In English law and other countries with similar common law systems, a legal contract requires each party to provide something in return. In other words, each party will give something valuable to the other party in order for the contract to be considered binding. [3] The situation is different for contracts within the civil courts, since such nominal consideration can be characterized as a disguised gift. [4] Another common example is the English practice of „peppercorn rent“, the nominal rent for real estate, land or buildings. If a lease is entered into and the owner of the property wants it to be rent-free, it is normal to charge a small amount as „pepper rent“, because if the landlord wants to rent the property, he must charge rent so that there is a consideration for both parties. In addition, pepper rent is often used as a form of nominal ground rent where a (potentially substantial) premium has been paid even at the beginning of a long-term lease of, say, 99 or 125 years (a „virtual property“). [9] The notional collection of annual pepper rent helps maintain a formal relationship between the two parties between the landlord and tenant, thereby eliminating the risk of an adverse property claim by the tenant if no consideration is paid for an extended period of time. [10] Add peppercorn rentals to one of your lists below or create a new one. In legal parlance, a peppercorn is a metaphor for a very small cash payment or other nominal consideration used to meet the requirements of creating a legal contract. It is presented in Chappell & Co Ltd v. Nestlé Co Ltd ([1960] AC 87) where it is stated that „a peppercorn does not cease to be a good consideration when it is found that the Promising does not like pepper and will throw it away“.

[1] [2] The Sevenoaks Vine Cricket Club in Sevenoaks, England, leases the Vine Cricket Ground to Sevenoaks City Council for an annual rent of a peppercorn. It`s been many years since the club paid a peppercorn to rent the pavilion. In return, the Council gives Baron Sackville a new cricket ball each year when asked. [15] [16] A nominal or nominal rent (e.g. peppercorn, red rose, £1.00) paid in exchange for entering into a legally binding lease and creating a legal relationship between landlord and tenant. A peppercorn rent is sometimes quoted in original physical goods rather than in money. For example, many buildings in Covent Garden in London were rented for „a red apple and a flower pole“,[11] the National Coastwatch station at St. Albans Head occupied buildings on the Encombe estate in exchange for „one crab a year if desired,“[12] while the Isles of Scilly Wildlife Trust leased unleased land in the Isles of Scilly to the Duchy of Cornwall for one daffodil per year.

[13] Thus, in order for an essentially unilateral contract (such as a gift) to always be valid and binding, the contract is usually drafted in such a way that one party renounces something of value, while the other party gives a symbolic sum – a pound, a dollar or literally a peppercorn. Peppercorn payments are sometimes used when selling a struggling business whose net worth may be negative. If a party agrees to take it over and assume its liabilities and assets, the seller may effectively agree to make a large payment to the buyer. But the buyer still has to make a payment for the company, even if only slightly, to prove that both parties have taken it into account. [7] A dried berry of black pepper. In law, a metaphor for a low or nominal payment, which is all that is necessary for the counterparty requirement to benefit from a binding contact. Something valuable. In English law, the reservation of a purely nominal rent in a lease is sometimes expressed as a provision for the payment of a peppercorn. The main campus of the University of Bath was leased for 999 years by the then Bath City Council.

Each year, a peppercorn is presented by the university treasurer to the President of Bath and North East Somerset Council as rent (but also to promote the relationship between „city and dress“). [17] The Masonic Lodge of St. George`s, Bermuda, rents the Old State House as a lodge for the annual sum of a single peppercorn presented to the Governor of Bermuda on a velvet cushion on a silver platter in an annual ceremony since 1816 on or about April 23. [14] A peppercorn is also used in more balanced contracts, where one party wants to hide how it is paid. For example, since real estate contracts are generally public affairs, the buyer of a home may not want to indicate the exact amount of payment on the contract. However, a specific payment must be stated in the contract, otherwise the contract will be considered null and void for lack of consideration. Thus, the contract can be drafted to reflect that the house is sold in exchange for „ten dollars and other good and valuable considerations.“ The ten dollars are the „peppercorn“ that provides concrete consideration and guarantees the validity of the contract, while the amount actually paid for the house is hidden and designated only as „other good and valuable consideration“. [8] It is often used in place of a ground lease or when the lease is intended to be essentially „rent-free“, and it is common when a premium is payable on the lease, although it is generally only found in older leases. Theoretically, rent can be charged, but in practice there is no rent to pay and the landlord does not have to bother to collect it. However, courts will not normally ask questions about the relevance or relative value of the consideration provided by each party.

[5] Thus, if a contract requires one party to give up something of great value while the other party renounces something much less valuable, then it is generally considered a valid contract, even if the exchange of value greatly favours one party.