Consideration 

Australian law does not enforce every promise. It enforces bargains. Consideration is the price of the promise — something given or promised in return, which is what distinguishes an enforceable agreement from a gratuitous undertaking. A promise supported by nothing is, at common law, unenforceable however sincerely it was made.

The one formal exception is the deed: a promise made in a document executed as a deed binds without consideration, which is why gifts and some guarantees are put in that form.

What counts as consideration

Consideration must move from the promisee. The party seeking to enforce the promise must themselves have provided the price; it is not enough that someone else did. It must also be part of a genuine bargain: in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424,¹ producers who bought wool after a government subsidy announcement could not enforce the promised subsidy as a contract, because the announcement was never made in exchange for their purchases — acting in reliance on an announcement is not the same as providing consideration for it.

It may be:

• An act — doing something you were not otherwise bound to do.
• A forbearance — refraining from something you were entitled to do, including giving up a genuine legal claim.
• A promise — in a bilateral contract, each party's promise is the consideration for the other's. This is why an exchange of promises binds before either is performed.

Sufficient, not adequate

The law asks whether consideration is sufficient — that is, whether it has some value recognised by law — not whether it is adequate, meaning proportionate to what was received. Courts do not police the fairness of the exchange. A nominal sum can support a promise about something far more valuable.

This is deliberate. Parties are taken to be the judges of their own bargains, and inadequacy is left to the doctrines that exist for it — unconscionability, duress, undue influence — rather than corrected through consideration.

But sufficiency has limits. Something with no legal value at all will not do, and neither will a promise so illusory that the promisor has not actually committed to anything.

The two recurring problems

Past consideration

Consideration must be given in exchange for the promise, not before it. An act already completed, then followed by a promise to pay for it, is past consideration and does not support the promise — the promise looks like gratitude rather than bargain.

The distinction is often one of characterisation rather than chronology. Where the act was done at the promisor's request, and both parties understood at the time that it would be paid for, the later promise may be treated as fixing the amount of an arrangement that was always a bargain.

Existing legal duty

Performing something you are already legally bound to do is generally not consideration for a fresh promise, because the promisor receives nothing they were not already entitled to. This arises in three settings:

• A public duty already owed.
• A duty owed to a third party — where performance can be good consideration, since the promisor gains a direct right they did not have.
• A duty already owed to the same promisor, the hardest case, which is where the rule bites in practice.

That last situation is the classic part-payment problem: a promise to accept less than the sum owed is not, without more, supported by consideration. The law has been reluctant to extend that rule, and where a party obtains a genuine practical benefit from securing performance, courts have been willing to find consideration. Equitable estoppel now does much of the work here, and in Australia it operates independently of contract rather than as a gloss on consideration.

Applying this in a problem question

1. Identify the promise being enforced, and who is trying to enforce it.
2. Ask what that party gave or promised in return — and confirm it moved from them.
3. Check the timing: was it given in exchange for the promise, or already complete?
4. Check whether they were already bound to do it, and if so, to whom.
5. If consideration fails, consider whether estoppel or a deed provides another route.

Consideration is one of three requirements for formation. An agreement supported by consideration still needs an intention to create legal relations, and terms certain enough to enforce.

Where the authority sits

These principles are common law, developed case by case. Australian law has diverged from English authority in places — most importantly on estoppel — so English decisions should be treated as persuasive rather than governing, and checked against Australian appellate authority before being relied on.