Consideration

It is "hornbook" law that a "contract" requires offer, acceptance, and "consideration." But defining and applying the consideration requirement is not straightforward, and much of the caselaw is not particularly illuminating.

The consideration requirement draws the line between promises of gifts (gratuitous promises) and contracts (non-gift promises). This is not so difficult at the ends of the spectrum. For example:

(1) "I will give you my car" is a promise not supported by consideration

but

(2) "I will give you my car for $10,000" is a promise supported by consideration

The first promise (or agreement) is a gift, whereas the second is a promise anticipating a transaction, or a "bargained-for exchange." Think about the first as a "no strings attached" situation. The second involves an "if" -- I will give you my car if you give me $10,000. Notice that this involves an exchange or a transaction between the two parties.

Both of these are the easy cases, but there are some situations in which it is not easy to determine whether there is a "bargained-for exchange." The first case you will read in this section, Hamer v. Sidway, is one of the "chestnuts" of law school casebooks -- you can decide whether it's worth that designation. The promise at issue in the case is one that is not as easy to characterize as the two simple examples above: "I will give you $5000 if you refrain from drinking and smoking until you are 21."

As you read the case, try to determine what test the court uses for determining whether the promise is supported by consideration. How does the court apply that test? And do you think this is the kind of promise that the law should enforce?