What counts as consideration in contract law?

Question

What counts as consideration in contract law? Does consideration from party A have to be to the benefit of the party B?

Answer 1

See generally Hamer v. Sidway (1891), 124 NY 538, citing indirectly Currie v Misa (1875) LR 10 Ex 893:

'A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.' Courts 'will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party, or is of any substantial value to anyone. It is enough that something is promised, done, forborne or suffered by the party to whom the promise is made as consideration for the promise made to him.

Answer 2

Pretty much anything that is neither illegal nor a pre-existing obligation can be consideration. A necessary pre-condition for any trade or contract is a different valuation of whatever is being traded. Inherent in that is that judges and legislators would value it differently.

Given that, who is to say that a contract with a surgeon to save the life of someones daughter, mother, pool boy, isn’t valuable to the non-surgeon party? An overgrown lawn on someone else’s property.

Unconscionable contracts are a different matter, because they inherently involve either a reevaluation or someone else having an interest that wasn’t addressed.

Answer 3

united-states

Consideration is usually an element of a valid contract. But consideration is not required at all for a personal guarantee of a debt, for marital agreements entered into during a marriage, or for some (but not all) forms of contract modifications (usually singled out by statute).

Any benefit to one party, or detriment assumed by the other party, can constitute consideration. Consideration is often money, but it can involve mutual promises, giving up claims in a lawsuit, services, goods, promises to refrain from action, or almost anything else that is not specifically prohibited.

Consideration in U.S. common law, however, cannot be "meretricious" (i.e. for having sex) or otherwise illegal (e.g. illegal drugs or a contract to murder someone). Likewise "love and affection" or other donative intent directed at the other party to the contract is not consideration.

The benefit or detriment could be to someone related to, or intended to be benefited by, a party to the contract rather than to the contracting party.

The consideration does not have to be proportionate to the contract validated by the consideration. Instead, the prevailing theory of consideration in the United States is the "peppercorn theory".

In legal parlance, a peppercorn is a metaphor for a very small cash payment or other nominal consideration, used to satisfy the requirements for the creation of a legal contract. It is featured in Chappell & Co Ltd v Nestle Co Ltd ([1960] AC 87), which stated that "a peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn".

The main kind of contract that is rendered unenforceable by the consideration doctrine in the U.S. is a promise to make a gift in the future.

Another common application of the consideration requirement is to invalidate a contract modification (in a type of contract where consideration is required for a contract modification) which is entirely one sided.

Under the doctrine of promissory estoppel, detrimental reliance on a promise can substitute for consideration.

Inadequacy of consideration, when there is some consideration to support the contract, is governed by the doctrine of unconscionability as between the parties to the contract.

If the parties to the contract do not exchange "substantially equivalent value" then a buyer in a contract is not a "bona fide purchaser for value" (which impacts the ability of a third-party to challenge the validity of the contract vis-a-vis their rights) and the contract could be a "fraudulent transfer" which can be undone by a third-party creditor if the person on the losing side of the deal is insolvent.