I The Enforceability Framework

A consideration and alternative-enforcement problem should proceed in sequence.

II. Consideration and Bargained-for Exchange

Consideration requires a bargained-for exchange. A performance or return promise is bargained for when the promisor seeks it in exchange for the promise and the promisee gives it in exchange for that promise.

Suppose Employer promises Employee a $5,000 bonus if Employee remains with the company through the end of the year. Employee remains rather than accepting another position. The continued service may constitute consideration because Employer requested it as the price of the bonus promise.

Suppose instead that Employer tells Employee after the year has ended, “You worked very hard last year, so I promise to pay you a $5,000 bonus next month.” Employee’s prior work was not performed in exchange for the later promise. Traditional consideration is absent because the alleged exchange occurred in the wrong order.

The bargain requirement focuses on inducement. The promisor’s promise must induce the promisee’s performance or promise, and the promisee’s performance or promise must induce the promisor’s commitment.

The exchange need not provide direct economic benefit to the promisor. A promisor may request that the promisee perform an act benefiting a third party. The act may still be consideration if it was genuinely sought as the price of the promise.

Benefit and Detriment

Traditional consideration language refers to either a benefit to the promisor or a detriment to the promisee. Modern analysis ordinarily emphasizes bargain rather than attempting to measure benefit and detriment abstractly.

A legal detriment exists when a person does something the person was not legally required to do or refrains from doing something the person had a legal right to do.

For example, a person’s promise to refrain from drinking, gambling, smoking, filing a lawsuit, selling property, or accepting other employment may constitute consideration if the forbearance was requested in exchange for the promisor’s promise.

The promisee need not suffer actual harm. Refraining from a legal freedom is enough when bargained for. A person may even benefit physically or financially from the forbearance and still supply consideration.

The student should avoid writing that consideration requires both a benefit and a detriment. Modern doctrine generally requires a bargained-for legal value. The benefit-and-detriment terminology may help explain the exchange, but bargain is the organizing principle.

Adequacy of Consideration

Courts ordinarily do not examine the economic adequacy of consideration. The law generally permits parties to decide for themselves whether an exchange is worthwhile.

A person may sell a valuable object for a small amount, agree to work for below-market compensation, or accept an unfavorable allocation of risk. Mere disparity does not ordinarily invalidate the bargain. This rule promotes autonomy and certainty. If courts routinely reconsidered prices after the fact, parties could not rely confidently on their agreements.

A transaction in which a vulnerable person transfers highly valuable property for a token amount under suspicious circumstances may warrant inquiry. The concern, however, is not simply that the price was low. The disparity may indicate that genuine assent or a genuine bargain was absent.

Nominal consideration presents a related problem. A recitation such as “for one dollar and other valuable consideration” may be legally significant in some contexts. But when the stated consideration is merely a pretense and was neither exchanged nor intended as the price of the promise, a court may conclude that no genuine bargain existed.

Gifts, Conditional Gifts, and Past Consideration

A promise to make a future gift generally lacks consideration.

Suppose Aunt promises Niece, “I will give you $10,000 next year.” The promise may be sincere and morally important, but it is ordinarily unenforceable without reliance, a completed transfer, or another recognized basis for enforcement.

A completed gift is different. Once the legal requirements for a valid gift are satisfied, the donor generally cannot recover the property merely because the gift lacked consideration. Consideration concerns contractual enforcement of promises, not the validity of every completed gratuitous transfer.

Bargain vs. Conditional Gift

Students must distinguish a bargain from a conditional gift.

• Conditional Gift: Suppose Uncle says, “Come to my house and I will give you my old piano.” Traveling to the house may be a condition necessary to receive the gift. Uncle may not have sought the trip as the price of the piano; the trip merely allows delivery.
• Bargain: By contrast, suppose Uncle says, “If you paint my house this weekend, I will give you the piano.” Painting the house appears to be the requested price of the promise. The exchange is a bargain.

The distinction turns on the promisor’s objective purpose. Was the requested act sought as consideration, or was it merely a condition attached to receiving a gift?

Past Consideration

Past consideration is not consideration because the alleged performance occurred before the promise was made.

If a person rescues another from danger and the rescued person later promises a reward, the rescue was not performed in exchange for the later promise. Traditional bargain analysis therefore does not support enforcement.

A moral obligation arising from a past benefit is ordinarily insufficient by itself. The law does not generally convert every moral duty of gratitude into a contractual obligation.

The student should not describe these doctrines as ordinary consideration. They are alternatives or exceptions addressing particular antecedent obligations or benefits.

III The Preexisting-Duty Rule and Modification

Under the common law, performing or promising to perform an existing legal duty ordinarily does not constitute consideration for a new promise.

Suppose Contractor agrees to build a house for $300,000. Halfway through construction, Contractor refuses to continue unless Owner promises an additional $50,000. If Contractor promises only to complete the work already required by the original contract, Contractor has supplied no new consideration for Owner’s promise to pay more.

The preexisting-duty rule discourages opportunistic demands. A party should not be able to exploit the other party’s vulnerability by threatening to withhold performance already owed.

Contract Modification Under Common Law

Traditional common law generally requires consideration for a contract modification.

