Revisiting the Traditional Recital of Consideration

I’d like to revisit an aspect of the traditional recital of consideration.

I mentioned in a footnote in my first book, Legal Usage in Drafting Corporate Agreements, that in some jurisdictions a recital of consideration will establish a rebuttable presumption that the contract in question is supported by consideration. An inquiry from a reader served to remind me that MSCD doesn’t mention this principle. That’s something I’ll remedy in the third edition, but it’s of no practical significance for purposes of determining how to address the issue of consideration in a contract.

That’s because any rebuttable presumption established by the traditional recital of consideration should be of no practical significance. Whether a business contract was supported by consideration is a question of fact. If there’s zero evidence for consideration, the rebuttable presumption isn’t going to be of any use, because it’s a long-established principle that, to quote § 71 comment b of the Restatement (Second) of Contracts, there is no consideration where there is “a mere pretense of bargain … as where there is a false recital of consideration or where the purported consideration is merely nominal.” In any dispute, any evidence as to consideration, or the lack of any evidence, will be more important than the rebuttable presumption.

Furthermore, having the presence of a traditional recital of consideration in a contract establish a rebuttable presumption makes no sense. Almost all contracts contain a traditional recital consideration; drafters include it without giving it any thought. It follows that courts shouldn’t accord it any significance—if something is in essentially every contract, it might as well be in no contract.

But here’s what really matters for drafters: Usually the consideration—payment of money, performance of services, whatever—is evident on the face of the contract, meaning that consideration doesn’t have to be otherwise addressed. But if consideration is an issue in a contract, it would be the height of drafting recklessness not to address it explicitly and instead rely on a traditional recital of consideration.

So if the consideration for a contract is, one way or the other, clearly stated, a traditional recital of consideration and the associated mumbo-jumbo (in consideration of the premises; good and valuable consideration; receipt and sufficiency; and so on) would just gum up the works.

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.