Nominal Consideration Under English Law

My recent article debunking the recital of consideration (here) explains the terms “nominal consideration” and “sham consideration” (footnotes omitted):

Such a recital of consideration might seek to express what the parties have actually bargained for. If instead what is being offered wasn’t bargained for as part of an exchange, it’s a pretense. In that case, the recital is said to provide for “nominal” consideration, usually a small amount of money. And if the parties never intended for the amount stated—whether bargained for or not—to be paid, that too involves pretense, and the recital is said to provide for “sham” consideration.

It goes on to note that under U.S. law, “Because both nominal and sham consideration are a pretense, they don’t generally constitute consideration.”

But what of English law? I got me an extract of Chitty on Contracts, the inevitable English authority on contract law. My extract is from the 31st edition. Although my copy is so grainy as to suggest that I was dealing with some samizdat publication, I’m comfortable relying on it, as the 32nd edition has only just rolled off the production line.

Here’s what Chitty para. 3–019, 3–020 says about nominal consideration:

The rule that consideration need not be adequate makes it possible to evade the doctrine of consideration in the sense that a gratuitous promise can be made binding by giving a nominal consideration, e.g. £1 for the promise of valuable property, or a peppercorn for a substantial sum of money. Such cases are merely extreme examples of the rule that the courts will not judge the adequacy of consideration.

It is not normally necessary to distinguish between “nominal” and “inadequate” consideration, since both equally suffice to make a promise binding.

So under English law, nominal consideration is enough to support a contract. In other words, English courts give legal effect to what is a pretense. Bravo! *sarcastic slow clap*

Treatment of nominal consideration can join treatment of endeavours provisions (here) and represents and warrants (here) in the English-contract-interpretation hall of shame.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.