LEGAL PRINCIPLE: CONTRACT LAW — Consideration — Adequacy of Consideration — Inadequacy Not a Ground to Avoid Contract
PRINCIPLE STATEMENT
Consideration must be real but need not be adequate. Gross inadequacy may amount to evidence of fraud, but not a ground to avoid a contract. A sale at a price not ridiculous or inadequate cannot be challenged.
RATIO DECIDENDI (SOURCE)
Per Iguh, JSC, in Spasco Vehicle and Plant Hire Company Limited v. Alraine (Nigeria) Limited (1995) NLC-1641989(SC) at p. 16; Paras. A–C.
"Consideration must be real but need not be adequate, although a patently or grossly inadequate consideration may in an appropriate case amount to strong evidence of fraud. Where the appellant itself valued the crane at N50,000.00 in February 1983, a sale for N40,000.00 four years later after use cannot by any stretch of the imagination be described as ridiculous or inadequate."
EXPLANATION / SCOPE
The adequacy of consideration is not a ground to avoid a contract. The law does not inquire into whether the consideration is sufficient, only whether it exists. Gross inadequacy may indicate fraud, but mere inadequacy is insufficient. The principle is based on freedom of contract. Parties are free to make bad bargains. The court will not intervene unless fraud or unconscionability is shown. The rule applies to all contracts. The party challenging the contract must prove fraud or undue influence. The principle promotes contractual certainty. The court will enforce the contract as made.
