Part B The law of obligations 4: Formation of contract II 57Illustration^
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A offers a reward for the return of lost property, their promise becomes binding when B performs the act
of returning A's property to them. A is not bound to pay anything to anyone until the prescribed act is
done. Therefore in Carlill's case, the claimant's act, in response to the smoke ball company's promise of
reward, was executed consideration.
Executed consideration can be defined as follows.
'That which takes place at the present time. Thus in a contract for the sale of goods, the consideration is
executed if the price is paid at the same time that the goods are delivered.'
Executory consideration is a promise given for a promise. The consideration in support of each promise
is the other promise, not a performed act.
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If a customer orders goods which a shopkeeper undertakes to obtain from the manufacturer, the
shopkeeper promises to supply the goods and the customer promises to accept and pay for them. Neither
has yet done anything but each has given a promise to obtain the promise of the other. It would be breach
of contract if either withdrew without the consent of the other.
Executory consideration can be defined as follows.
'That which is to take place at some future time. The consideration for the delivery of goods would be
executory if it is a promise to pay at a future date.'
1.1.1 Additional rules for valid consideration
As well as being either executed or executory, there are additional rules that must be met for
consideration to be valid:
Performance must be legal, the courts will not enforce payment for illegal acts
Performance must be possible, agreeing to perform the impossible is not a basis for a binding
contract
Consideration must pass from the promisee
Consideration must be sufficient but not necessarily adequate
1.2 Past consideration
Past consideration can be defined as follows.
'... something which has already been done at the time the promise is made. An example would be a
promise to pay for work already carried out, unless there was an implied promise to pay a reasonable sum
before the work began.'
Anything which has already been done before a promise in return is given is past consideration which,
as a general rule, is not sufficient to make the promise binding. The following is the key case in this area:
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