Texas Real Estate Contracts
4th Edition
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Chapter 3: Consideration
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Consideration, in general
• Consideration is simply the inducement to a
contract, often referred to as a bargained for
exchange between the parties to an
agreement.
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Benefit / Detriment
A
B
Benefit / Detriment
Both parties experience a benefit and a
detriment
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Types of Consideration
•
•
•
•
Promise
Performance
Money
Physical Exchange
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Promise as Consideration in Bilateral
Contracts
Gives / Loses Title
Seller
Buyer
Gives / Loses Money
Exchange of promises in a real estate sales
contract
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Performance as Consideration in
Unilateral Contracts
• Unlike the bilateral contract, the
consideration in a unilateral contract is a
promise given in exchange for performance.
• For example, a seller under a listing
agreement promises to pay a specified
commission in exchange for the broker’s
performance in bringing forth a ready,
willing, and able purchaser.
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Money as Consideration
• In a typical option under the standard
residential real estate sales contract, a
prospective purchaser may pay a fixed sum
for the option to terminate the contract for
the purchase and sale of real estate for any
reason within a specified time.
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--Nominal Consideration
• Nominal consideration is consideration that
bears no relation to the real value of the
contract.
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--Valuable Consideration
• Valuable consideration is consideration that
bears a substantial relation to the real value
of the contract.
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Types of Nonconsideration
• Gratuitous consideration
• Past consideration
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Gratuitous Consideration
• Where either party to the transaction intends
to make a gift, there is typically no detriment
induced and therefore there is no
consideration.
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Past Consideration
• Past consideration refers to an act
completed before the contract is created.
• Past consideration on an old transaction is
not consideration on a new transaction and,
therefore, cannot create a valid contract.
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--Preexisting Legal Duty
• The general rule is that the promise or
performance of a preexisting legal duty does
not constitute sufficient consideration for
the creation of a subsequent valid contract.
• Where additional consideration is combined
with the promise or performance of a
preexisting legal duty, this is sufficient to
create a valid enforceable agreement.
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Voidable Contracts
• A voidable contract is a contract that can be
avoided at the option of one party to the
contract.
• However, where a voidable agreement is
ratified, the new agreement is enforceable
without additional consideration.
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Alternatives to Consideration
Promissory Estoppel
• There must be a promise made to the
injured party.
• That promise must be calculated to induce
reliance by the injured party.
• There must be actual reliance on the
promise by the injured party.
• Some injustice may result if the agreement
is not enforced.
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