Consideration consists of a mutual exchange of benefits and sacrifices between contracting parties. In the exchange, what is a benefit to the offeree is, at the same time, a sacrifice to the offerer. Likewise, the benefit bargained for by the offerer results in a sacrifice by the offeree. The legal term used for this sacrifice is detriment. A detriment is any of the following: doing (or promising to do) something that one has a legal right not to do; giving up (or promising to give up) something that one has a legal right to keep; and refraining from doing (or promising not to do) something that one half a legal right to do. This last type of detriment is known as forbearance. Consideration has three characteristics:
• promises made during bargaining are dependent on the consideration to be received;
• the consideration must involve something of value; and
• the benefits and detriments promised must be legal. Unless an agreement has been bargained for, the law will not enforce it. An agreement involves a bargained-for exchange when a promise is made in exchange for another promise, a promise is made in exchange for an act, or a promise is made for a forbearance of an act. The concept of bargaining means that each party is hurt in some way if the other party fails to keep a promise. Conversely, each party gains something when the promises are kept and the exchange is made.
It is important only that the parties freely agree on the value and the price. There is, however, an exception to this rule. Courts, at times, give a party relief when the consideration is so outrageous that it shocks the conscience of the public. A court may refuse to enforce a contract or any clause of that contract if it is considered unconscionable, that is, ridiculously inadequate, for example, when bargaining power between the two parties is greatly unequal.
Consideration requires that the benefits and sacrifices promised between the parties be legal. Absence of legality renders the consideration invalid. Thus, a party cannot agree to do or promise to do something that he or she does not have the legal right to do.
Most often, consideration takes the form of money, property, services, or benefits and sacrifices.
A promise not to sue, when there is the right to sue, is enforceable when supported by consideration. Promising not to sue is a forbearance. A promise not to sue, in exchange for an amount of money, is a customary way to settle a pending lawsuit. Settlements of this type are often preferred to expensive and time-consuming litigation.
