In consideration of -- : how courts enforce bargains.

• Author: Swais, Nishan

If A promises, "I will give you a free mug if you visit my restaurant", does B have a legal claim against A if B visits A's restaurant but does not receive a mug? To answer this question we must turn to the doctrine of consideration.

Simply put, the doctrine of consideration asserts that for a contract to be legally binding, it must represent some sort of bargain or exchange between the parties. A simple promise to do something, say, manufacture certain goods, will not be enforceable against the person making that promise unless the person to whom the promise is made gives something of value in return, for example, money. The doctrine of consideration thus stands for the proposition that to get something, you have to give something and it functions as the dividing line between a gratuitous promise, on the one hand, and a contractual obligation, on the other.

It is for this reason that one almost always finds a contract prefaced with the words,

"In consideration of two dollars and other good and valuable consideration (the receipt and sufficiency of which is acknowledged), the parties agree as follows:"

The point of doing this is to provide written evidence of consideration, thus indicating the parties' mutual intention to be legally bound by what is contained in the contract. That said, it will always be a question of fact whether an exchange truly took place and in that regard, courts have had to deal with a variety of legal issues which have arisen out of the practical application of the doctrine of consideration.

Perhaps most important among these is the body of law that has been built around the issues of the adequacy and sufficiency of consideration.

By adequacy of consideration we mean whether, from the point of view of the consideration actually given, the exchange was a fair one. The general principle in Canadian law is that courts will not inquire into the adequacy of consideration. That is left to the parties to determine. So, for example, if you choose to sell your antique sports car for one dollar, that is up to you. Courts do not see it as their place to question your business judgment. The only instance in which a court is likely to interfere and overturn a contract is where it is clear that there was fraud or that a party was incapable of looking after its own interests.

Where sufficiency of consideration is at issue, courts take the position that regardless of the value of the things exchanged...