Consideration
Consideration is the price the law makes the parties pay each other to have an enforceable bargain.
5. Consideration
Under both the UCC and common law, consideration is required for the creation of an enforceable contract.
- Consideration is required for the creation of an enforceable contract.
- Consideration is a performance or return promise that is bargained for. In other words, each party must seek the performance or promise of the other in exchange for their own performance or promise.
- Under the common law, consideration can be a promise; an act; a forbearance; or the creation, modification, or destruction of a legal relationship.
- The UCC has no separate definition of consideration, so the common law rule is applied when the UCC governs.
- A conditional gift may be expressed similarly to an offer (“If you do X, I will give you Y”) but a conditional gift is not enforceable as a contract.
- Whether a communication is a conditional gift or an offer depends on whether the performance is bargained for, which is a question of fact evaluated using the objective standard.
- A benefit received in the past cannot serve as consideration for a later promise because the promise did not induce the promisee to provide the benefit.
- The Nevada FLE does not test the rules governing consideration for contract modifications.
Consideration is a performance or return promise that is bargained for, meaning each side seeks the other's performance or promise in exchange for its own. It is required to create an enforceable contract under both the common law and the UCC.
Consideration is the price the law makes the parties pay each other to have an enforceable bargain. It is a performance or a return promise that is bargained for, and bargained for means each side seeks the other side's performance or promise in exchange for its own. That mutual inducement is the heart of the doctrine. Under the common law, the thing that counts as consideration can be a promise, an act, a forbearance, or the creation, modification, or destruction of a legal relationship. The form does not matter; the bargained-for exchange does.
The single most important framing point here is governing law. The UCC governs contracts for the sale of goods, and the common law governs everything else. But on consideration the split makes no difference, because the UCC has no separate definition of consideration. When the UCC governs, the court simply applies the common-law rule. Under both bodies of law, consideration is required to create an enforceable contract.
- 1Conditional gift. A promise like 'If you come to my house, I will give you a coat' can be phrased exactly like an offer, but if the stated condition is merely the necessary step to receive a gift rather than the price the promisor is seeking, it is an unenforceable conditional gift, not a contract. Whether a communication is a conditional gift or a true offer turns on whether the performance was bargained for, and that is a question of fact judged by the objective standard, what a reasonable person would understand the words and conduct to mean.
- 2Past consideration. A benefit the promisee already conferred in the past cannot support a later promise, because a promise made after the fact could not have induced a benefit that was already given. The inducement has to run both ways at the time of the bargain.
An answer that says the UCC dispenses with consideration, or that a goods contract needs no consideration, is applying the wrong body of law and is wrong.
The Nevada FLE does not test the rules governing consideration for contract modifications, so any analysis that depends on whether a modification needs fresh consideration is outside the tested universe.
bargained for is the whole test: each side must seek the other's performance or promise in exchange for its own.
If the inducement does not run both ways, there is no consideration.
Goods do not buy you out of consideration. The UCC has no separate consideration definition, so when the UCC governs you apply the common-law rule. 'Goods, so no consideration needed' is the wrong-law trap, eliminate it.
Gift vs. bargain: 'If you do X, I will give you Y' can read like an offer, but a conditional gift is not a contract.
Ask whether X was the price the promisor sought (bargain) or just the step to collect a gift (gift).
past means powerless: a benefit already conferred cannot support a later promise, because a later promise cannot induce something that already happened.
A homeowner emails a roofer: 'If you replace the roof on my house, I will pay you 9,000 dollars.' The roofer replaces the roof and the homeowner refuses to pay. The homeowner argues that because a roof and its shingles are goods, the UCC governs and the deal needs no consideration to be enforceable.
The homeowner's 'goods, so no consideration needed' argument applies the wrong body of law and fails; the contract is enforceable. Now suppose instead the homeowner had said, 'Because you fixed my fence for free last year, I now promise to pay you 500 dollars,' and never paid. The fence work is past consideration; the later promise did not induce it, so there is no consideration and that promise is unenforceable.
An option says a sale-of-goods contract needs no consideration, or that the UCC dispenses with consideration once the goods are delivered.
