Consideration (Bargained-for Exchange)

Consideration is one of the fundamental elements of a valid and enforceable contract. At its core, consideration reflects the idea that both parties must exchange something of legal value, thereby distinguishing an enforceable promise from a gratuitous one. The essential feature is a bargained-for exchange: each party consents to give or refrain from something in return for the other party’s promise or performance. This ensures that contractual obligations rest on a foundation of mutual inducement, rather than unilateral generosity.

While the concept of consideration is straightforward in theory, its application often raises nuanced questions. What counts as sufficient value? How do courts handle promises that appear unfairly one-sided? When does a promise, unsupported by formal consideration, still remain enforceable? The following subtopics explore these dimensions in more depth and illustrate how consideration serves as a critical check on the formation and modification of contracts.

Adequacy of Consideration

This section looks at the principle that courts generally do not inquire into the fairness or equivalence of the exchange. Even a small or nominal amount of value can be deemed sufficient, provided it is part of a genuine bargain. However, issues can arise when the purported consideration is illusory, irrelevant, or entirely lacking in real substance.

Promissory Estoppel (Substitute for Consideration)

Here, the doctrine of promissory estoppel comes into play as a potential substitute for traditional consideration. Under certain circumstances, a promise may be enforced despite the absence of a bargained-for exchange, based on the reliance of the promisee. This section discusses the requirements for promissory estoppel and highlights the equitable rationale underlying its application.

Pre-existing Duty Rule & Modifications

This section addresses the question of whether a new obligation or benefit is truly exchanged when a party is already legally bound to perform. Ordinarily, performing a pre-existing duty is not deemed valid consideration. Still, modern contract law recognizes exceptions—such as unforeseen circumstances—to allow for modifications that do not always require fresh consideration. This topic outlines the traditional rule and examines contemporary approaches to contract modifications.