This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Whether a consideration exists in cases in which the promisor agrees to transfer property and the like to the promisee, and the promisee, without incurring any personal obligation, agrees to pay for such property out of its proceeds or accretions, is a question upon which there is little direct authority. If the promisee does not agree to do anything in order to produce such proceeds, it is held that such a contract lacks consideration.1 A promise by A to sell certain realty to B, B to pay out of the rents and profits of such realty, is without consideration.2 A promise by A to buy certain land from X, to give a mortgage for the purchase price, to take possession thereof, and to convey such property to B when the money advanced by A is repaid out of the rents and profits, is without consideration.3 On the other hand, a contract whereby A agrees to sell property to B, and B agrees to resell it and to pay A from the proceeds thereof, is supported by sufficient consideration.4
In other cases which might seem to present these facts, there is either an additional consideration present, or else the courts so construe the contract as to impose some duty upon the promisee.5 A promise to sell stock in a corporation, to be paid for out of the dividends, possesses sufficient consideration if the buyer agrees to pay interest at the end of each year at the rate of six per cent.6 A similar contract which provided that the interest should not exceed the dividends and that interest should cease when the dividends ceased, was held to be supported by a valuable consideration on the theory that although the buyer had not agreed, in express terms, to pay for the stock, and although the only provision for payment was out of the dividends, the contract, in legal effect, required the buyer to pay the contract price within a reasonable time, if the dividends did not form a fund sufficient for such payment.7
26Carnig v. Carr, 167 Mass. 544, 57 Am. St. Rep. 488, 35 L. R. A. 512, 46 N. E. 117.
27Ziehm v. Frank Steil Brewing Co., 131 Md. 582, 102 Atl. 1005.
1Beall v. Clark, 71 Ga. 818; Hall v. Edwards, 140 Ga. 765, 79 S. E. 852.
2Beall v. Clark, 71 Ga. 818.
3Hall v. Edwards, 140 Ga. 765, 79 S. E. 852.
4 The facts do not appear in the opinion. Richards v. Johnson, 143 Ga. 213, 84 S. E. 543.
5 See Sec. 583; Brosseau v. Jacobs' Pharmacy Co., 147 Ga. 185, 93 S. E. 293; Stewart v. Herron, 77 O. S. 130, 82 N. E. 956.
6 Brosseau v. Jacobs' Pharmacy Co., 147 Ga. 185, 93 S. E. 293.
A so-called mining, oil or gas lease may really be a lease, passing an estate in the realty. In such case it does not need a consideration. If it is a contract and needs a consideration, questions have arisen under such contracts where the consideration is a certain proportion of the product of the mine or well, and the lease does not, by its express terms, impose upon the lessee any duty to produce such product. The difficulty is usually evaded by construing the contract, in the absence of a covenant which expressly relieves the lessee from all liability, as requiring the lessee to use due diligence in developing the property so as to produce an adequate return for the lessor.8 Where the court construes the contract as imposing no duty upon the lessee, and where it finds that no other consideration exists, there is a strong tendency to hold that such contracts are without consideration.9