Consideration in Contracts

The legal requirement for Consideration in Contact

Dhillon v Grand Empire Banquet and Convention Centre, 2016 CanLII 51828 (ON SCSM)

[24] It is trite law that one of the main building blocks of a legally binding contract is “consideration.” Consideration can be anything of value which each party to a legally binding contract must agree to exchange if the contract is to be valid. If only one party offers consideration, the agreement is not legally a binding contract. In other words, in order for parties to be able to enforce a promise, they must have given or promised something in exchange or return for the promise.

Past Consideration not Valid

Healthy Lifestyle Medical Group Inc. v. Chand Morningside Plaza Inc., 2019 ONCA 6 (CanLII)

[7] As noted, the motion judge observed that the defence that past consideration is not valid consideration could have been a genuine issue for trial, but she refused to consider it. In our view she erred. The motion judge did not consider the principles by which a court assesses the adequacy of pleadings. In considering whether a pleading discloses a reasonable defence, a court is obliged to read the pleading generously to allow for drafting deficiencies, and if the defence has some chance of success, it must be permitted to proceed. A statement of defence is required to contain the material facts on which a party will rely. Here the facts on which the legal argument about consideration would be based were alleged.

King Road Paving and Landscaping Inc. v Plati, 2017 ONSC 557 (CanLII)

[65] Given these conclusions I do not have to consider whether the price increase in the second or third contract would be enforceable even if the defendants had agreed to the increase. Where parties agree to an increased price there must be new consideration because “past consideration is not good consideration”. For example, in Gilbert Steel Ltd. v. University Construction Ltd. (1976) 1976 CanLII 672 (ON CA), 12 O.R. 19; 67 D.L.R.( 3d) 606 (Ont. C.A.), a steel supplier, having contracted to supply a contractor with steel at a specified price, in the course of a contract asked a higher price for the same steel. The contractor, who urgently needed the steel, agreed. The steel was supplied, but the contractor refused to pay the increased price. The steel supplier sued for the increased amount. His action failed on the ground that the supplier had given no consideration for the contractor’s promise to pay an increased price for the steel.