For today’s post we will take a look at the 2nd key element of a contract which is Consideration.
Consideration
Consideration is something of value that each party gives to the other as part of the contract. It can be in the form of money, goods, or services. For a contract to be valid, there must be consideration.
Hamer v. Sidway: In this case, an uncle promised his nephew $5,000 if he refrained from drinking, smoking, and gambling until the age of 21. The nephew complied with the terms of the agreement and reached the age of 21. However, the uncle refused to pay the $5,000. The court held that the agreement was a valid contract because the nephew gave up something of value (his right to drink, smoke, and gamble) in exchange for the uncle’s promise of $5,000.
Here is another case where the consideration or rather the lack of consideration is more subtle.
Alaska Packers’ Association v. Domenico (1902): A group of sailors and fishermen individually signed contracts with the Alaska Packers’ Association “(Association)” and then traveled from San Francisco to Alaska in order to work for the Association. They were each to be paid $50 for the season plus two cents for each red salmon that they caught. Upon arrival in Alaska, the sailors and fishermen demanded $100 for the season instead of the agreed upon $50. Since the Association could not obtain any other workers, the Association agreed to pay the price demanded. At the end of the season, the Association paid each man $50 in accordance with the first agreement, and the workmen initiated this law suit.
Essentially what was at issue in the law suit was whether the second contract had sufficient consideration to be valid.
Sufficient Consideration: One deemed by the law of sufficient value to support an ordinary contract between parties, or one sufficient to support the particular transaction. Black’s Law Dictionary, 6th ed. (1990). Page 307.
The court held that there was not sufficient consideration in the second contract because the sailors and fisherman did not provide anything beyond the original consideration that was agreed to in the original contract. The Association agreed to the demands of the workmen out of necessity. The new agreement was based solely upon the sailors’ and fishermen’s assent to render the exact services that they were already under contract to render. Hence, the new agreement was not supported by new consideration and therefore unenforceable.