When Can Consideration in Contracts?

Consideration in contracts is valid when it involves a bargained-for exchange of value, where both parties agree to give something up or maintain an obligation. It must be lawful, sufficient, and not pre-existing duties.

Consideration is a foundational element of contract law that refers to the value exchanged between parties in a contract. For consideration to be valid, it must be the result of a mutual agreement where each party contributes something of value, which can be a promise to act, a promise to refrain from acting, or the actual performance of an act. Importantly, the consideration must be sufficient, meaning it has some legal value, although it does not need to equal the economic value of what is received in return.

Consideration must also be lawful, meaning it cannot be based on illegal acts or public policy violations. Additionally, existing duties, such as obligations imposed by law, cannot serve as consideration for a new contract. For instance, a police officer’s duty to uphold the law cannot be considered valid consideration for a contract to perform that duty.

Moreover, the timing of the consideration is crucial. A promise made solely in return for an act that has already been completed (past consideration) generally does not constitute valid consideration. Courts focus on the intent and exchange at the time the contract is formed rather than at a later date.

Cases like Hamer v. Sidway, where consideration was found in a promise to refrain from drinking until a certain age, illustrate that the detriment or sacrifice must be real, whereas in the case of Stilk v. Myrick, the court held that existing duties do not constitute sufficient consideration. This demonstrates how nuanced understanding of consideration can significantly influence the enforceability of contracts.

• 1Hamer v. Sidway (1891) - established the principle that consideration can be forbearance to act.
• 2Stilk v. Myrick (1809) - clarified that a pre-existing duty cannot be consideration.
• 3Pennsy Supply Inc. v. American Ash Recycling Corp. (2006) - recognized the necessity of consideration being legally sufficient and not against public policy.
• 4Baird v. Johnson (1827) - emphasized that consideration must be contemporaneous with the agreement.

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