Sec. 29. Definition. During the early history of contracts
some formality was required to accompany a promise before the
courts would enforce it. This feature early took the form of a
waxen impression, which followed the promisor's signature, and
was known as a seal. Although the seal is now a mere scroll, or
L.S., it is still required in certain cases. The doctrine of considera-
tion, which made possible the enforcement of an oral promise, orig-
inated during the fifteenth century. This doctrine was gradually
developed until such time as it practically supplanted the use of the
seal. In a few states the seal is still effective as a consideration for
the purpose of giving effect to a promise, although by legislative
enactment in the majority of the states the seal is merely presump-
tive evidence of consideration. Generally speaking, therefore, con-
sideration is a requisite of all contracts. In order that the promisee
may enforce the promisor's promise, the promise itself must be sup-
ported by some consideration. 1
To illustrate, if A merely promises to make a gift of $500 to B,
the promise will not be enforced by the courts ; B has furnished no
consideration to support it. In other words, there must be mu-
tuality each party doing or agreeing to do something.
Consideration has been defined in various ways. It may be
something of detriment to the promisee or of benefit to the prom-
isor. Perhaps the most satisfactory definition is: Consideration
constitutes the waiving of, or a promise to waive, a legal rights at the
request of another. 2 It is, in reality, the price which the offeror de-
mands for agreeing to carry out his part of the contract.
Sec. 30. Adequacy of consideration. The value of any given
consideration is usually unimportant. So long as the promisee
gives the consideration demanded by the promisor, the courts are
satisfied. Although the act requested is of little value, and the
promise given is relatively of much greater value, the courts seldom
give any attention to that fact, except as it may be some evidence
of fraud. Nevertheless, it should be borne in mind that a promise
unsupported by any consideration and which exacts no action or
promise by the promisee is unenforceable. Some consideration
must exist. A promise in the nature of a gratuity is unenforceable.
The mere fact that the recipient of the proposed gift must take cer-
tain steps to place himself in a position to receive it cannot be sub-
stituted for consideration. If, however, the promisee is requested
to act in a certain manner, and the action is considered to be the
price paid for the promise, the taking of such action as is requested
will function as consideration.
A gift, once it has been executed, cannot be set aside by the donor
because of the lack of consideration. Once a gift has been com-
pleted, the property involved belongs to the donee.
Sec. 31. Payment of a lesser sum. There is one exception to
the general rule relating to the adequacy of consideration. If the
consideration on each side involves money money given to satisfy
a money debt or to support a promise to pay money in the future
the consideration given must equal in value the promise made.
Because of this rule an existing debt which is due cannot be settled
by doing no more than making payment of, or promising to make
payment of, less than the amount owing. Although a creditor
agrees to receive half of the debt in full satisfaction thereof, he may
later reject the proffered payment and bring suit for the full
amount. He may also accept the partial payment and later sue for
the balance unless the debt has been discharged by some other rule
Where the debt consists of a note or written agreement, the can-
cellation and return of the evidence of indebtedness will act to dis-
charge the debt. There are also a number of cases to the effect
that, if the partial payment is accompanied by a receipt in full for
the account, an executed gift is made of the unpaid balance. This
is particularly true where the receipt or writing indicates in some
way an intention to make a gift of the unpaid portion.
Sec. 32. Lesser sum and other consideration. Payment of a
lesser sum, where accompanied by additional consideration, will
discharge a larger sum. Since the value of consideration is ordi-
narily unimportant, the added consideration may take any form,
Because the general rule recorded in the previous section has proved
to be unpopular, the courts have seized upon almost any act as sup-
plying the needed consideration. Payment in advance of the due
date, payment at a place other than that agreed upon, surrender of
the privilege of bankruptcy, and the giving of a secured note for less
than the face of the debt have all been found sufficient to discharge
a larger amount than that paid.
The mere giving of a negotiable note for a lesser sum than the
entire debt will not release the debtor of his duty to pay the balance.
The note is merely a promise to pay, and consequently the mere
promise to pay less than is due will not discharge the debt.
