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.
There is a very strong tendency in the common law to permit persons who are competent to make contracts to fix upon such terms of the contract as they may agree mutually, as long as such terms are not forbidden by positive rules of law or by the general policy of the law, and as long as some consideration exists.
16McGuire v. Hughes, 207 N. Y. 516, Ann. Cas. 1914C, 585, 101 N. E. 460.
17People v. Porter (III.), 123 N. E. 59. See Sec. 1147 et seq.
18Meginnes v. McChesney, 179 la. 563, 160 N. W. 50 [sub nomine, Megin-nes v. Copeland, L. R. A. 1917E, 1060]; Parsons v. Teller, 188 N. Y. 318, 80 N. E. 930.
19Martin's Estate, 131 Pa. St. 638, 18 Atl. 987. To the same effect, see Morris v. Norton, 75 Fed. 912, 21 C. C. A. 553.
21 Hobbs v. Greifenhagen, 91 111. App. 400; Massachusetts Mutual Life Ins. Co. v. Green, 185 Mass. 306, 70 N. E. 202.
22 Fidelity & Casualty Co. v. Thompson, 128 Cal. 506. 61 Pac. 94; Widger v. Baxter, 190 Mass. 130, 3 L R.A. (N.S.) 436, 76 N. E. 509.
23 Gooch v. Gooch, 70 W. Va. 38, 73 S. E. 56 [sub nomine, Gooch v. Allen. 37 L. R. A. (N.S.) 930].
If the contract is supported by a valuable consideration, and the value of such consideration is inadequate as compared with the value of he thing which is promised, a two-fold distinction must be made. On the one hand, we must distinguish between the cases in which the value of the thing promised and the value of the consideration to support such promise are both measured by a money value, either because the consideration on each side is money, or because it is something the value of which is fixed by law at a definite price in money; and the cases in which one or both are not measured by a money value. On the other hand, we must consider whether the question of inadequacy is raised in an action at law upon the promise, or whether it is raised in a suit in equity, which is brought for the purpose of obtaining specific performance or some other equitable relief, in which the court exercises a considerable degree of judicial discretion in determining whether such remedy shall be granted or denied.
If the case arises in an action at law to enforce the promise, and the parties to the contract are competent and are not induced to act by mistake, misrepresentation, fraud, duress, or undue influence, they may select as a consideration any right or forbearance of a right which the law recognizes, and if they receive just what they bargained for, and if the value of the promise and of the consideration therefor are not measured by money, and are not fixed by law at a money value, the law will not consider the wisdom or folly of the parties in making such promise for such a consideration, nor will it inquire into the profit or loss arising out of such transaction to either party. This principle is often expressed by the rule that if the consideration is substantial, mere inadequacy of consideration does not, at law, affect the validity of the contract.1 Examples of considerations which the law regards as valuable, though practically of no financial value, are a release of a debt against a decedent whose estate is insolvent,2 or a debt which is barred by limitations;3 delivery of a note of a third person which is useless and of no value;4 the surrender of a note, the principal debtor whereon is insolvent and the surety has been released;5 an assignment of rentals, though nothing was in fact collected therefrom. A sold to B his share in a partnership, taking B's note therefor. Thereupon the other members of the partnership refused to admit B to membership unless he would assume his portion of the debts of the partnership. B made such promise in consequence of such admission. The partnership was apparently insolvent when B bought such interest, and subsequently the partnership property was destroyed. It was held that sufficient consideration for B's promise to assume his proportion of the debts of the partnership existed.6
1 England. Bainbridge v. Firmstone, 8 Ad. & El. 743; Pilkington v. Scott, 15 M. & W. 657.
Alabama. Juzan v. Toulmin, 9 Ala. 662, 44 Am. Dec. 448; McCurry v. Gibson, 108 Ala. 451, 54 Am. St. Rep. 177, 18 So. 806; Byrd v. Hickman, 167 Ala. 351, 52 So. 426.
Arkansas. Webster v. Williams, 62 Ark. 101, 34 S. W. 537; Bloodworth v. Booser, 99 Ark. 238, 138 S. W. 457; Monticello State Bank v. Killian, 127 Ark. 410, 192 S. W. 369.
Colorado. Vreeland v. Murray, 62 Colo. 322, 162 Pac. 148.
Connecticut. Allen v. Kuland, 79 Conn. 405, 118 Am. St. Rep. 146, 65 Atl. 138; Church v. Spicer, 85 Conn. 579, 83 Atl. 1115.
Florida. Spann v. Baltzell, 1 Fla. 301, 46 Am. Dec. 346; Scotch Mfg. Co. v. Carr, 53 Fla. 480, 43 So. 427; Atlantic Coast Line R. R. Co. v. Beaz-ley, 54 Fla. 311, 45 So. 761; Southern Home Ins. Co. v. Pritnal, 57 Fla. 199, 49 So. 922; Mizell Live Stock Co. v. McCaskill Co., 59 Fla. 322, 51 So. 547.
Idaho. Bates v. Capital State Bank, 21 Ida. 141, 121 Pac. 661.
Illinois. Cobb v. Heron, 180 111. 49, 54 N. E. 189 [affirming, 78 111. App. 654]; Carey v. White, 278 111. 474, 116 N. E. 140; Schlatter v. Triebel, 284 111. 412, 120 N. E. 289.
Indiana. Duffy v. Shockey, 11 Ind. 70, 71 Am. Dec. 348; First National Bank v. Farmers.' & Merchants' National Bank, 171 Ind. 323, 86 N. E. 417 [transferred from the appellate court, 82 N. E. 1013]; Oldenburg v. Baird, 26 Ind. App. 379, 58 N. E. 1073.
Iowa. Howe v. Barnes, 101 la. 302, 70 N. W. 197; State Bank v. Gates, 114 la. 323, 86 N. W. 311.
Kentucky. Price's Administratrix v. Price's Administratrix, 11 Ky. 771, 66 S. W. 529; Illinois Cent. R. Co. v. Heath (Ky.), 80 S. W. 502.
Maine. Goodspeed v. Fuller, 46 Me. 141, 71 Am. Dec. 572; Liberty v. Haines, 103 Me. 182, 68 Atl. 738; Ken-ney v. Pitt, 111 Me. 26, 87 Atl. 480.