A. Theory and Nature.
A promise or undertaking not under seal is not legally binding upon the promisor unless the promisee thereof has on its faith and pursuant to it parted with or promised to part with something to which he has a legal right, or, in other words, unless such promisee has sustained a legal detriment. This legal detriment constitutes the consideration.
By the English common law two classes of promises were enforceable: First, where the promise was made in solemn form, that is, under seal; and second, where something was given, done, or promised by the promisee on account of the promise. In the formation of simple contracts, whether written, oral or implied, consideration must enter, and it must enter also in sealed contracts where the statute has abolished the ancient meaning of the seal in that regard.
We have noticed that contracts result from offer and acceptance. In every simple contract the offer must consist in a promise to do something or to part with something, if in return therefor, the offeror will also do something or part with something or promise to do so. There is here an exchange of values, that is to say, each party gives up or undertakes to give up something to which he is legally entitled in return for the other party's similar act or engagement. And the test of the validity of the contract alleged to be found in an offer and acceptance consists in this: Did the party now seeking to enforce a promise made by the other (either by way of offer or acceptance) sustain a legal detriment - give up something to which lie was entitled? There may have been an offer and an acceptance, but the offeror or the acceptor may have promised to do something he was already bound to do; he may have promised to surrender something to which he had no right. If so, no contract resulted.
We define a consideration by saying it is a detriment to the promisee, or a benefit to the promisor; but it is only in rare cases we need consider whether it is a benefit to the promisor. For it is not usually to be considered a benefit to the promisor unless it is also a detriment to the promisee. It is a benefit to the promisor when he can demand something or has obtained something to which he was not otherwise legally entitled. We may then for our purposes simplify the discussion by referring to consideration in its aspect as a detriment to the promisee.
Thus, A offers to sell B a certain acre of ground for $5,000 on certain terms, one year from date. B accepts the offer. Each are promisors; each promisees. Each has promised to part with something to which he was legally entitled. He has therefore in the eyes of the law sustained a legal detriment. A contract has resulted.
Again, A orders a sack of flour from his grocer. A promise to pay the reasonable value of the flour is implied. B delivers the flour, thereby accepting the promise with an act. B in this case never was the promisor. But he becomes a promisee by accepting the promise by parting with that which the promise calls upon him to part with. He has sustained a legal detriment. The consideration for A's promise is B's act, that is, it is a detriment to the promisee.
A detriment is sustained whenever one gives up something to which he has a legal right, though he may have no moral right to it. Thus, we have a line of cases in which a young man is induced by promise of reward to give up a self-indulgent way of life. It is held in such cases that if he lives up to his agreement he may recover though it was to his benefit to live so, and no personal benefit to the promisor. Yielding up his right to live as he chooses within the law is a legal detriment.72
When a person comes into court to sue upon a promise, he comes in his capacity as promisee. He alleges that a promise was made to him and the law asks him what he paid for it, what detriment would it be to him if the promise was not enforced?
If he has given or promised nothing in return for the promise to him, that promise is said to be without consideration - "nudum pactum."
The adequacy of consideration, as between the parties, is immaterial, so long as there is no fraud. Gross inadequacy may in a proper case be considered as evidence tending to prove an allegation of fraud.
If one in full possession of his faculties parts with a right for an inadequate return, there being no fraud, he cannot ask the courts to aid him. The law leaves the parties to bargain for themselves and one may give away his property or sell it for whatsoever he chooses.73
Where the rights of creditors are involved, and affected by the contract or gift, other considerations appear; altogether it may be said generally that creditors who have no lien cannot complain where the debtor sells for even an inadequate consideration, so long as he and his vendee are not acting fraudulently to defeat or delay the creditor. If a consideration is grossly inadequate that may, with other circumstances, make out a case of fraud, but in itself such inadequacy is not material.
72. Hamer v. Sidway, 124 N. Y. 538.
73. Nelson v. Brassington, 116 Pac. (Wash.) 629.
B. Examples of Consideration.