If only one party promises to do exactly what that party already owes while the other promises more, the modification may fail. The parties can support modification through reciprocal changes (e.g., more work for more pay).

Modern principles may also recognize a modification that is fair and equitable in light of circumstances not anticipated when the contract was made.

Suppose excavation reveals an underground condition that neither party could reasonably have anticipated and that greatly increases the cost of performance. A voluntary and reasonable price adjustment may be enforceable even if traditional consideration analysis is uncertain.

The doctrine should not protect economic coercion. If a party created the problem, assumed the risk, or waited until the other party became vulnerable before demanding an excessive increase, enforcement is less likely.

Modification Under Article 2 (UCC)

Article 2 does NOT require consideration to modify a contract for goods.

The modification must be made in good faith. Good faith prevents parties from using the flexible modification rule as a tool of extortion.

Suppose Seller agrees to supply goods at a fixed price but later faces an unexpected market shortage that sharply raises acquisition costs. A commercially reasonable price modification negotiated honestly may satisfy good faith.

By contrast, Seller may act in bad faith by threatening to withhold goods immediately before Buyer’s critical production deadline solely to extract a higher price, despite having no legitimate commercial reason.

Additional rules may affect enforceability:

• If the contract as modified falls within the Statute of Frauds, the modification generally must satisfy the applicable writing requirement.
• A clause requiring modifications to be in writing may receive legal effect, especially under Article 2, although conduct may sometimes create waiver or raise reliance issues.

IV. Settlement of Claims

Forbearance from asserting a legal claim may serve as consideration.

A settlement may be supported when:

• The claim is valid.
• The claim is honestly disputed.
• The claimant has a good-faith belief that the claim may be valid.

The purpose is to encourage resolution of disputes without requiring the claimant to prove the case before settlement can be enforceable.

Suppose Tenant honestly believes Landlord violated a lease, while Landlord disputes liability. Tenant’s agreement not to sue in exchange for a payment may supply consideration even if a court later would have rejected Tenant’s claim.

The result differs when a person knows that a claim is entirely invalid and threatens to assert it solely to extract payment. Forbearance from a knowingly baseless claim may lack consideration and may also raise concerns about duress or improper conduct.

The key is not whether the claimant would ultimately win. The question is whether the claim was genuinely disputed or asserted with an honest belief in possible validity.

V. Illusory Promises and Mutuality

An illusory promise does not genuinely bind the promisor.

“I promise to purchase your car if I feel like it” appears to promise something but leaves the promisor free to perform or not perform for any reason. Because the promisor has made no commitment, the statement may not provide consideration for the other party’s promise.

The student should ask whether the promisor has retained completely unrestricted choice. If any legal standard meaningfully restricts the choice, the promise may be real rather than illusory.

Satisfaction Clauses

A satisfaction clause conditions performance on one party’s satisfaction. Such a promise is not automatically illusory because the law may impose a standard governing the satisfaction decision.

• For commercial quality, value, utility, or fitness, courts often apply an objective reasonable-person standard. The question is whether a reasonable person would be satisfied.
• For personal taste, aesthetics, fancy, or subjective judgment, courts may permit a subjective standard. The party must still exercise judgment honestly and in good faith.

Suppose Buyer commissions a portrait “to Buyer’s personal satisfaction.” Because artistic taste is subjective, Buyer may reject the work based on genuine dissatisfaction even if others consider it excellent. Buyer may not falsely claim dissatisfaction to avoid payment for unrelated reasons.

Suppose a construction contract requires performance “satisfactory to Owner” regarding compliance with technical specifications. An objective standard may be more appropriate because the issue concerns commercial quality rather than personal taste.

Requirements and Output Contracts

Requirements and output contracts are not illusory merely because the exact quantity is not fixed numerically.

A requirements contract measures quantity by the buyer’s actual good-faith needs. The buyer promises to obtain the relevant goods from the seller, and the seller promises to supply those needs.

An output contract measures quantity by the seller’s actual good-faith production. The seller promises to sell the relevant output to the buyer.

Good faith limits discretion. The buyer cannot ordinarily demand zero merely to avoid the bargain if genuine requirements continue. Nor may the buyer demand a quantity unreasonably disproportionate to a stated estimate or prior requirements. Similarly, the seller cannot manipulate production dishonestly to escape or exploit the arrangement.

Exclusive-Dealing Contracts

Exclusive-dealing contracts may contain implied obligations.

A manufacturer may grant Distributor exclusive rights to market a product in a territory. The written agreement may not state exactly how much Distributor must sell. Nevertheless, the law may imply a duty to use reasonable efforts to promote the product. The manufacturer may likewise have an implied obligation to supply the distributor.

These implied duties prevent the agreement from being illusory. The parties’ commercial purpose and exclusivity indicate that each side assumed meaningful obligations even if every duty was not expressed.

VI Promissory Estoppel

Promissory estoppel provides an alternative basis for enforcement when formal consideration is absent.

The promise must be sufficiently definite to justify reliance. A vague statement of hope or intention may be insufficient.

