WHAT IS CONSIDERATION IN A SALE OF GOODS CONTRACT?

Section 3 of the Sale of Goods Act defines a contract of sale of goods as one where property is transferred for a money consideration called the price. Consideration is anything of value promised to another in exchange of what the other is providing when making a contract. I use the word promised because though Section 29 of the Sale of Goods Act provides that delivery and payment are concurrent conditions, in that the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods; the two do not have to happen at the same and their happening does not affect the time of passing of property. Section 19 of the Sale of Goods Act provides that where there is a sale of ascertained goods, property passes at such time as the parties intend it to pass. It therefore follows that consideration is anything of value promised to be given, and the time of giving it depends on the intention of parties.

A sale of goods contract is characterized by a money consideration. It should be money. It has to have an economic value though it need not be ‘adequate’, and it has to move from the buyer to the seller.

The question then is; what is money?

The Black’s Law Dictionary defines money as a generic term that embraces every description of coin or bank-notes recognized by common consent as a representative of value in effecting exchanges of property or payment of debts. It goes ahead to quote the case of Hopson versus Fountain 5 Humph Tenn 140 in which the court stated “Money is used in a specific and also in a general and more comprehensive sense. In its specific sense, it means what is coined or stamped by public authority, and has its determinate value fixed by governments. In its more comprehensive and general sense, it means wealth.”

The court in Moss v Hancock ([1899] 2 QB 111, England), in defining money sated;

"Money ... (is) that which passes freely from hand to hand throughout the community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it to any other use than in turn to tender it to others in discharge of debts or payment of commodities."

Similarly, the court in Re Alberta Statutes ([1938] SCR 100) defined money as

"Any medium which by practice fulfills the function of money and which everyone will accept as payment of a debt is money in the ordinary sense of the word even though it may not be legal tender."

If the parties to a contract have not fixed a price, their agreement cannot fall under the sale of goods. The consideration is a sum of money combined with another thing; it will still be good consideration. As was held in Chappall & Co. versus Nestle Co Ltd (1960) money plus chocolate wrappers would amount to good consideration because part of the consideration was in the form of money.

Objects other than money will not form a good consideration and a contract based on consideration of any kind other than money will not be enforceable in court. An example is the case of Bret v JS & Wife (1600) Cro Eliz 756 where the court held that good consideration in law did not include natural affection.

Consider also the case of White v Bluett (1853) 23 LJ Ex 36, where a father lent a son money and told the son that if he stopped complaining about how the father wanted to distribute his property, then he did not need to refund the money. The son pleaded in court that “not complaining” was good consideration and he therefore did not have an obligation to refund the money, the court held;

“The plea is clearly bad. …………….the father said, if you will promise me not to complain, I will give up the note. If such a plea as this could be supported, the following would be a binding promise: A man might complain that another person used the public highway more than he ought to do, and that other might say, do not complain, and I will give you five pounds. It is ridiculous to suppose that such promises could be binding…………….. In reality, there was no consideration whatever. The son had no right to complain, for the father might make what distribution of his property he liked; and the son's abstaining from doing what he had no right to do can be no consideration.”