CIPS L4m3 Commercial Contracting · Free Practice Question Easy
Question 15
What is always considered as a valid consideration?
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A
Implied consideration
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B
Promise to perform over and above an existing obligation
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C
Past consideration
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D
Promise given to a third party
Reveal correct answer
Correct answer: B
Explanation
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
- Past consideration is something that has already been done or given. This cannot act as consideration
- Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
- A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
- A promise to perform over and above an existing obligation: This is always consideration
Reference:
- Consideration & Promissory Estoppel
- CIPS study guide page 36-40
LO 1, AC 1.2
Discussion
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