ADEQUACY OF CONSIDERATION
ADEQUACY OF CONSIDERATION
The court does not weigh whether you made a good bargain. Suppose Donna purchases a flat-screen TV from Celia, a friend in her business law class. Donna pays $500 for the TV but later realizes it is worth less than $100! May Donna sue Celia? Typically, the answer is no. It is Donna’s responsibility to do her research and determine what price she should pay. The court will not set aside the sale because she made a bad deal. Conversely, if the court believes fraud or undue influence occurred, the court may look at adequacy of consideration. (For example, suppose a person divests himself of all his assets for pennies on the dollar and then declares bankruptcy—the court would likely review the consideration paid to determine whether there was fraud by the debtor against the creditors.)
Legal Principle: The court seldom considers adequacy of consideration.
Is a promise to refrain from something you are legally entitled to do appropriate consideration for a contract? See Case 15-2.
| CASE 15-2 | HAMER v. SIDWAY COURT OF APPEALS OF NEW YORK 124 N.Y. 538 (1891) |
| Plaintiff sought to enforce against the defendant estate a promise made by his now-deceased uncle to pay plaintiff a sum of money if plaintiff refrained from the use of alcohol and tobacco for a period of years. Plaintiff so refrained and sought recovery of the sum promised.
J. PARKER: In 1869, William Story, 2d, promised his nephew that if he refrained from drinking liquor, using tobacco, swearing, and playing cards or billiards for money until he was 21 years of age, then he would pay him the sum of $5,000. William Story, the nephew, agreed and fully performed. The defendant (the deceased uncle’s estate) now contends that the contract was without consideration to support it, and, therefore, invalid. He asserts that the nephew, by refraining from the use of liquor and tobacco, was not harmed but benefited; that that which he did was best for him to do independently of his uncle’s promise, and insists that it follows that unless the nephew was benefited, the contract was without consideration. This contention, if well founded, would seem to leave open for controversy in many cases whether that which the promisee did or omitted to do was, in fact, of such benefit to him as to leave no consideration to support the enforcement of the promisor’s agreement. Such a rule could not be tolerated, and is without foundation in the law. Consideration means not so much that one party is profiting as that the other abandons some legal right in the present or limits his legal freedom of action in the future. Now, applying this rule to the facts before us, the promisee used tobacco, occasionally drank liquor, and he had a legal right to do so. He abandoned that right for a period of years based upon the promise of his uncle that for such forbearance he would give him $5,000. We need not speculate on the effort which may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle’s agreement. Now, having fully performed the conditions imposed, it makes no difference whether such performance was actually a benefit to the promisor, and the court will not inquire into it. Even if it were a proper subject of inquiry, we see nothing in this record that would permit a determination that the uncle was not benefited in a legal sense. It is deemed established for the purposes of this appeal, that on January 31, 1875, defendant’s testator was indebted to William E. Story, 2d, in the sum of $5,000. All concur. |
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| The order reversing the trial court judgment in favor of plaintiff is reversed on the grounds that plaintiff’s promise to abandon his legal right to use tobacco and alcohol was sufficient consideration to enforce the contract. | ||||||
What difference would it have made in this case had the nephew not had the legal right to drink or smoke? Why is this question crucial to the decision? |
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