Sec. 33. Disputed claims. In a controversy between two par-
ties over the amount of indebtedness owing, it is possible to com-
promise at any figure which is not less than both parties admit to be
correct. 3 That is, if A denies that he owes over fifty dollars, while
B insists that A owes him one hundred dollars, a settlement at fifty
dollars or more is binding. Even though at a later date B offers
convincing evidence that the amount was in excess of the agreed
figure, no recovery can be had. The consideration for B's promise
to settle for less than one hundred dollars was A* a surrender of the
right to enter court in an attempt to reduce the figure below that
Sec. 34. Composition of creditors. When all of the creditors
agree with each other and with their debtor to accept a certain per-
centage of their claims in full satisfaction thereof, the agreement
is binding. This combined agreement is known as a composition of
creditors and bars them from enforcing the balance of their claims.
Under our Bankruptcy Act a composition of creditors may take
place before or after bankruptcy proceedings have been instituted.
Sec. 35. Gratuitous promises. A mere promise to give a sum
of money to some worthy or charitable cause is unenforceable. It
is not supported by any consideration. In order to avoid the harsh
effect of this rule, the courts have grasped at various theories which
would enable them to enforce the promise. The majority of the
courts today enforce such promises as soon as the beneficiary of
the promise has incurred liabilities in reliance upon the promise. 4
The offeror may, however, withdraw his offer at any time before ob-
ligations have been incurred in reliance thereon. Only those gra-
tuitous promises which are made for a definite purpose are thus
enforceable. A promise to make a gift of a thousand dollars to an
individual would not be enforceable, although the latter did incur
liabilities in reliance thereon.
Some states enforce gratuitous promises when other promises are
made at the same time, especially where the paper signed provides
that each promise is made in consideration of the promise of the
other parties appearing thereon.
Sec. 36. Performance of contractual obligation. An agree-
ment which offers for its consideration the performance of an exist-
ing contractual duty by one of the parties is unenforceable. Per-
formance by the promisee is nothing more than the courts would
compel him to do. He has waived no legal rights. Hence, an owner
who promises a contractor an additional sum, provided the con-
tractor completes a job already contracted for, is not legally bound
'Nardine v. Kraft Cheese Co., 1944 (Ind. App.) 52 N.E.(2) 634; p. 483.
4 Furman University v. Waller et al., 1923, 124 S.C. 68, 117 S.E. 357; p. 484.
to pay the additional sum. If, however, the promisee agrees to do
anything other than or different from what the original contract de-
manded, ample consideration is provided. Therefore, the contrac-
tor who agrees to complete his work at a different date or in a dif-
ferent manner may always recover on a promise of the owner to
pay an additional amount. Furthermore, the cancellation of the
original contract and the formation of an entirely new agreement
is always possible.
Some conflict exists concerning those cases in which the promisee
is under a duty to perform for some third party. The majority of
the courts hold that a promise made to a third party to perform
an existing contractual obligation offers no consideration. Thus, a
promise by a third party to a contractor to pay an additional sum
upon the latter's completion of a certain construction job is un-
enforceable, although the contractor executes his contract, when
otherwise he would have refused to perform. Here also, if any-
thing new or different is requested, the contract becomes binding
because of the new consideration.
Sec. 37. Unforeseen difficulties. A promise to pay additional
compensation for the completion of a contract is usually deemed
binding where unforeseen difficulties were encountered after the
original agreement was entered into. 5 In such a case the result is
most often justified on the theory that in effect the parties rescinded
the old agreement, because of the new circumstances, and formed a
new one. Even in such cases, however, it is safest for the contrac-
tor the party under duty to perform to have some new consider-
ation provided for or to rescind the old agreement and execute a
new one. Unforeseen difficulties are those which seldom occur and
are extraordinary in nature. Price changes, strikes, bad weather,
and shortage of material are not unforeseeable. However, even
though difficulties are unforeseen, the promisor is obligated to per-
form at the original contract price unless the other party indicates
a willingness to make an adjustment.
