What is insufficient consideration?

Studying US contract law you will probably learn that consideration must be “sufficient. ”  If there is insufficient consideration a court may say there is no contract.  But this does not mean that there must be “enough”  consideration.  Consideration must be “legally” sufficient.

What is consideration?

To form a contract in the United States, there must be consideration.  Consideration means that one party exchanges something of value in return for something of value from the other party.  That is, one party provides something of value to the other party to induce a promise from the other party or to induce performance from the other party.  If Patty promises David  that she’ll pay him $100, and David promises Patty in return that he’ll paint her fence, the parties formed a contract because they have each exchanged something of value in return for something of value from the other party,

Courts Distinguish Between Inadequate Consideration and Legally Insufficient Consideration

Inadequate consideration refers to a situation where one party argues that the value that it provided the other party is greater than the value it was provided in return.  Therefore, the consideration was inadequate.

The general rule in the US is that courts don’t worry about the amount of consideration when determining whether the parties formed  a contract.  For example, if David offers to clean Patty’s car for $75 a court probably won’t worry about whether the job is worth more or less money.  As long as no deception was involved it probably won’t matter if Patty should have paid $10 or $100.  Court don’t usually concern themselves with the amount of consideration.

But courts will worry about legally sufficient consideration.  For example, past consideration is not legally sufficient consideration. If David gives Patty an apple on Monday as a present and Patty is so happy she says she’ll give David a pear the following day, there is no contract.  Patty does not have to give David a pear on Tuesday.   Patty and David did not agree to give a pear in exchange for an apple.

Likewise, let’s say David and Patty agree that David will mow Patty’s lawn once a week for $50 per week for three months  One day, David suddenly demands $75 to complete the job. Patty probably does not have to pay the $75.  Because David was already obligated to mow the lawn, his promise to mow the lawn (but for a higher price) was probably legally insufficient consideration.  But keep in mind that there are always exceptions.

Below is an older video on an example of legally insufficient consideration: