Consideration 55Sufficiency and adequacy
A well-known principle of the law of contract holds that consideration must be sufficient
but does not need to be adequate. At first sight this can seem puzzling, as in everyday lan-
guage the words ‘sufficient’ and ‘adequate’ have a very similar meaning. However, in the
context of the law of contract the two words have quite different meanings:
n By saying that consideration must be sufficientit is meant that consideration must be of
some recognisable value, however small.
n By saying that consideration does not need to be adequateit is meant that consideration
does not have to be of the same value as the other party’s consideration.
An example demonstrates what is meant. If I agree to buy a new television from a shop for
its ordinary selling price of £299.99 then my consideration, like that of the shop, is sufficient
and adequate. My consideration is sufficient because it has some recognisable value. It is
adequate because my promise to pay the money is worth much the same as the shop’s
promise to give me ownership of the television. If the shop and I had agreed that I could
have the television for £1, then my consideration would have been sufficient but would
not have been adequate. That is to say, my promise to pay £1 would have been worth
something, but would not have been worth as much as I was getting in return. However, a
contract would still have been formed, because consideration does not need to be adequate.
If the shop had agreed to give me the television for nothing then no contract would have
been formed. I would not have given any consideration to the shop in return for the promise
to give me ownership of the television. The shop would therefore not need to give me the
television, unless its promise to do so had been made in a deed.
There are two main reasons why the law is not concerned with the adequacy of consider-
ation. The first is that it is not always possible to say what something is worth. A thing is
worth what someone will give for it, and this will depend on all of the circumstances. The
second reason is that a business which makes bad contracts should not be allowed to escape
from these contracts.
The performance of a trivial act can amount to good consideration as long as it confers
an economic benefit on the other party. For example, in Chappell & Cov The Nestlé Co
Ltd (1959)the defendants advertised that they would ‘give away’ records to members of the
public who sent in 7.5p and three chocolate bar wrappers. For copyright reasons it became
necessary to know whether or not the sending in of the wrappers was part of the customers’
consideration. The House of Lords held that it was. Customers who sent in 7.5p without
the wrappers would not have received a record. The principle in this case is important. As
consideration does not need to be adequate, a trivial act could be given as consideration in
any contract, as long as it conferred an economic benefit on the other party. In Chappell &
Cov The Nestlé Co Ltdthe defendants benefited through the publicity generated and also
made a profit on the records sold.
CommentThis case demonstrates the principle that a past act can amount to good
consideration if the two conditions are satisfied. The amount of money payable would now
be governed by s. 15(1) of the Supply of Goods and Services Act 1982. Section 15(1)
implies a term that where the price of a service supplied under a contract is not fixed by
the parties, a reasonable price will be paid.