Reliance must be foreseeable from the promisor’s perspective and reasonable under the circumstances. A person who relies on an obviously preliminary statement or who ignores clear conditions may face difficulty.

The promisee must actually change position (detriment). Common forms of detrimental reliance include spending money, beginning work, moving, declining another opportunity, retiring, making improvements, or entering a related transaction.

Finally, enforcement must be necessary to avoid injustice. This requirement gives courts flexibility to consider the seriousness of the promise, the reasonableness of reliance, available evidence, alternative remedies, and the extent of harm.

Promissory estoppel may arise in family promises, employment promises, charitable subscriptions, construction bids, precontractual negotiations, retirement promises, and land-related promises.

Promissory-Estoppel Remedies

Promissory estoppel does not always produce full expectation damages.

Traditional contract damages seek to place the claimant in the position the claimant would have occupied if the promise had been performed. Reliance relief instead seeks to reimburse losses caused by reasonable reliance.

A court may limit the remedy as justice requires. It may enforce the promise fully, award reliance expenses, or grant another tailored remedy.

Suppose Employer promises Employee long-term employment, causing Employee to relocate and decline another job. If the promise is not supported by traditional consideration or is otherwise insufficient as a contract, a court might award moving costs and other reliance losses rather than the full value of many years of expected employment.

Students should distinguish the basis of liability from the measure of relief. A promissory-estoppel claim is not simply a contract claim with consideration omitted.

VII. Restitution and Unjust Enrichment

Restitution prevents one person from being unjustly enriched at another’s expense.

A quasi-contract is not a genuine contract. It is an obligation imposed by law even though the parties did not form an enforceable agreement.

Restitution may arise when: emergency services are provided; an agreement is unenforceable; a contract is avoided; a breaching party conferred a benefit exceeding the loss caused; one person mistakenly conferred a benefit; or one party received services under circumstances implying payment.

The measure is generally the value of the benefit retained rather than the value of the promised bargain.

Suppose a doctor provides necessary emergency treatment to an unconscious patient. The patient could not assent, but retaining the lifesaving benefit without reasonable compensation may be unjust. Restitution may support recovery.

Officious Intermeddlers

Restitution does not reward every voluntary benefit.

A person who officiously provides an unwanted service without justification may be denied recovery. People ordinarily have a right to decide whether to purchase services.

Suppose Landscaper enters Homeowner’s property without request and installs expensive landscaping, expecting payment. Homeowner had no opportunity to reject the service. Restitution may be denied because Landscaper acted officiously.

The result may differ in an emergency, when consent is impossible and the service protects life or property. Context determines whether retention without payment is unjust.

Promissory Restitution (Material-Benefit Rule)

Some jurisdictions enforce a promise made in recognition of a substantial material benefit previously received. This doctrine is sometimes described as promissory restitution or a material-benefit rule. It is narrow and should not be confused with ordinary consideration.

The promise may be enforceable to the extent necessary to prevent injustice, but enforcement may be denied when the benefit was intended as a gift, the promised amount is disproportionate to the benefit, enforcement would violate public policy, the benefit was conferred officiously, or the connection between benefit and promise is too remote.

Suppose a person saves another’s life at great personal cost. The rescued person later promises reasonable compensation. Some jurisdictions may recognize the promise because it acknowledges a substantial material benefit, even though the rescue preceded the promise.

The doctrine does not mean every promise motivated by gratitude is enforceable. Moral obligation alone remains insufficient in most cases.

VIII. Good Faith and Fair Dealing

Every contract generally includes an implied obligation of good faith and fair dealing in performance and enforcement.

Good faith does not create obligations inconsistent with express contract terms. It cannot be used to rewrite a valid bargain simply because one party dislikes the result.

Instead, good faith prevents a party from using contractual discretion or technical power to deprive the other party of the expected benefit of the agreement.

The doctrine focuses on performance and enforcement. It ordinarily does not create a contract where none exists, although reliance and restitution may independently support liability.

X. Bar-Style Analysis Notes

• For consideration, identify the promise and the requested legal value. Explain why each induced the other.
• For gifts, distinguish a donative promise, a conditional gift, and a bargain.
• For adequacy, state that courts generally do not evaluate economic equivalence, but extreme disparity may suggest another defense or sham consideration.
• For past consideration, explain that the act occurred before the promise and therefore was not bargained for.
• For the preexisting-duty rule, ask whether the promisee supplied new or different performance, mutual modification, an unanticipated circumstance, a duty owed to another person, or settlement of a disputed obligation.
• For common-law modification, discuss consideration and modern fair-and-equitable treatment of unanticipated circumstances.
• For Article 2 modification, discuss good faith, the Statute of Frauds, and any no-oral-modification clause or waiver.
• For settlement, identify validity, honest dispute, or good-faith belief in possible validity.
• For illusory promises, identify unrestricted discretion and then search for legal limits on that discretion (good faith, satisfaction, exclusivity).
• For promissory estoppel, state the promise, foreseeability, reasonableness, actual reliance, detriment, injustice, and possible remedy limitation.
• For restitution, identify the benefit, knowledge, unjust retention, and value of the benefit.
• For good faith, identify the contractual discretion or power allegedly used to deny the expected benefit of the bargain.