Consideration

Generally speaking, if I gave you a gift, you would call me a nice guy. You might even say I am a considerate person. Likewise, you might say I was kind enough to show you consideration. In the law of contracts, giving a gift means that there is no consideration present.

What does showing consideration mean in a legal context? Well, first of all, consideration is not shown to someone; it's given. The word is used in the context of "in consideration of your promise to do x, I will do y." Y may be an act, a forbearance from doing some act, a change in a legal relation, or a promise to do one of the three forementioned things in this sentence.

The idea is that courts will not just enforce just any old promise. If that were the case, my wife could sue me for not being home in time for dinner. (Although, in my case, she is much too kind to initiate such litigation.)

For the court to enforce a promise, there must be adequate consideration. In other words, the contract is seen as a "bargained-for" exchange. The promisor (guy making the promise) wants something the promisee (guy receiving the promise) has, and the promisee wants something the promisor has. Thus, the parties will create a contract to get what they want. Win-win scenario. ...Maybe.

Further, the making of the promise by the promisor must induce the furnishing of consideration, and the furnishing of the consideration by the promisee must induce the making of the promise.

This is more all-inclusive than one would think. For example, a century and a half ago, an old man promised his nephew to pay him a large sum of money if he abstained from drinking, cursing, gambling and other vices until age 21. The lad performed said abstinence and recovered the money from his uncle. The court enforced this as a contract. The uncle made a promise to pay to induce certain consideration, namely the good moral behavior of the nephew. Likewise, the vice-free behavior of the nephew induced the uncle's promise.

There are situations where only one half of the equation is met. A grandfather once promised his granddaughter to pay her a regular income annually. His hope was that the money would allow her to not have to work. Not surprisingly, the girl quit her job and began living off the grandpappy's income, until grandpappy passed away and the executor of his will refused to keep paying the baby girl her free money. The court refused to enforce this as a contract. The promise made by the grandpappy induced the consideration, namely, the girl quitting her job. But her quitting the job did not induce the grandpappy's promise. The promise had already been made, regardless of whether she would then choose to quit her job, or not.

The flipside is also true: the courts will not enforce a contract in which the promise does not induce the consideration, even when the consideration induces the promise. For example, a rich papa once helped arrange financing for a son's start-up business. The son then promised to pay the father as a board member but later refused to pay his father and changed his own salary. When jaded, angry, and wrathful papa sued for breach of contract, the court held for the son. The papa's financing was consideration that induced the son's promise to pay him monetary dividends. But the son's promise did not induce the consideration; the papa's gratutitous gift pre-existed the son's promise.

What does the doctrine of consideration have to say about the our society's legal view of promises?

Promises are weighty, yes, and there is a moral duty to keep them. But we refuse to enforce promises that were made without each party really having an awareness of the bargain.

Of course, that doesn't take detrimental reliance and a host of other more modern contract theories that still might allow Baby Girl to recover money from Granddaddy. But that's what the rest of the semester is all about.

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All that to say, Rule #1: In law school, you learn the rule. And that's it.
And then there's the exception to the rule. And that's it.
And then there's the exception to the exception. And that's it.
And then theres...

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Tune in next time for "Rule #2"...