Chapter 11
Contracts: Consideration
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Introduction
 Consideration is legal value given in return for a
promise or performance.
 Must have something of legal value or sufficiency.
 Must be a bargained-for exchange.
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§1: Elements of Consideration
 Consideration for a promise must be either:
 Legally detrimental to the promisee, or Legally
beneficial to the promisor.
“Legal Value”:
 Promise,
 Performance, or
 Forbearance.
Case 11.1: Hamer v. Sidway (1891).
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§2: Adequacy of Consideration
 A Court will not question the fairness of the
bargain if legally sufficient.
 Law does not protect a person from entering into an
unwise contract.
 In extreme cases, a court may find that a party lacks
legal capacity or that contract was unconscionable.
Case 11.2: Powell v. MVE Holdings (2001).
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§3: Agreements That Lack
Consideration
 Preexisting Duty.
 A promise to do what one already has a legal duty to do
does not constitute legally sufficient consideration.
 Exceptions:
• Unforeseen Difficulties.
• Recession and New Contract.
 Past Consideration is no consideration because the
bargained-for exchange element is missing.
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§4: Problem Areas
Concerning Consideration
Uncertain Performance.
Settlement of Claims.
Promises enforceable without consideration.
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Uncertain Performance
 Illusory Promises.
 Promisor has not definitely promised to do anything
(no promise at all).
Option-to-Cancel Clauses.
Requirements and Output Contracts.
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Settlement of Claims
Debtor offers to pay a lesser amount than the
creditor purports to be owed.
Accord and Satisfaction.
 Liquidated Debt.
• Amount has been ascertained, fixed, agreed on, settled, or
exactly determined.
 Unliquidated Debt.
• Parties give up legal right to contest the amount in dispute,
and thus consideration is given.
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Settlement of Claims [2]
Release bars any further recovery beyond the
terms stated in the release.
 Case 11.3: Mills v. Berlex Laboratories (1999).
Convenant not to Sue is an agreement to
substitute contractual obligation for some other
type of legal action based on a valid claim.
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Promises Enforceable
Without Consideration
Promises to Pay Debt Barred by a Statute of
Limitations.
Detrimental Reliance and Promissory
Estoppel:




Must be definite promise.
Promisee must justifiably rely on the promise.
Reliance is substantial.
Justice will be served by enforcing promise.
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Law on the Web
Contract Case Law at Cornell U.
New Hampshire’s Consumer Protection.
Legal Research Exercises on the Web.
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