal, and the legal implications of a Void Agreement. Understanding these interconnected concepts ensures your contracts are not only enforceable but also compliant with legal standards in your jurisdiction.

By applying these principles and being aware of exceptions such as natural love and affection, voluntary services, time-barred debts, agency relationships, and deeds under seal, you can draft agreements that stand up in court and avoid costly disputes. Whether you are a law student, practitioner, or business owner, mastering the doctrine of consideration alongside other core elements of contract law will give you a stronger legal foundation and greater protection in your transactions.

13) Frequently Asked Questions

Does consideration have to be equal to the promise?

No. It must be real and lawful, but not economically equivalent (Chappell v Nestlé).

Is a promise to do what I already must do valid consideration?

Generally no (Stilk v Myrick), unless there is added burden or a practical benefit (Williams v Roffey Bros).

Can a promise be enforced without consideration?

Ordinarily no. Equity (promissory estoppel) may suspend strict rights where reliance makes enforcement unjust; Australia recognises broader estoppel in some contexts.

Who can provide consideration?

UK: typically the promisee. US: consideration must be bargained-for; it may be furnished by the promisee or another person; intended third-party beneficiaries can enforce. South Asia: statute allows it from the promisee or any other person (third-party consideration).

Is love and affection valid consideration?

Not by itself in most common-law systems. Some South Asian statutes validate written/registered promises based on natural love and affection.

Define consideration and discuss various exceptions to the general rule that an agreement without consideration is void.

Consideration is the value—benefit or detriment—exchanged between parties to make a contract enforceable. The general rule is that agreements without consideration are void, but exceptions include natural love and affection (in specific formalities), voluntary services, time-barred debts, agency, contracts under seal, and extensions of time.

What is consideration? Describe the rules relating to consideration.

Consideration is something of value given in exchange for a promise. Rules include: it must be real and lawful, move at the promisor’s request, be possible to perform, and not be past consideration unless it falls within an exception.

Agreement made without consideration is void — enumerate its exceptions.

Exceptions include: love and affection (formalised), voluntary services, time-barred debts (written promise), creation of agency, deeds under seal, and certain extensions of time. These exceptions vary slightly between jurisdictions.

Explain the term consideration and state the exceptions to the rule “No consideration, no contract.”

Consideration is the essential element that transforms a promise into a legally binding contract. The exceptions to the rule include those provided under statutory law and common law: love and affection, voluntary services, time-barred debts, agency agreements, deeds under seal, and in some cases, extensions of contractual deadlines.