Consideration is an essential element of a valid contract not made by deed. The most common form of consideration refers to paying or promising to pay money for the supply of goods or services. Where the parties exchange promises to perform acts in the future, the consideration may be executory, e.g., ‘M’ promises to deliver goods to ‘P’ and ‘P’ promises to pay for the goods. The consideration may be executed where ‘A’ promises to do something in return for the act of ‘B’, rather than for the mere promise of future performance of an act.
In terms of the formation of the contract, consideration is governed by the following general rules: (1) Simple contracts must be supported by consideration. (2) Consideration need not be adequate, but must have some value however slight. (3) Bailment. (4) Consideration must be sufficient. (5) Consideration must be legal. (6) Consideration must not be past. (7) The Contracts (Rights of Third Parties) Act, 1999 has an effect where A contracts with B to give benefit to C. (8) Consideration must move from the promisee.
