CONSIDERATION

I.

II.

Elements of Consideration
A. Legal value
1. Promisee does, or agrees to do, something he or she had no prior
legal duty to do
a. Performance
b. Forbearance
c. Promise to perform
d. Promise to forbear
2. Amount or adequacy of consideration is unimportant
3. I.e., courts generally do not cancel a contract based on the
inequality of the exchange
B. Bargained for and given in exchange for an act or promise
Exchanges That Fail to Meet Consideration Requirements
A. Illusory promises
1. Promise is illusory if
a. Does not bind the promisee to do or refrain from doing
anything
b. I.e., I promise to mow your lawn if I feel like it.
2. Promise is valid if
a. Output contract: one party promises to buy all the goods
another party produces
b. Requirements contract: one party promises to buy all the
goods that it needs
i.
A partys demands are limited to those quantity
needs that are based on good faith
ii.
A party can increase the amount if it is not
unreasonably disproportionate to a quantity estimate
in the contract
B. Preexisting duties
1. Public duties: everyone has a duty to obey the law and refrain from
committing crimes or torts
2. Contractual duties
a. Under common law
i.
An agreement to modify an existing contract
requires new consideration to be binding, such as
a) Greater money
b) Faster service
ii.
Unless the modification resulted from
unforeseen circumstances that
a) A party could not reasonably be expected to
have predict; and

III.

b) Makes that partys performance far more

difficult than the parties originally
anticipated
b. Under UCC
i.
Does not require new consideration to modify a
contract for the sale of goods
ii.
Only requires good faith and fairness
iii.
However, if the original agreement requires a
modification to be in writing, any oral agreement is
unenforceable
3. Agreements to settle debts
a. If a debt is due and undisputed, a creditors promise to
discharge the debt upon receipt of part payment is
unenforceable for lack of consideration
b. However, if a debt is not due or is disputed, a creditors
promise to discharge it will be enforceable (settlement of
the debt = accord and satisfaction)
4. Forbearance to sue: an agreement to refrain from suing can be
valid consideration
C. Past consideration
1. An act or other benefit given in the past that was not given
exchange for the present promise is not valid consideration
2. Promises made to satisfy a preexisting moral obligation are
unenforceable
Exceptions to the Consideration Requirement
A. Promissory estoppel: donative promises that are detrimentally relied upon
will be enforced absent consideration, such as
1. Gratuitous agency promises
2. Promises of bonuses or pensions
3. Promises of gifts of land
B. Promises to pay debts no longer enforceable
1. Debts barred by the statute of limitations
a. State statutes often prohibit suit after the passage of a
certain amount of time
b. Many states enforce a new promise to repay debts for
which creditors can no longer sue due to statutes of
limitations
2. Debts barred by bankruptcy discharge
a. Most states enforce a promise to repay the debts without
consideration
b. Promise must be made prior to the date of discharge and
can be revoked for up to 30 days after becoming
enforceable
C. Charitable subscriptions: promises to make gifts for charitable or
educational purposes are enforced without consideration if the donee has
acted in reliance on the gift