The Basics of Consideration and the Bargain Theory: Discussions in Contracts Podcast
This podcast examines when agreements are enforceable as contracts because they are supported by consideration. The podcast looks at common descriptions of consideration, including benefit-detriment and “bargained-for exchange.” It also considers traditional issues of consideration and common disputes involving unequal bargains, nominal or sham consideration, and past consideration. The podcast discusses several hypotheticals and also the following cases: Schnell v. Nell, 17 Ind. 29 (1861), Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256 (1891), and Basatkis v. Demotsis, 226 S.W.2d 673 (Tex. Civ. App. 1949).
On completion of the podcast, the student will be able to:
1. Explain that the formation of a contract requires consideration or another justification for enforcing the agreement.
2. Describe the difference between the courts’ previous application of a benefit-detriment test as contrasted with modern courts evaluation of whether there is a bargained-for exchange to determine whether promises were supported by consideration
3. Apply the rule for bargained-for exchange as requiring a promise or performance sought by a party in exchange for the other party’s promise or performance where the exchange is present on a reciprocal basis.
4. Identify situations where there is no consideration because there is a promise for a gift, past consideration, or nominal or sham consideration.
5. Discuss why courts do not typically inquire into consideration's adequacy, so bargains of unequal value are enforceable and not lacking consideration.