Consideration

Definition

Consideration is a common-law requirement: a contract is only enforceable if each side provides something of value, such as money, goods, or a promise to act. It explains why a bare promise without anything in return is generally not binding under English or US law. Dutch civil law has no direct equivalent. The old causa (oorzaak) requirement was abolished, and a contract is binding on the basis of offer and acceptance and a lawful, determinable obligation.

Example

In a US contract, a company's promise to pay €10,000 is supported by the consultant's promise to deliver a report; each is consideration for the other.

Why this is a business risk

For businesses operating under English or US law, missing consideration can make a contract unenforceable, particularly when modifying an existing agreement without giving anything new in return. Dutch companies entering cross-border deals should be aware that their counterparts may insist on formal consideration language even when Dutch law does not require it.

How to manage it

• When contracting under English or US law, verify that both parties provide something of value; a nominal sum ("£1") is sufficient but must be genuine.
• For contract amendments under common law, include a recital of consideration or use a deed to avoid enforceability problems.
• If the governing law is Dutch, you can omit consideration language, but explain the difference to common-law counterparties to avoid confusion.