CONSIDERATION
Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.
Consideration is an essential element for the formation of a contract. It may consist of a
promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other’s performance, the performance is consideration for the promise, while the promise is consideration for
the performance.
Consideration must have a value that can be
objectively determined. A promise, for example,
to make a gift or a promise of love or affection is
not enforceable because of the subjective nature
of the promise.
Traditionally, courts have distinguished
between unilateral and bilateral contracts by
determining whether one or both parties pro-
vided consideration and at what point they pro-
vided the consideration. Bilateral contracts were
said to bind both parties the minute the parties
exchanged promises, as each promise was
deemed sufficient consideration in itself. Unilat-
eral contracts were said to bind only the
promisor and did not bind the promisee unless
the promisee accepted by performing the obliga-
tions specified in the promisor’s offer. Until the
promisee performed, he or she had provided no
consideration under the law.
For example, if someone offered to drive you
to work on Mondays and Tuesdays in exchange
for your promise to return the favor on Wednes-
days and Thursdays, a BILATERAL CONTRACT
would be formed binding both of you once you
provided consideration by accepting those
terms. But if that same person offered to pay you
$10 each day you drove him to work, a unilateral
contract would be formed, binding only upon
the promisor until you provided consideration
by driving him to work on a particular day.
Modern courts have de-emphasized the dis-
tinction between unilateral and bilateral con-
tracts. These courts have found that an offer
may be accepted either by a promise to perform
or by actual performance.An increasing number
of courts have concluded that the traditional
distinction between unilateral and bilateral con-
tracts fails to significantly advance legal analysis
in a growing number of cases where perform-
ance is provided over an extended period of
time.
Suppose you promise to pay someone
$500.00 to paint your house. The promise
sounds like an offer to enter a unilateral con-
tract that binds only you until the promisee
accepts by painting your house. But what con-
stitutes lawful performance under these circum-
stances? The act of beginning to paint your
house or completely finishing the job to your
satisfaction?
Most courts would rule that the act of begin-
ning performance under these circumstances
converts a unilateral contract into a bilateral
contract, requiring both parties to fulfill the
obligations contemplated by the contract. How-
ever, other courts would analyze the facts of each
case so as not to frustrate the reasonable expec-
tations of the parties. In neither of these cases
are the legal rights of the parties ultimately
determined by courts by applying the concepts
of unilateral and bilateral contracts.
In still other jurisdictions, courts have simply expressed a preference for interpreting contracts as creating bilateral obligations in all cases
where no clear evidence suggests that a unilateral
contract was intended. The rule has been
stated that in case of doubt an offer will be presumed
to invite the formation of a bilateral contract
by a promise to perform what the offer
requests, rather than the formation of a unilateral
contract commencing at the time of actual
performance. The bottom line across most jurisdictions
is that as courts have been confronted
by a growing variety of fact patterns involving
complicated contract disputes, courts have
turned away from rigidly applying the concepts
of unilateral and bilateral contracts and moved
towards a more ad hoc approach.
CROSS-REFERENCES
Contracts; Performance; Promise.
