Consideration and Intention to Create Legal Relations
Consideration
Consideration is what each party gives in exchange for the other's promise: a benefit to the promisor or a detriment to the promisee. It must move from the promisee, be sufficient (have some value) but need not be adequate (equal in value). Key rules: past consideration is generally no consideration; performance of an existing duty is usually not good consideration (unless it exceeds the duty or benefits a third party); and part payment of a debt is not consideration for a promise to forgive the balance.
Intention to create legal relations
As noted in Domain 1, intention is presumed in commercial dealings and presumed absent in social/domestic ones. Questions test whether facts rebut the presumption: a written agreement, money, or reliance can rebut the domestic presumption; express "honour" clauses or "subject to contract" can rebut the commercial one.
Traps to watch
- Pre-existing duty: performing what you already owe a third party can be good consideration, but performing what you owe the same promisor usually is not.
- Promissory estoppel: where a party makes a clear promise not to enforce rights, intending reliance, and the other relies, the promise may be binding even without consideration, but only as a defence, not a cause of action.
- Adequacy vs sufficiency: a peppercorn can be sufficient; do not reject consideration merely because it is small.
Rule of thumb
For every promise, ask: what did the promisee give up, or what did the promisor gain? If the answer is "nothing new", consideration likely fails. Worked example: an employer promises extra pay for work an employee already contracted to do; the employee gives no fresh consideration, so the promise is generally unenforceable unless the employee does something extra or a third party benefits.