LAW 505-002 – Contracts I

Consideration


Consideration is a bargained-for exchange of a promise for a performance or a promise for a promise.

Restatement Second of Contracts § 71

Requirement of Exchange; Types of Exchange

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  1. To constitute consideration, a performance or a return promise must be bargained for.
  2. A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
  3. The performance may consist of
    1. an act other than a promise, or
    2. a forbearance, or
    3. the creation, modification, or destruction of a legal relation.
  4. The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
Restatement Second of Contracts § 73

Modification of Executory Contract

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Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.

Consideration requires each person's promise or performance to induce the other's.

There is no requirement for the adequacy of the values exchanged, as long as it is more than a mere pretense of bargain.

Gratuitous promises, including conditional gifts are not enforceable.

Motive is not considered as long as the exchange was bargained for.

Illusory promises and alternative promises are not enforceable.

Restatement Second of Contracts § 77

Illusory and Alternative Promises

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A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless

  1. each of the alternative performances would have been consideration if it alone had been bargained for; or
  2. one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration.