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 is adequate or not depends very largely on the circumstances of each particular case. No arbitrary rule as to the percentage of the actual value that must be paid to constitute an adequate consideration can be laid down. To give some specific examples, keeping in view the fact that often the other circumstances of weakness of mind, confidence and trust, oppression, and the like, are after all decisive in each particular case: the consideration has been held inadequate where five dollars was paid for realty worth one thousand dollars;1 where five hundred dollars was paid for realty worth eight thousand dollars;2 where fifty dollars was paid for land worth five hundred dollars;3 and where nearly five hundred dollars was charged for the trouble of endorsing an insurance policy.4 A conveyance made by a spendthrift, of his life estate in property worth two thousand dollars, for fifty dollars, has been avoided in equity.5 So where A borrowed about two thousand, five hundred dollars by a transaction whereby, in addition to the principal and interest, he was to pay nearly twelve thousand dollars for land not worth six thousand dollars, the consideration was held to be so inadequate that the contract was unconseionable.6 Specific performance has been refused in case of a sale for five hundred and fifty dollars of land worth sixteen hundred dollars,7 or of a contract for exchanging a farm worth about twenty-five thousand dollars for one which was mortgaged to its full value.8 A lease of valuable oil land, which imposes no duty upon the lessee and the consideration for which is one dollar, is said to be unconscionable.9 A release of a claim for personal damages is upon inadequate consideration where compensation is made only for a small part of the time which is actually lost, and no compensation is made for suffering or for permanent disability.10 If an annuity for life is part of the consideration, the question of adequacy depends in part on the expectancy of life of the annuitant if the annuity exceeds the annual income from the property. If the annuity is less than annual income, inadequacy to some extent is there manifest. Hence, the expectancy of life of the annuitant may be considered in determining whether the consideration is inadequate.11 A conveyance of property worth twenty thousand dollars, in return for the assumption of a mortgage for four thousand dollars, giving a note for five thousand dollars and agreeing to pay an annuity of six hundred dollars a year for the life of a woman then over seventy, was held to be on inadequate consideration.12 So a conveyance of property worth from six to eight thousand dollars, in consideration of a cash payment of two hundred and fifty dollars, and an agreement to pay an annuity of five hundred dollars and all doctor's bills for the life of a woman between sixty and seventy, in very poor health, who died in a few weeks, was held to be on inadequate consideration.13 So conveyance of land worth three thousand dollars, on consideration of supporting a feeble grantor of eighty,14 or a conveyance of land worth- ten thousand dollars, on consideration of supporting grantor for life and paying him one hundred dollars annually for life, the grantor being more than seventy years of age,15 had been held to be upon inadequate consideration. A conveyance to a child in consideration of support for life of a grantor aged eighty-six, has been upheld.16 Inadequacy of consideration and unfairness of a contract for support have been held to exist where the promise to furnish support was unenforceable, as where it was made orally when required to be in writing,17 or where the promisor gave no security for performance and had no means of performing outside of the property thus conveyed.18 So a conveyance upon the grantee's verbal promise to pay a lien on the property which the grantor was under no personal obligation to pay, was held to be on inadequate consideration.19
Montana. Interior Securities Co. v. Campbell (Mont.), 178 Pac. 582.
North Dakota. Beebe v. Hanson, - N. D. - , 169 N. W. 31 (statute).
Washington. Pasco Fruit Lands Co. v. Timmerman, 88 Wash. 112, 152 Pac. 675. Inadequacy will be considered as an element in determining whether to grant specific performance or not; and such relief will not be granted unless the party who seeks such relief can show that no injustice will be done to the adversary party. McDermott v. Lindquist (Colo.), 179 Pac. 147. 11 Morrill v. Evereon, 77 Cal. 114, 19 Pac. 190; Prince v. Lamb, 128 Cal. 120, 60 Pac. 689; Klein v. Markarian, 175
Cal. 37, 165 Pac. 3; Darnell v. Alexander, 178 Ky. 404, 199 S. W. 17; Melton v. Cherokee Oil & Gas Co., - Okla. - , 170 Pac. 691.
12 Darnell v. Alexander, 178 Ky. 404, 199 S. W. 17.
13 See Sec. 641.
1 Stephens v. Ozbourne, 107 Tenn. 572, 89 Am. St. Rep. 957, 64 S. W. 902.
2 Rothenbarger v. Rothenbarger, 111 Mo. 1, 19 S. W. 932.
3 Wright v. Wilson, 8 Tenn. (2 Yerg.) 294.
4KeIley v. Coplice, 23 Kan. 474, 33 Am. Dec. 179.
5Ridgeway v. Herbert, 150 Mo. 606, 73 Am. St. Rep. 464, 51 S. W. 1040.
6 Hough v. Hunt, 2 Ohio 495, 15 Am. Dec. 569.
7Phelan v. Neary, 22 S. D. 265, 117 N. W. 142.
8 Koch v. Streuter, 232 111. 584, 83 N. E. 1072.
9 Federal Oil Co. v. Western Oil Co., 112 Fed. 373.
10 Causey v. Seaboard A. L. R. Co., 160 N. Car. 5, L. R. A. 1915E, 1185, 81 S. E. 917.
11 Kennedy v. Currie, 3 Wash. 442, 28 Pac. 1028.
12Bruguier v. Pepin, 106 la. 432, 76 N. W. 808.
13Allore v. Jewell, 94 U. S. 506, 24 L. ed. 260.
14 Johnson v. Stonestreet (Ky.), 66 S. W. 621.
15McKinnon v. Henderson, 145 Ga. 373, 89 S. E. 415.
If the consideration is substantially equal in value to the property or other legal right which is given therefore inadequacy of consideration does not, of course, exist.20 The sale of land worth twenty-three dollars an acre for sixteen dollars an acre;21 a sale of land which is worth about eight hundred dollars for four hundred and fifty dollars;22 a sale for twenty thousand dollars, of mining rights, part of which may possibly not be exercised for many years, and which prove ultimately to be worth seventy thousand dollars;23 a contract to devise certain property to A, if A would marry B, even if the wife and family of the promisor received much less from his estate than they would have received if he had not made such contract;24 or to transfer a number of shares of stock which had no market value and was not readily sold, to B, in consideration of B's going to a city at a considerable distance and selling a considerable amount of the treasury stock of such corporation, which required several months;25 or to pay two hundred dollars for an equity in realty worth less than one thousand dollars, encumbered by some invalid tax sales and a mortgage which was prima facie barred by the Statute of Limitations,26 are none of them on considerations so inadequate that the contract is unenforceable.
16 Davis v. Latta, 94 la. 727, 62 N. W. 17.
17Odell v. Moss, 130 Car. 352, 62 Pac. 555.
18Landfair v. Thompson, 112 Ga. 487, 37 S. E. 717; Thomas v. Crawford, 118 Mich. 253, 76 N. W. 394.
19 Lamb v. Lamb (N. J. Eq.), 23 Atl. 1009.
20Hunholz v. Helz, 141 Wis. 222, 124 N. W. 257.
21 Harrison v. Otley, 101 la. 652, 70 N. W. 724.
22Storthz v. Arnold, 74 Ark. 68, 84 S. W. 1036.
23 Bradley v. Heyward, 164 Fed. 107.
24Sarasohn v. Kamaiky, 193 N. Y. 203, 86 N. E. 20.
25 Wait v. Kern River Mining, Milling & Developing Co., 157 Cal. 16, 106 Pac. 98.
26 Barney v. Chamberlain, 85 Neb. 785, 124 N. W. 482.
Adequacy is to be determined by the value of the forbearance of the promisee and not by the value of the gain to the promisor.27 A contract by which A agrees to convey realty to B, in consideration of which B agrees to build a house thereon, in which the parents of A and B are to reside, is supported by adequate consideration.28