Sec. 38. Performance of statutory duty. The performance of
some duty imposed by statute will not constitute a valid considera-
tion for another's promise. Thus, a promise to appear as a witness
at a trial, or an arrest, or a promise to make an arrest, by a public
officer, will not support a promise to pay money therefor. If the
party promises to go beyond what the canadian law demands, then he has
waived a legal right and consideration has been given.
Sec. 39. Forbearance to sue. Forbearance to sue, or a prom-
ise to forbear, where requested, will support a promise by another.
Surrender of the right to bring suit acts as the
B Linz v. Schuck, 1907, 106 Mel. 220, 67 Atl. 286; p. 485.
Should the promisor want assurance that the promisee will not in-
stitute legal proceedings, there must be a promise to forbear. Mere
inaction in such a case will not suffice, since the promisor wants a
bilateral agreement rather than a unilateral one. Perhaps in most
cases involving the surrender of suit a bilateral agreement is
desired and, thus, mere refraining is inadequate to support the
A claim must be made in good faith for its surrender to act as
consideration. Consequently, if one makes a claim in bad faith
without any intention of prosecuting suit, the waiver of suit will
not make the promise of the other party to settle for a certain sum
enforceable. Forbearance to sue constitutes consideration only if
the party forbearing thinks he has a genuine cause of action.
Whether he could win in court is unimportant so long as he thinks
he has cause for action.
Sec. 40. Mutuality of engagement or illusory promises. A
promise for a promise may, and usually does, constitute sufficient
consideration. However, both must be bound or neither is bound.
Therefore, if one of the promises, when analyzed, is not a promise
and does not clothe the promisor^vith a duty to act or refrain from
acting, no contract results. 6 Promises which appear to assure
something of value but, when fully understood, do not embody such
an assurance, are called illusory promises, because real mutuality is
lacking. Let us consider the following agreement: B promises to
purchase from S all of *S's ten-pound jelly pails that he wants at
fifty cents a dozen, and S promises to sell all that B wants at that
price. Careful analysis of this agreement makes it clear that B has
not agreed to buy any of the pails. He has promised to purchase
only in case he wants them, which is equivalent to no promise at all.
Since B has thus given S no consideration for his promise, B's prom-
ise being illusory, S is at liberty to withdraw, and his withdrawal
becomes effective as soon as notice thereof reaches B. Until with-
drawn by S, the above agreement stands as a continuing offer on his
part. Consequently, any orders received prior to revocation must
be filled at the quoted price.
In the above case, if B had been engaged in a business requiring
the use of jelly pails of the size indicated and he had agreed to buy
his requirements of pails from S, the agreement would have been
binding. Whenever the buyer is certain to have needs or require-
ments, an agreement to purchase all of one's needs or requirements,
will support the promise to supply them, even though the amount
is uncertain, since past experience will, in a general way, aid the
seller in estimating the number required.
6 Bailey et al. v. Austrian, 1873, 19 Minn. 465; p. 487.
Often a buyer purchases a limited amount of goods and obtains
a guaranteed price on other goods of like character that are ordered
within an agreed time. Such an agreement constitutes an option
as to the future goods, the consideration for the option being the
purchase of some of the goods. The seller in these cases is under
a duty to deliver the goods ordered within the agreed period.
Sec. 41. Past consideration. Past consideration is insufficient
to support a present promise. The consideration must consist of
some present waiver of a legal right. Some act which has taken
place in the past will not suffice. 7 Hence, a warranty concerning
certain goods made after the sale has taken place is not enforceable.
A seeming exception to this rule exists in those cases in which one
person requests another to perform some work for him without
definitely specifying the compensation to be paid. After the work
is completed the parties agreed upon a certain sum to be paid for
the work. It appears as if the work done in the past furnishes the
consideration to support the promise made later to pay a definite
sum. This assumption is scarcely correct. As soon as the work is
completed, the party performing it is entitled to reasonable com-
pensation. Later he surrenders this right in consideration of a
promise to pay a definite sum. It is the surrender of this right to
reasonable compensation, rather than the work, which forms the
consideration for the promise to pay a definite sum.
Sec. 42. Moral consideration. A moral duty, however strong
it may be, will never constitute consideration. An extreme case
arises when a benefit is unintentionally conferred upon an individ-
ual and he later promises to pay for the benefit he has received.
