Define: Inadequate Consideration

Inadequate Consideration
Inadequate Consideration
Quick Summary of Inadequate Consideration

Inadequate consideration occurs when something given or promised in exchange for a promise is not fair or acceptable within the terms of the agreement. Consideration is anything that inspires someone to undertake something, particularly to engage in a legal action. It could be an act, a forbearance, or a return promise. An agreement must contain consideration or a substitute, such as promissory estoppel, in order to be enforceable. Adequate consideration is defined as consideration that is fair and reasonable given the circumstances of the agreement. Valuable consideration is defined as consideration that is legally binding and either provides a pecuniarily measurable benefit to one party or imposes a pecuniarily measurable cost on the other.

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

Inadequate consideration refers to a situation in contract law where the value exchanged between parties in a contract is deemed to be unfairly disproportionate. Consideration is an essential element of a valid contract, representing the benefit received or promised by each party to the agreement. For a contract to be legally enforceable, there must be a mutual exchange of consideration, meaning both parties must give something of value.

When consideration is deemed inadequate, it implies that one party is not receiving a fair exchange for what they are giving up or promising in the contract. This can lead to legal challenges regarding the validity of the contract. Courts may invalidate contracts with inadequate consideration on the grounds of unfairness or a lack of meeting the basic requirements for contract formation.

However, it’s essential to distinguish inadequate consideration from lack of consideration. Inadequate consideration involves an exchange that is disproportionate in value, whereas lack of consideration means there was no exchange of value at all, which can render a contract void or unenforceable.

Full Definition Of Inadequate Consideration

Inadequate consideration refers to a situation in contract law where the value exchanged between parties is not deemed fair or reasonable. Consideration is a fundamental element of a contract, representing what each party gives up or agrees to give up in exchange for the promises of the other party. For a contract to be enforceable, consideration must be present and adequate, meaning it must have some value in the eyes of the law.

When consideration is deemed inadequate, it means that what one party is offering or giving up is significantly less valuable compared to what the other party is receiving. In such cases, the contract may be vulnerable to being deemed unenforceable or voidable at the discretion of the affected party. Courts may intervene if there’s evidence of gross inequality in the value exchanged, indicating potential unfairness or exploitation.

However, mere inequality in the value exchanged doesn’t necessarily render a contract unenforceable. Courts generally refrain from scrutinising the adequacy of consideration as long as there’s some form of value exchanged and the parties have freely entered into the contract without duress, fraud, or undue influence. Nonetheless, in cases where the inadequacy of consideration is so extreme as to shock the conscience of the court or where there are other indications of unfair dealing, courts may intervene to protect the disadvantaged party.

In summary, inadequate consideration refers to a situation where the value exchanged in a contract is so disproportionate that it may render the contract unenforceable or voidable under certain circumstances.


In the context of contract law, consideration is a fundamental element required for the formation of a valid and enforceable contract. Consideration refers to something of value that is exchanged between the parties involved. This can take the form of money, goods, services, or a promise to do or refrain from doing something. The principle of consideration ensures that each party receives a benefit or suffers a detriment, creating mutual obligations. However, issues often arise regarding the adequacy of consideration. This overview examines the concept of inadequate consideration under British law, its legal implications, and relevant case law.

Definition and Importance of Consideration

Consideration is defined as “some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other” (Currie v Misa [1875] LR 10 Ex 153). It serves to distinguish enforceable contracts from mere promises or social agreements.

The doctrine of consideration is integral to the enforceability of contracts in British law, acting as evidence that the parties have entered into a binding agreement. Without consideration, a contract is generally considered void or unenforceable, except in certain cases involving deeds or promissory estoppel.

Adequacy vs. Sufficiency of Consideration

British law distinguishes between the adequacy and sufficiency of consideration. Sufficiency implies that the consideration must have some value in the eyes of the law, even if it is minimal. Adequacy, on the other hand, refers to the comparative value of the consideration exchanged between the parties.

In general, British courts do not require consideration to be adequate, as long as it is sufficient. This principle was established in the case of Thomas v Thomas [1842] 2 QB 851, where the court held that “consideration need not be adequate, but it must be sufficient.” The court does not typically assess the fairness of the bargain or the relative value of the exchanged items, provided that something of value has been exchanged.

Inadequate Consideration: Legal Perspectives

Inadequate consideration arises when the value exchanged in a contract appears grossly disproportionate. While the courts do not generally evaluate the adequacy of consideration, extreme inadequacy may raise issues of unfairness, fraud, duress, or undue influence. These factors can lead to the contract being set aside or deemed unenforceable.

Unconscionability and Inadequate Consideration

The concept of unconscionability plays a crucial role in cases of inadequate consideration. A contract may be deemed unconscionable if one party exploits their superior bargaining power to impose unfair terms on the other party. This doctrine aims to prevent exploitation and protect vulnerable parties.

In Lloyds Bank Ltd v Bundy [1975] QB 326, the court recognized the principle of unconscionability, where Lord Denning MR highlighted the importance of preventing unfair bargains obtained through unequal bargaining power. Although consideration was not the central issue, the case illustrates the court’s willingness to intervene in cases of significant disparity in bargaining power, which may often involve inadequate consideration.

Fraud, Duress, and Undue Influence

Inadequate consideration may also be indicative of fraud, duress, or undue influence. If a party is coerced into entering a contract or deceived about the nature of the consideration, the contract may be voidable. British law seeks to ensure that contracts are entered into freely and with informed consent.

