Consideration

One of the other important elements of contract law, which is difficult for the non-lawyer to understand, is the requirement of consideration. One 1875 English case, Currie v. Misa, offered a definition of "consideration" which is still used:

".. some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other."

As such, a contract differs from a gift. This also explains why you sometimes hear of very expensive objects sold for $1; which is done to ensure that what is essentially a gift, comes with the legal protection of contract law.

Under contract law, there is no contract if there is no consideration.

But consideration does not necessarily have to be quantified or quantifiable in monetary terms. Any discernible detriment to one of the parties could be that party's consideration. In one case, Hubbs v. Black, 1918, agreeing not to take a certain plot in a cemetery was considered to be sufficient consideration. Giving a right to sue on a "bona fide" claim has been deemed to be adequate consideration. Also, the courts don't really care about the adequacy of the consideration. This is the business of the parties and not a matter for judicial interference. Some other notes on consideration:

The consideration must be reciprocal, each party offering consideration.

Motive is different from consideration. Your motive for contracting is your personal reason for contracting. It may not coincide with the consideration you are giving, or receiving, as part of the contract.

If a consideration is already "spent" in a prior contract, a new contract using that same consideration would be valid. In the words of one law professor (The Law of Contract in Canada, G. Fridman): "where a contractual duty already exists, it may be possible...to vary the original agreement without necessarily establishing a whole new contract with fresh consideration on both sides." In fact, refreshing a commitment to do something for a third party is consideration under common law.

The consideration cannot be something or some act which is illegal, immoral or contrary to public policy (see also the section on Restraint of Trade contracts below). If a certain act is punishable by some law, then it is "illegal". An example would be a work contract to an unlicensed electrician.

9 Privity of contract

One sure sign of the personal nature of contracts is that no one but one of the parties can go to court and enforce the contract even if the contract was to operate to a third party's benefit. This is known as the "privity of contract" rule. There are exceptions to it:

Agents, or employees who obviously accept or offer a contract not in their own personal names but on another person's or a corporation's behalf. In these situations, the contract is said to be signed by an "agent". The person employing the agent is called the "principal" and the principal could sue or be sued under contracts entered into by his or her agent even though the principal id not sign the contract directly.

Another exception allowed under special laws is cheques and promissory notes (which are really just miniature contracts but contracts nonetheless). In these cases, enforcement rights are created by special laws between non-signatories as the cheque exchanges hands, from one bank to another or from one person to another.

Contracts that restrict or impact upon the use of land (eg. an easement) may be enforceable upon the next land-owner, even though they were not privy to the original contract. This is an old exception to the rule of "privity of contract" that is still applicable today.

The law of trusts, where a person may contract to the benefit of another, operates to convey certain rights to the third party even though, in fact, this third party was not party to a contract which created the trust.