Consideration is an essential element of the formation of a contract. Consideration gives a party the right to enforce a contract. Unless the agreement is made under seal, only a party who has furnished consideration can enforce a contract.
The most concise definition of consideration was given in the famous case of Currie v. Misa (1875) L.R 10 Exch. 153 at p. 162. In that case, consideration was defined as a right, interest or benefit accruing to one party or some forbearance, detriment or loss given, suffered or undertaken by the other. Thus, consideration does not only consist of profit by one party but also exist where the other party abandons some legal rights, part with his possession at some point. In other words, any act or promise accepted by one party to a contract as the price for his own act or promise is sufficient consideration.
The statement, “consideration must move from the promisee” simply means that only a party that has furnished consideration can enforce a contract. Total failure of consideration on the part of the promisee (the plaintiff) can take three forms;
1. Gratuitous promise: A gratuitous promise is a promise made without consideration and is usually unenforceable. For example; if A promises to pay for B’s university education till graduation without any corresponding act or promise from B, A could withdraw his promise at any time without legal liability because B lacks consideration. However, where the gratuitous promise is made under seal, A, in the example above, would be bound to fulfill his promise because in contracts made under seal, the element of consideration is dispensed with.
2. Non performance by promisee: Parties to a contract have obligations to perform under it. Where the promisee (plaintiff) or the other party has not performed his obligation under the contract, any attempt to enforce the contract will fail for want of consideration.
3. When consideration is furnished by a third party: According to the doctrine of privity, a contract does not confer enforceable rights or any obligation made under it on any person except parties to it. Only a party to a contract can enforce it. Therefore, any action based on consideration furnished by a third party will fail.
There are three types of consideration namely;
1. Executory Consideration: Consideration is said to be executory when a promise is made in exchange for a promise thus, the consideration of both parties is their promises to each other. Here, it is the exchange of promises that constitutes the contract.
2. Executed Consideration: Consideration is said to be executed when an act is performed in return for a promise. It is associated with unilateral contracts. See Carlill v. Carbolic Smoke ball Co. (1893) 1 Q.B 256. It should be noted that, only one party, the offeror or promisor, is under a contractual obligation at any relevant period in an executed consideration.
3. Past Consideration : Consideration is said to be past when an act is performed before a contract is made. It is a consideration that is already given or some act that is already performed before a contract comes into existence. Past consideration is not a valid consideration. In Re McArdle , a testator left a house jointly to his children. The wife of one of the children, who was living in the house with her husband spent a lot of money making improvements and carrying out alterations to the house. Later on, the other children jointly signed a document agreeing to pay her 488 pounds for expenses in improving the house. Subsequently, they failed to pay and she sued. It was held that the agreement was not binding on the children because she (the plaintiff) had already completed the works on the house before the promise to repay her was made therefore, her consideration was past.
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