Chapter 8: Consideration
• Contract = bargain supported by consideration.
• Courts will not enforce a contract unless consideration is provided by both parties to the
• Consideration exists when a party either gives or promises to give a benefit to someone
else or suffers or promises to suffer a detriment to itself.
• Consideration must move from each party, but not necessarily to the other party.
Sufficient and Adequate Consideration (pg 177)
• A contract must be supported by sufficient consideration.
• Sufficient = any value from a legal perspective (money, goods, land or services, but not
love and affection).
• Consideration does not have to be adequate.
• Adequate = exchange of equal value, a good bargain.
• However, if it is clearly inequitable, courts will look for other flaws in contract, such as
undue influence or unconscionability (see Chapter 10).
Forbearance to Sue (pg 178)
• Forbearance to sue = give up right to pursue a lawsuit.
• Forbearance as consideration:
o If underlying claim is valid, agreement is enforceable.
o If underlying claim is invalid, agreement is unenforceable, unless the party
honestly believed it had a valid claim.
Past Consideration (pg 180)
• Mutuality of consideration: consideration must be exchanged under contract.
• Past consideration:
o Consideration is given before entering into a contract.
o No mutuality and therefore no consideration.
• Not to be confused with situations where a contract is contemplated but price is not
Pre-Existing Obligations (pg 180)
• A pre-existing obligation is an obligation that existed but was not actually performed,
before the contract was contemplated.
• Pre-existing public duty (i.e. firefighters and police officers) = no consideration.
• Pre-existing obligation to third party = sufficient consideration (new benefit for new party
under new contract). • Pre-existing obligation to same party = no consideration (same person cannot be
required to pay twice for the same benefit, see Gilbert Steel v. University Construction).
Problems with Rule in Gilbert Steel (pg. 183)
• Should a new contract be enforceable if the revision accurately reflects an unexpected
change in circumstances?
• The argument was accepted in England and may be adopted in Canada.
• Ways to avoid the rule in Gilbert Steel:
o Novation: discharge initial contract and sign a new one.
o Provide fresh consideration.
o Promise under seal
o Simply ignore.
Promise to forgive an existing debt
• Promise to discharge debt upon part payment is unenforceable because no new
o Promise is placed under seal.
o Promise exchanged for new benefit (early payment, payment in different form,
payment and new benefit).
o Statutes (e.g. Ontario Mercantile Law Amendment Act): enforceable if part
payment actually received.
Mercantile Law Amendment Act (Ontario)
• Part performance of an obligation either before or after breach thereof when expressly
accepted by the creditor or rendered in pursuance of an agreement for that purpose,
though without any new consideration, shall be held to extinguish the obligation.
• Only applies when the payment is actually made (promise to accept less can be
withdrawn anytime before payment).
• Court will not allow the statute to be used in an unconscionable manner.
Promises Enforceable without Consideration (pg 185)
• General rule: promise unenforceable without consideration
o Seal = special mark on document
Must be applied when contract signed
Need not take any particular form
Not sufficient to simply use form that has word “seal” beside signature
Symbolizes seriousness of promise
Enforceable even without consideration o Promissory estoppel
Promissory Estoppel (pg 185)
• The doctrine prevents a party from retracting a promise that another party has relied
• The promise is enforceable even without consideration
• Four requirements:
o Promise that existing rights will not be enforced.
o Promisee reasonably