Introduction
This essay seeks to explore the fundamental concepts of consideration in contract law, focusing on the distinctions between executory, executed, and past consideration. Consideration is a core element of a legally binding contract under English law, representing something of value given by one party in exchange for a promise or performance by another. By distinguishing these three types of consideration, this essay will provide a clear understanding of their legal implications. Furthermore, it will critically examine the circumstances under which a contract may still be enforceable despite being supported solely by past consideration—a concept traditionally deemed insufficient to form a binding agreement. Through an analysis of legal principles, statutory provisions, and relevant case law, this essay aims to demonstrate a broad understanding of the topic while considering the limitations and applicability of past consideration in modern contract law. The discussion will proceed by defining each type of consideration, followed by an in-depth exploration of exceptions to the rule against past consideration.
Defining Executory, Executed, and Past Consideration
Consideration is a cornerstone of contract law, ensuring that agreements are based on mutual exchange rather than mere promises. It can be classified into three distinct categories: executory, executed, and past consideration, each with unique characteristics and legal significance.
Executory consideration refers to a promise to perform an act or provide something of value in the future. In this scenario, both parties have yet to fulfil their obligations at the time the contract is formed. For instance, in a contract for the sale of goods, the seller promises to deliver the goods, and the buyer promises to pay upon delivery. This mutual exchange of promises constitutes valid consideration and is enforceable under English law (Adams and Brownsword, 2007).
Executed consideration, on the other hand, occurs when one party has already performed their part of the bargain at the time the contract is made, while the other party’s obligation remains outstanding. A common example is a reward scenario, where a person returns lost property to its owner, and the owner subsequently promises a reward. Here, the act of returning the property is executed consideration, and the promise of payment remains to be fulfilled. Such consideration is deemed valid because the act was performed in response to a request or implied promise (Poole, 2016).
Past consideration, however, refers to an act or benefit conferred before the promise was made, without any prior request or agreement. Traditionally, past consideration is not considered valid in forming a contract because it lacks the element of bargained-for exchange at the time of the promise. A classic illustration of this principle is found in the case of Roscorla v Thomas (1842), where a promise to guarantee the soundness of a horse after its sale was held unenforceable because the consideration (the sale) had already occurred. The court reasoned that the past act did not form part of a mutual bargain at the time the promise was made (Treitel, 2011).
Limitations and Challenges of Past Consideration
The rule against past consideration is rooted in the principle that contracts must involve a reciprocal exchange at the time of agreement. Without this mutuality, a promise lacks the necessary legal incentive to be binding. However, this strict rule often poses challenges in scenarios where parties may have acted in good faith or where moral obligations suggest a promise should be upheld. The rigidity of this principle has been debated, as it may lead to perceived injustices in certain cases. For instance, if a person voluntarily performs a service expecting no reward, and the beneficiary later promises payment out of gratitude, the law traditionally denies enforceability due to the absence of contemporaneous exchange (Treitel, 2011).
Moreover, the rule can appear overly formalistic in modern commercial contexts where informal agreements and subsequent promises are common. This limitation highlights the need for exceptions or alternative mechanisms to address situations where past consideration might reasonably justify enforcement. Indeed, English law has evolved to recognise specific circumstances under which past consideration may support a binding contract, as discussed in the following section.
Exceptions to the Rule Against Past Consideration
Despite the general rule that past consideration is insufficient to support a contract, English law provides certain exceptions where such a promise may be enforceable. These exceptions demonstrate the law’s flexibility in accommodating fairness and practical realities, though they are narrowly defined to prevent abuse of the principle.
One notable exception arises under the doctrine of implied assumpsit or prior request. If a party performs an act at the implied or express request of another, and it is understood that payment or reward will follow, a subsequent promise to pay may be enforceable. This principle was established in the case of Lampleigh v Brathwait (1615), where the defendant requested the claimant to undertake efforts to secure a pardon, and later promised payment for the service already performed. The court held that the past act constituted valid consideration because it was performed at the defendant’s request with the expectation of remuneration. This exception hinges on the understanding that the act was not truly “past” in the sense of being unrelated to the promise, but rather part of an implied contractual framework (Poole, 2016).
Another exception is provided by statute under Section 27 of the Bills of Exchange Act 1882, which stipulates that past consideration can support a bill of exchange if the consideration was given at the request of the promisor. This legislative provision ensures that certain financial instruments remain enforceable despite relying on past acts, reflecting a practical acknowledgment of commercial needs (Adams and Brownsword, 2007).
Furthermore, the concept of moral obligation has been discussed in academic literature as a potential justification for enforcing promises based on past consideration, though it is not universally accepted in English courts. For example, some argue that a promise to repay a debt previously incurred, though not legally enforceable at the time, should bind the promisor if it reflects a clear moral duty. However, courts have generally resisted broadening this exception, maintaining that moral obligations alone do not suffice to create legal ones (Treitel, 2011).
These exceptions illustrate the law’s attempt to balance the strict doctrine of consideration with equitable outcomes. Nevertheless, their limited scope suggests that past consideration remains a problematic area in contract law, often requiring statutory or judicial intervention to achieve fairness.
Conclusion
In conclusion, the distinctions between executory, executed, and past consideration are essential to understanding the formation of contracts under English law. Executory and executed consideration align with the principle of bargained-for exchange, ensuring that mutual obligations or completed acts form the basis of enforceable agreements. Past consideration, however, is generally deemed insufficient due to the absence of contemporaneous exchange, as evident in historic cases such as Roscorla v Thomas. Nevertheless, exceptions like implied assumpsit, prior request, and statutory provisions under the Bills of Exchange Act 1882 demonstrate the law’s capacity to adapt to specific circumstances where fairness or commercial necessity demands enforceability. While these exceptions provide limited relief, they also underscore the broader limitations of the rule against past consideration, particularly in addressing moral or informal obligations. The ongoing tension between legal formalism and equitable outcomes suggests a need for continued evaluation of this principle, especially in evolving commercial and social contexts. Ultimately, a sound grasp of these concepts and their exceptions equips practitioners and students alike to navigate the complexities of contract law with greater clarity and insight.
References
- Adams, J. and Brownsword, R. (2007) Understanding Contract Law. 5th edn. London: Sweet & Maxwell.
- Poole, J. (2016) Textbook on Contract Law. 13th edn. Oxford: Oxford University Press.
- Treitel, G.H. (2011) The Law of Contract. 13th edn. London: Sweet & Maxwell.