In Williams v Bayley [1866] LR 1 HL 200, a father was coerced into guaranteeing his son’s debts through threats and undue influence by the bank. The House of Lords set aside the guarantee, emphasizing that genuine consent is essential for a valid contract. Although the case did not hinge solely on consideration, it underscores the interplay between inadequate consideration and factors like duress and undue influence.

Case Law on Inadequate Consideration

Several key cases illustrate the treatment of inadequate consideration under British law:

Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87

In this case, Nestlé offered records in exchange for three chocolate bar wrappers and a small sum of money. The House of Lords held that the wrappers constituted part of the consideration, despite their negligible value. This case reaffirmed the principle that consideration need not be adequate but must be sufficient.

White v Bluett [1853] 23 LJ Ex 36

A father promised to forgive his son’s debt if the son stopped complaining about the distribution of the father’s estate. The court held that the son’s promise lacked consideration, as ceasing to complain did not constitute a legal detriment or benefit. This case highlights that the consideration must have some tangible value or legal effect.

Stilk v Myrick [1809] 2 Camp 317

In Stilk v Myrick, sailors who agreed to continue working after some crew members deserted were not entitled to additional wages, as they were already contractually obliged to complete the voyage. The court ruled that performing an existing duty did not constitute valid consideration for a new promise. This case underscores that the consideration must involve a new or additional obligation.

Statutory Interventions and Consumer Protection

While the common law principles provide a framework for assessing consideration, statutory interventions have also played a role in addressing issues related to inadequate consideration. Consumer protection legislation aims to prevent unfair practices and ensure fair treatment in contractual relationships.

Consumer Rights Act 2015

The Consumer Rights Act 2015 consolidates and simplifies consumer protection laws in the UK. It includes provisions that address unfair contract terms and practices. Although the Act does not directly address inadequate consideration, it provides a mechanism for challenging unfair terms, which may be linked to disproportionate consideration.

Section 62 of the Act states that unfair terms are not binding on the consumer. A term is considered unfair if it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. This provision allows courts to scrutinize contracts for fairness, indirectly addressing issues of inadequate consideration in consumer transactions.

Equitable Doctrines and Remedies

Equitable doctrines and remedies provide additional avenues for addressing inadequate consideration and related issues in contractual disputes. These principles aim to achieve fairness and justice in contractual relationships.

Promissory Estoppel

Promissory estoppel is an equitable doctrine that prevents a party from going back on a promise, even if the promise lacks consideration. This principle is invoked when one party relies on a promise to their detriment, and it would be unjust to allow the promisor to renege on the promise.

In Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, the court enforced a promise to reduce rent during wartime, despite the lack of consideration. This case illustrates how equitable principles can provide remedies in situations where traditional consideration rules may fall short.

Specific Performance and Rescission

Equitable remedies such as specific performance and rescission can also address issues of inadequate consideration. Specific performance compels a party to perform their contractual obligations, while rescission allows the contract to be set aside.

In cases of inadequate consideration involving fraud, duress, or undue influence, courts may grant rescission to restore the parties to their pre-contractual positions. This remedy aims to undo the effects of an unfair or exploitative bargain.

Conclusion

The concept of inadequate consideration in British law involves a complex interplay between legal principles, case law, and equitable doctrines. While the courts generally uphold the principle that consideration need not be adequate, significant disparities in consideration may raise issues of unconscionability, fraud, duress, or undue influence. Statutory interventions and consumer protection legislation further ensure fairness in contractual relationships.

Ultimately, the courts aim to balance the need for contractual certainty with the imperative to prevent exploitation and ensure fair dealing. Inadequate consideration, though not a standalone ground for invalidating contracts, serves as a crucial factor in assessing the overall fairness and enforceability of contractual agreements. Through a combination of common law principles, equitable doctrines, and statutory protections, British law seeks to uphold the integrity of contractual relationships and safeguard the interests of the parties involved.

Inadequate Consideration FAQ'S

Inadequate consideration refers to a situation where the value exchanged between parties in a contract is deemed unfair or unreasonable.

Consideration is something of value exchanged between parties to a contract, typically the price paid for goods or services or a promise to do or refrain from doing something.

In certain cases, a contract may be voidable if the consideration exchanged is so inadequate that it renders the contract unfair or unconscionable.

Consideration is generally considered adequate if it has some value in the eyes of the law and is proportionate to what is being promised in return. Factors such as fairness, equality of value, and whether the parties entered into the contract freely are considered.

Examples include situations where one party promises to sell a valuable asset for a token amount or where one party agrees to perform a substantial service for a nominal fee.

Depending on the circumstances, a court may refuse to enforce the contract, allow the disadvantaged party to rescind or void the contract, or provide other equitable relief.

In contracts of adhesion, where one party has significantly more bargaining power than the other, courts may closely scrutinise the adequacy of consideration to ensure fairness and prevent exploitation.

Yes, if a party believes that the consideration exchanged in a contract is inadequate, they may challenge the contract’s enforceability in court.

Yes, inadequate consideration refers to situations where the value exchanged is unfairly disproportionate, while lack of consideration means there was no value exchanged at all, which typically renders a contract unenforceable.

Parties can ensure fairness in their contracts by negotiating terms in good faith, disclosing all relevant information, and ensuring that the consideration exchanged is reasonably proportionate to the promises made. Seeking legal advice before entering into a contract can also help mitigate risks associated with inadequate consideration.

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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: 9th June 2024.

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