Brief Fact Summary.
Browning (Plaintiff) and Johnson (Defendant) entered into a contract to cancel a sales contract between the two men in exchange for $40,000. Plaintiff claimed the contract was not supported by consideration.
Synopsis of Rule of Law.
When a unilateral contract includes one party incurring a detriment in exchange for the other party’s promise, the consideration is sufficient even when it may not be of comparable value to the promise.
A unilateral contract is one in which a promise is given in exchange for an act or forbearance.View Full Point of Law
Plaintiff agreed to sell Defendant his osteopathic practice and equipment in a contract of sale. Plaintiff then changed his mind and asked to be released from the contract. The parties entered into a new contract where Plaintiff promised to pay Defendant $40,000 to cancel the sale. Plaintiff later regretted this second contract and filed an action for declaratory judgment and restitution, arguing that the contract was not supported by consideration and was based upon a mutual mistake. The trial court held that the sale contract lacked mutuality and was unenforceable, but that the cancellation contract was supported by “adequate” consideration and was enforceable. Plaintiff appealed.
In a unilateral contract that exchanges a detriment for a promise supported by sufficient consideration to be enforceable, even where the consideration may not be of equivalent value to the promise?
(Langenbach, J.) Yes. When a unilateral contract includes one party incurring a detriment in exchange for the other party’s promise, the consideration is sufficient even when it may not be of comparable value to the promise. There is a difference between “adequate” and “sufficient” consideration in contract analysis. “Adequate” consideration is of comparative value to the promise given. “Sufficient” consideration is enough to support a promise without necessarily being of equal value. Here, Plaintiff bargained for Defendant’s act of releasing him from the sale contract. The issue is not whether this act was worth the $40,000 provided by Plaintiff, but whether this act was sufficient consideration to support Plaintiff’s promise to pay. It is not clear whether the trial court used the term “adequate” to mean sufficient consideration to support the promise or to indicate that the promise and consideration were of comparable value to not constitute fraud. Either way, without getting into the comparable value of the act and promise exchanged, the consideration provided by Defendant was certainly sufficient to support Plaintiff’s promise to pay. The contract is a unilateral contract, meaning that a promise was given in exchange for an act or restraint. Consideration is sufficient in a unilateral contract when the promisee incurs a detriment or the promisor receives a benefit. In this case, both parties had equal bargaining power and were represented by counsel. The bargain was freely entered. Defendant incurred a detriment, giving up the sale contract, at Plaintiff’s request. This was sufficient consideration for Plaintiff’s promise to pay. The contract is enforceable. Affirmed.
The Restatement (Second) of Contracts has eliminated the distinction between “sufficient” and “adequate” consideration. If a performance is bargained for, there is consideration. So long as the consideration has some value, there is no additional requirement that the items or acts exchanged be equivalent. This determination would be difficult anyway, as value is frequently based upon subjective considerations of the parties involved.