Define: Executed Consideration

Executed Consideration
Executed Consideration
Quick Summary of Executed Consideration

Executed consideration in contract law refers to consideration that has already been given. Consideration is the exchange of something valuable between parties in a contract, such as an act, forbearance, or return promise. Executed consideration differs from executory consideration, which is consideration promised to be given in the future. For instance, if John promises to pay Jane £500 for painting his house and Jane has already completed the painting, the consideration is considered executed. Jane’s act of painting the house is the executed consideration, while John’s promise to pay $500 is his consideration. Another example of executed consideration is when a person pays for a product or service. The payment made is the executed consideration, while the product or service received is the consideration given by the other party.

What is the dictionary definition of Executed Consideration?
Dictionary Definition of Executed Consideration

Executed consideration refers to something that has already been given or done in exchange for a promise. This can include an act, a forbearance, or a return promise that motivates someone to engage in a legal act. For an agreement to be enforceable, consideration is necessary. It must be fair and reasonable given the circumstances of the agreement. However, past consideration, which is something given, done, or suffered in the past that supposedly supports a subsequent promise, is not considered valid consideration. Valuable consideration, on the other hand, refers to something of value given or promised by one party in exchange for the promise of the other. In parliamentary law, consideration is the process by which a deliberative assembly disposes of a motion.

Full Definition Of Executed Consideration

Consideration is a fundamental concept in contract law, essential for the formation of a binding agreement. It refers to the value exchanged between parties entering into a contract. Consideration can be of three types: executed, executory, and past. This overview focuses on executed consideration, examining its definition, legal principles, practical applications, and relevant case law within the context of British law.

Definition of Executed Consideration

Executed consideration occurs when a promise is made in exchange for an act that has already been performed. In other words, it is a consideration that has been completed at the time the contract is formed. This is in contrast to executory consideration, where a promise is made in exchange for a future act, and past consideration, which refers to an act performed before a promise is made and is generally not valid consideration.

Legal Principles Governing Executed Consideration

The doctrine of consideration is rooted in the need to distinguish between enforceable contracts and mere promises. The following principles are critical in understanding executed consideration:

  • Bargain Requirement: For consideration to be valid, there must be a bargain or exchange between the parties. The act performed (executed consideration) must be in exchange for the promise made.
  • Sufficiency and Adequacy: Consideration must be sufficient but need not be adequate. This means that the consideration must have some value in the eyes of the law, though it does not have to be equivalent in value to the promise received.
  • Legal Obligation: The act constituting the executed consideration must be something the promisee is not already legally obligated to do. If the act is already a legal duty, it cannot constitute a valid consideration.

Practical Applications of Executed Consideration

Executed consideration commonly arises in everyday transactions and contractual agreements. For example:

  • Sales Transactions: In a retail context, when a customer purchases an item, the payment made at the point of sale constitutes executed consideration for the retailer’s promise to transfer ownership of the goods.
  • Service Contracts: When a service provider performs a service at the request of a client, the performance of the service can be executed in consideration of the client’s promise to pay for the service.

Case Law on Executed Consideration

Several key cases illustrate the application and nuances of executed consideration in British law:

  1. Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256
    • In this landmark case, the court held that Mrs. Carlill’s use of the smoke ball as prescribed constituted executed consideration for the company’s promise to pay £100 if the product did not prevent influenza. Her act of using the product, as specified, was sufficient consideration to make the company’s promise binding.
  2. Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
    • This case involved a promotional scheme where chocolate wrappers were sent in as consideration for purchasing a record at a discounted price. The House of Lords held that the wrappers, though of trivial value, constituted sufficient executed consideration because they were part of the bargain.
  3. Lampleigh v Brathwait (1615) Hob 105
    • Although primarily discussed in the context of past consideration, this case is relevant as it illustrates that an act performed at the promisor’s request with an implied promise of payment can constitute valid executed consideration.

Exceptions and Special Considerations

While the general rule is that past consideration is not valid, there are exceptions where past acts can be treated as executed consideration under specific circumstances:

  • Previous Request Doctrine: If an act was performed at the request of the promisor with an understanding that it would be compensated, it can be considered a valid consideration. This is often cited in cases involving services rendered where payment was implied.
  • Continuing Obligations: In some cases, ongoing or continuous performance can transform what might seem like past consideration into executed consideration, especially if the performance is integral to the contract.
  • Implied Promises: Courts may infer a promise to pay for services rendered, even if the promise is not explicit, provided there is a clear expectation of payment based on the conduct and circumstances of the parties.

Limitations and Challenges

Despite its broad applicability, executed consideration is not without limitations:

  • Legal Sufficiency: The act performed must be legally sufficient. Acts of nominal or no value, or those already legally required, cannot constitute valid consideration.
  • Intent to Create Legal Relations: There must be an intention to create legal relations. Social or domestic arrangements, even if involving executed acts, may not constitute binding contracts if this intent is absent.
  • Mutuality: The principle of mutuality requires that consideration move from the promisee to the promisor. Gratuitous acts, where the promisor receives no benefit or the promisee incurs no detriment, typically do not meet this criterion.

Comparative Perspectives

Examining the treatment of executed consideration in other jurisdictions can provide additional insights:

  • United States: American contract law, governed by the Uniform Commercial Code (UCC) and common law, recognises similar principles of consideration. Executed consideration in the US also requires a bargained-for exchange and sufficiency.
  • European Civil Law Systems: Many European countries, following civil law traditions, do not require consideration for contract formation, focusing instead on the mutual consent of the parties. This contrasts with the common law requirement of consideration and highlights the unique position of executed consideration in British and other common law jurisdictions.

Conclusion

Executed consideration is a pivotal concept in British contract law, underpinning the enforceability of many everyday agreements. It ensures that promises supported by completed acts are legally binding, provided the acts are performed as part of a bargain, is legally sufficient, and there is an intention to create legal relations. Through key case law and practical applications, the principles governing executed consideration are well-established, though challenges and limitations persist. Understanding these nuances is essential for legal practitioners and individuals engaged in contractual arrangements.

In summary, executed consideration remains a cornerstone of contract law, balancing the need for enforceable agreements with the requirement for reciprocal value exchange. Its continued relevance underscores the enduring nature of consideration as a fundamental element of contract formation in British law.

Executed Consideration FAQ'S

Executed consideration refers to a promise that has been fulfilled or a contract that has been performed. It means that both parties have completed their obligations under the contract.

Once consideration has been executed, it cannot be revoked. Both parties have already fulfilled their obligations, and the contract is considered complete.

If one party fails to provide executed consideration as promised, it may be considered a breach of contract. The other party may have legal remedies available, such as seeking damages or specific performance.

Yes, executed consideration is necessary for a valid contract. It ensures that both parties have provided something of value and have fulfilled their obligations.

No, executed consideration can take various forms, including money, goods, services, or even a promise to do or refrain from doing something.

Yes, executed consideration can be provided by a third party if the contract allows for it. However, the consent of all parties involved is usually required.

No, executed consideration must be provided after the contract is formed. It is a result of the agreement between the parties.

No, executed consideration cannot be in the form of a past act. Consideration must be given in exchange for a promise, and a past act does not fulfill this requirement.

In some cases, executed consideration can be substituted with another form of consideration if both parties agree to the change. However, it is important to ensure that the substituted consideration is still of value and meets the requirements of a valid contract.

Executed consideration cannot be waived or modified without the agreement of both parties. Any changes to the executed consideration would require a new agreement or contract.

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This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 8th June 2024.

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