Definitions

There are two basic elements of consideration: legal detriment, and bargained-for exchange.

Consideration can take the form of:

• a return promise to do something;
• a return promise to refrain from doing something;
• the actual doing of some act; or
• refraining from doing some act.

Pre-Contractual Liability Based upon Detrimental Reliance

If a subcontractor submits an offer to perform a subcontract to a contractor knowing that the contractor will rely on that offer when making a bid to the contracting authority, then under the doctrine of promissory estoppel, the subcontractor may not revoke his offer until the contractor has had an opportunity to accept, if the contractor is the successful bidder.

Bargain and Exchange

The concept of bargain is the essence of consideration.  If a party asks for something that he wants, even though it does not directly benefit him, and promises something in return, there is valid bargained-for consideration.

An illusory promise, one which gives the party the unilateral right to do anything they want, is not valid consideration.

A gift contingent on a minor condition which is not bargained for by the donor, such as "I will give you a birthday present if you come down and pick it up," does not amount to a contract supported by consideration.

Adequacy of Consideration

The value of what a party promises or requests is irrelevant for purposes of determining if there is valid consideration.

If a party to a contract performs the promise he makes, he is entitled to enforce the contract according to its terms, even if he is getting far more than he has given.

Moral Obligations; Detrimental Reliance

One party's promise to make a gift is enforceable under the doctrine of promissory estoppel if (1) the donor-promisor knows that the promise will induce substantial reliance on the part of the promisee, and (2) failure to enforce the promise will cause substantial hardship.

A service which has already been gratuitously rendered is not valid consideration for a later promise to pay for that service.

A promise in writing to pay a debt which is barred by the statute of limitations is enforceable according to its terms without new consideration.

Modification of Contracts; Preexisting Duty Rule

The pre-existing duty rule arises when the "legal detriment" is something that the promisee is already obligated to do. The agreement to perform an act which a person is already legally obligated to perform is not valid consideration.

In a non-UCC contract, consideration is required to support a modification.  In a UCC contract, consideration is not required to support a modification.

If each side to an existing contract modifies its rights and obligations in exchange for modification of the rights of the party(ies) on the other side, there is consideration.

If the parties agree to rescind an executory (i.e., uncompleted) contract, consideration is found in the mutual agreements to give up rights under the contract.

Compromise and Settlement of Claims

Forbearance (a promise not to assert a legal right) is valid consideration if the person seeking to enforce the contract reasonably believes that he has a valid legal claim.

Output and Requirements Contracts

Output or requirements contracts are generally valid.

They are enforceable for the actual amount of the output or requirements as long as those amounts are not unreasonably disproportionate to the expectations of the parties at the time the contract was formed.

Output and requirements contracts are specifically enforceable if the nonbreaching party will have difficulty in obtaining substitute performance.