His promise is unsupported by any valid consideration and cannot
therefore be enforced.
Sec. 43. New promise after bankruptcy. After a debtor has
been discharged from his obligations through bankruptcy proceed-
ings, a new promise to pay his old obligations is sufficient to revive
them. No new consideration is necessary. It is sometimes said
that, in those cases in which an obligation is cut off by a positive
rule of canadian lawyers, no consideration is needed to support the new promise
to pay. The promise to pay in such cases must be definite and
cannot be implied from a mere admission of the debt or from part
payment. The promise must also be made directly to the creditor
or his agent.
Sec. 44. Statute of Limitations. A promise to pay a debt
which has been outlawed by the Statute of Limitations is enforce-
7 A. F. Savage et al. v. Markey Machinery Co., 1924, 128 Wash. 433, 223
40 CONTRACTS ,
able, although no new consideration is given. 8 In this case an un-
qualified acknowledgment of the existence of the debt will imply
a promise to pay. The same is true of a voluntary part payment. 9
If the new promise is conditioned in any manner by the debtor, his
promise cannot be enforced until the contingency has happened.
Some states, by statute, require these promises to be written before
they can be enforced. The statutes of particular states should be
Review Questions and Problems
1. Why is consideration an essential element of a contract?
2. Give a definition of consideration.
3. A contracted to sell to B a certain farm for $25 an acre. Later he
refused to carry out the agreement. His defense was that the farm was
worth much more than the contract price. May he thus set up failure of
4. Mrs. B promised the pastor of X Church that she would donate to
the trustees of the church $2,500 with which to pay off a mortgage, if they
would obtain subscriptions for the balance of the mortgage. The bal-
ance was subscribed, but Mrs. B refused to pay her share. Were the
trustees allowed to recover on the promise?
5. A continually quarreled with his father because the latter had given
more to the other children than he had to A. The father promised not to
collect a note for $500 if A ceased to complain. Did the failure to com-
plain act as consideration for the father's promise?
6. B y being insolvent and faced with the possibility of bankruptcy,
called all his creditors together and agreed to refrain from bankruptcy
and to pay each one of them 10 cents on the dollar, if they would release
him. All the creditors agreed to the proposition. The payment was
made. Later, B became prosperous, and C, one of the creditors, at-
tempted to recover the balance of his claim. Had C any grounds for
trying to collect?
7. What is meant by past consideration? Is it ever sufficient to sup-
port a present promise?
8. A contracts to build a barn for B at a cost of $1,000. Because of
an increase in the cost of labor and materials, -A refuses to perform. B
promises to pay A an additional $300 if the barn is completed. May A
recover on this promise, assuming that the barn is completed? Suppose
A had agreed to complete the barn within a certain date at the time the
second promise was made. Would the result have been the same?
9. What is an illusory promise? Is a promise of a manufacturer to
furnish all of the Balata belting required by a retailer binding? Assume
that the retailer promises to purchase all of that kind of belting he needs
at an agreed price, but that he is not, by the nature of his business, re-
quired to use Balata belting.
8 Pittman v. Elder, 1886, 76 Ga. 371 ; p. 488.
'Nilsson et al. v. Kielman et al., 1945 (S.D.) 17 N.W.(2) 918; p. 489
10. May a sheriff recover a reward offered for an arrest, the arrest be-
ing one that his duties require him to make?
11. A owed B $500 which was past due, and, since B was having diffi-
culty in collecting the account, he accepted $400 in full satisfaction, at
the same time giving A a receipt in full of the account, which stated that
the $100 balance had been forgiven. At a later date, A was able to pay,
and B brought suit to recover the balance. Should he have been allowed
12. An agreement was entered into whereby the plaintiff promised to
refine a minimum of 400 barrels and a maximum of 1,500 barrels of oil a
day at certain agreed rates becausfe the defendant desired to have certain
of its oil refined in the plaintiff's plant. The agreement was signed by
both parties but contained no definite promise on the part of the defend-
ant to supply any oil for refining. Was the defendant, who failed to sup-
ply any oil for refining, liable?