The UCC has no separate definition of consideration, so the common-law requirement applies when the UCC governs; consideration is required under both bodies of law.A 'no contract' or 'yes contract' answer resting on a true but irrelevant fact, such as that no money changed hands, that one side profited more, or that a benefit was conferred.
Consideration is a bargained-for performance or return promise; adequacy, money, and the size of the benefit are irrelevant, and a past benefit cannot count at all.An option that recasts the test, for example requiring a writing, requiring equal value, or requiring that consideration be money rather than a promise, act, or forbearance.
Consideration is a bargained-for performance or return promise and may be a promise, an act, a forbearance, or the creation, modification, or destruction of a legal relationship; adequacy and form are not requirements.An absolute option using 'any,' 'always,' 'never,' or 'automatically,' such as 'any "if you do X" promise is a bargain' or 'performance always converts a gift into a contract.'
The controlling question is whether the performance was bargained for; the same 'if you do X' words can be a gift or an offer, so the unqualified universal is false.A correct yes/no keyed to the wrong rationale, for example calling a conditional gift unenforceable 'because it was oral' or denying enforcement of a past-benefit promise 'because of the promisee's state of mind.'
Name the operative reason, the presence or absence of a bargained-for exchange (and, for past benefits, that a later promise cannot induce an already-conferred benefit).the stem gives you a promise and asks whether it is enforceable, and it loads in one of three tells. (1) It flags that the subject is goods and invites you to say the UCC needs no consideration, run the governing-law check: the UCC borrows the common-law consideration rule, so consideration is still required. (2) It dresses a gift as an offer, 'If you do X, I will give you Y', ask whether X was the price the promisor sought (bargain, enforceable) or merely the step to collect a gift (conditional gift, not enforceable), judged on the objective standard. (3) It points to a benefit already conferred and a promise made afterward, that is past consideration and cannot support the later promise.
The single question that resolves all three: was the performance or promise bargained for, with each side seeking the other's in exchange?
If the facts turn on whether a modification needs fresh consideration, that is outside the tested scope.
A restaurant owner agreed to buy a commercial freezer from an appliance dealer, and the dealer agreed to deliver and install it the following week, with payment due on installation. Both promises were made plainly and willingly. After the dealer delivered and installed the freezer, the owner refused to pay, arguing that because the freezer is goods, the sale is governed by the law of sales and that body of law requires no consideration, so no enforceable contract was ever formed.
Is the owner's argument that the sale required no consideration correct?
A wealthy collector told a struggling young painter, 'Come to my gallery opening on Friday night, and I will give you one of the paintings from my private collection.' The collector wanted nothing from the painter except the painter's attendance as a guest; the collector sought no service, no work, and no return promise. The painter attended the opening, and afterward the collector refused to hand over any painting. The painter sued, claiming the collector's statement was an enforceable contract.
Is the collector's statement enforceable as a contract?
During a storm, a passerby spent an afternoon clearing a fallen tree and debris from a homeowner's blocked driveway while the homeowner was away, expecting nothing in return. A week later, the homeowner learned what the passerby had done and, grateful for the help, said, 'In return for clearing my driveway last week, I promise to pay you 600 dollars.' The homeowner later changed her mind and paid nothing. The passerby sued to enforce the promise to pay.
Is the homeowner's promise to pay supported by consideration?
A landlord wanted a long-vacant storefront occupied and told a baker, 'If you open and operate a bakery in my storefront for one year, I will pay you 5,000 dollars at the end of the year.' The landlord sought the baker's operation of the bakery to draw foot traffic to the block, and the baker, seeking the 5,000 dollars, agreed and ran the bakery for the full year. At year's end the landlord refused to pay, insisting the arrangement was merely a conditional gift because it was phrased as 'if you do X, I will give you Y.'
Why is the landlord's promise best characterized as supported by consideration rather than as a conditional gift?
An aunt told her adult nephew, 'If you stop smoking entirely for the next year, I will pay you 2,000 dollars at the end of the year.' The aunt genuinely sought the nephew's abstention and offered the money to induce it; the nephew, wanting the money, refrained from smoking for the full year. At year's end the aunt refused to pay, arguing that the nephew gave up nothing of economic value and merely did something good for his own health, so there was no consideration.
Is the nephew's forbearance from smoking consideration for the aunt's promise?