Five Fundamental Features of "Consideration" in Contracts Law

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CONSIDERATION is an essential element in Contracts law that refers to something of value that is exchanged between the parties involved in a contract. Here are five fundamental features associated with consideration:
1. Exchanging something of value:
• Consideration involves the exchange of something of value between the parties. It can take various forms, such as money, goods, services, promises, forbearance from an action or even surrender of a legal right.
• Each party must provide consideration to the other, indicating that they have given up something or incurred a legal detriment in exchange for the promises made in the contract.
• The determination of legal value is primarily based on the intention and the agreement of the parties involved in the contract. As long as the parties mutually agree that the exchanged value has legal worth, it satisfies the requirement of legal value.
• Not all forms of value are considered legal or enforceable. If the consideration involves engaging in illegal activities, goes against public policy, or violates any statutory provisions, it would be deemed unlawful and unenforceable.

2. Bargained-for exchange:
• Consideration must be the result of a bargained-for exchange between the parties. It distinguishes a contract from a gift or a one-sided promise. It signifies that the parties have engaged in a process of negotiation, give-and-take, and reaching a mutual understanding regarding the terms and conditions of the contract.
• A bargained-for exchange requires the parties to enter into the contract voluntarily and with an intention to be bound by the terms of the agreement.
• A key aspect of a bargained-for exchange is that the consideration provided must be something distinct from what the party is already legally obligated to do. The pre-existing legal duty rule states that if a party is already obligated by law to perform an act, promising to perform that act does not constitute valid consideration.
3. Mutuality:
• Consideration must be mutual, meaning that both parties involved in the contract must provide consideration. Each party must give up something or provide some benefit to the other party. For example, if Party “A” promises to pay Party “B” a certain amount of money in exchange for Party “B” delivering goods, both parties are providing consideration. Mutuality ensures that both parties have obligations and benefits under the contract.
• Mutuality ensures that a contract is not one-sided or unbalanced, as both parties are bound by their respective obligations. It establishes the principle of reciprocity and contributes to the enforceability and fairness of the contract.
• Mutuality also guards against illusory promises, which are promises that do not impose any real obligation on the promisor.

4. Adequacy of consideration:
• The principle of adequacy of consideration aligns with the freedom of contract, which allows parties to negotiate and agree upon their own terms without undue interference. Parties are generally considered to be the best judges of their own interests and what they consider to be valuable.
• In other words, the law does not assess whether the value exchanged is fair or equal. As long as there is some form of consideration, the court does not typically inquire into whether it is proportionate to the value of what is promised.
• However, there are exceptional circumstances when adequacy of consideration may be examined. These exceptions typically involve situations where there are indications of fraud, duress, undue influence, or unconscionability. In such cases, a court may examine whether the consideration was so grossly inadequate that it shocks the conscience or goes against public policy.

5. Past consideration is not valid:
• This means that past consideration, which refers to actions or services already completed before the promise was made, is generally not considered valid consideration.
• Consideration must be given in exchange for the promise and not be something that has already been provided in the past. Past consideration lacks the element of bargained-for exchange and is generally not considered valid consideration. The consideration must be present or in the future and executed as a result of an agreement.