MBE Rules · Contracts
Adequacy of consideration
The rule
Courts do not police the adequacy of consideration — even a peppercorn suffices. Exception: where the recited consideration is a sham (never actually exchanged), or where gross inadequacy combined with other factors signals fraud or duress.
In plain English
Courts don't care if the deal seems unfair or one-sided, as long as something of value is exchanged. But if the exchange is fake or involves trickery, they might step in.
Worked example
The buyer agrees to pay $1 for a car. The court won't question the fairness of the price. However, if the $1 was never meant to be paid and the seller was pressured, the court might find it invalid.
Memory hook
Peppercorn power: size doesn't matter. Even tiny consideration counts unless it's a sham or signals fraud.
The trap
Students think: consideration must be substantial. Wrong, because any consideration suffices unless it's a sham or fraudulent. The actual test is whether there was any exchange, not its size.
How examiners test it
The MBE loves: party claims contract invalid due to small consideration. Trap: students assume inadequacy voids it. Look for evidence of fraud or sham, not size of consideration.
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