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.

13 thoughts on “Nominal Consideration Under English Law”

  1. Seems to me that nominal consideration should be adequate to support a nominal promise, as in the old Soviet-era saying “they pretend to pay us and we pretend to work.”

  2. If the doctrine were being written on a clean slate today, it would probably not require consideration along with a mass of fictitious considerations that are functional exceptions. A fresh take might be along these lines:

    ‘A promise will not be legally binding unless there is consideration, detrimental reliance, estoppel, seal, unjust enrichment, waiver, or other similar or dissimilar sufficient reason to enforce the promise. A nontrivial promise otherwise enforceable will be legally binding if it is in writing, signed by the promisor, and contains the promisor’s statement to the effect that he intends the promise to be legally binding’.

    Under that regime, most drafters would lunge for the safe harbor and just have the parties say they intend their promises to be legally binding. No more backup, fictional, nominal, pretense, or sham consideration.

    In the world as it is, Ken’s recommendations shine.

    If we’re going to dip into Soviet-era humor: Q. What great world historical event took place on April 22, 1874? A. Lenin turned four years old!

  3. Ken:

    I think the problem is that the English have grokked that consideration is usually a stupid way of figuring out whether a contract is enforceable, so have allowed a transparent fiction to fix the problem without actually changing the law. Here we have a partial solution in the UCC, which allows modification of an existing contract without consideration, so long as it was actually bargained for. Outside of that, I don’t think we have a way of overcoming the fact that some transactions don’t have consideration, but are bargained for and expected to be enforced.


    • I think you are essentially right that consideration is, in effect, treated as an indication of intent to be bound – no consideration means no such intent, and therefore no contact.

      It is very typical of English common law – organic and possibly odd, but it is in fact a very clear and effective rule to work with.

        • Whether a contract exists is, in all jurisdictions, a matter of policy – the most important thing is to have clear rules that minimise disputes. It isn’t really about contractual interpretation.

          In situations where nominal consideration is used to form a contract, there is no pretence that a fair deal had been struck – that simply isn’t a requirement of English law, so there is no need to pretend anything.

          The requirement is that there should be some mutuality – any mutuality – just to ensure that litigants cannot attempt to enforce bare promises on assertions of the other party’s intent. You don’t need adequacy of consideration for that purpose.

          • The notion of adequate consideration is different from nominal consideration. I can understand courts not wanting to get into the business of deciding whether a deal is fair. But with nominal consideration, there is no bargain. It follows that there’s no meaningful distinction between nominal consideration and zero consideration. English courts should accept that instead of endorsing a bogus distinction.

            By the way, I read, and responded to, your comment rather quickly. In my initial response, “it’s” refers to nominal consideration, not consideration generally.

        • Wouldn’t it be kinder to say that it’s a fiction that courts use when a directer way of doing justice isn’t available, as when English courts could not overrule precedents and therefore developed to vertiginous heights the art of distinguishing ‘unhelpful’ precedents?

          Besides, not all pretences (fictions) are intellectually dishonest — think of corporations being legal persons. Is a fiction openly established by statutes dishonest because it’s a fiction? You judge more harshly than is required to cover the facts.

    • Yes, but that’s not idea either. Given the formalities involved, it’s like saying, “Wear this green hat when you sign the contract and you won’t need consideration!”


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