CONSIDERATION
By
D. Reed Freeman, Jr.
Arent Fox Kintner Plotkin & Kahn, PLLC
Consideration, in legal terminology, is what one party to a contract will get from the other party in return for performing contract obligations.
Example: Developer promised to pay Artist $500 if Artist would let Developer use one of Artist's drawings in Developer's multimedia work. The consideration for Developer's promise to pay Artist $500 is Artist's promise to let Developer use the drawing. The consideration for Artist's promise to let Developer use the drawing is Developer's promise to pay Artist $500.
According to traditional legal doctrine, if one party makes a promise and the other party offers nothing in exchange for that promise, the promise is unenforceable. Such a promise is known as a "gratuitous promise." Gratuitous promises are said to be "unenforceable for lack of consideration."
Example: John told Sam, "When I buy a new car, I'll give you my truck." John bought a new car but did not give Sam the truck. According to traditional legal doctrine, John's promise to give Sam the truck is an unenforceable gratuitous promise. Sam gave nothing to John in exchange for John's promise to give Sam the truck.
In some states, a gratuitous promise can be enforced if the party to whom the promise was made relied on the promise. Other states no longer require consideration for certain types of promises.
Lack of consideration is rarely a problem for promises made in the context of business relationships. In most business contracts, there is consideration for both parties ("mutual consideration", in legal terminology).
The lack of consideration problem can arise in the context of amendments to contracts, however. Also, in some states, a promise to hold an offer open (see "Offer and Acceptance," earlier in of this chapter) is unenforceable unless the offeree gives the offeror consideration (pays the offeror money) to keep the offer open.
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