ADEQUACY OF CONSIDERATION; MUTUALITY OF OBLIGATION
If the requirement of consideration is met, there is no
additional requirement of (a) a gain, advantage, or benefit to the promisor or a loss,
disadvantage, or detriment to the promisee; or
(b) equivalence in the values
(c) "mutuality of obligation."
a. Rationale. In such
typical bargains as the ordinary sale of goods each party gives up something of economic value, and the values exchanged are often
roughly or exactly equivalent by standards independent of the particular bargain.... Hence it has
sometimes been said that consideration must consist of a "benefit to the promisor" or a "detriment to
the promisee"; it has frequently been claimed that there was no consideration because the
economic value given in exchange was much less than that of the promise or the promised performance;
"mutuality of obligation" has been said to be essential to a contract. But experience has shown
that these are not essential elements of a bargain or of an enforceable contract....This Section makes
that negation explicit.
b. Benefit and detriment.
Historically, the common law action of debt was said to require a quid pro quo, and that requirement may have led to
statements that consideration must be a benefit to the promisor. But contracts were enforced in the common-law
action of assumpsit without any such requirement; in actions of assumpsit the emphasis was
rather on the harm to the promisee, and detrimental reliance on a promise may still be the basis of
contractual relief. See § 90. But reliance is not essential to the formation of a bargain, and remedies for
breach have long been given in cases of exchange of promise for promise where neither party has begun
c. Exchange of unequal
values. To the extent that the apportionment of productive energy and product in the economy are left to private action, the
parties to transactions are free to fix their own valuations. The resolution of disputes often requires a
determination of value in the more general sense of market value, and such values are commonly
fixed as an approximation based on a multitude of private valuations. But in many situations there
is no reliable external standard of value, or the general standard is inappropriate to the precise
circumstances of the parties. Valuation is left to private action in part because the parties are
thought to be better able than others to evaluate the circumstances of particular transactions. In any event, they
are not ordinarily bound to follow the valuations of others.
Ordinarily, therefore, courts do not inquire into the adequacy
of consideration. This is particularly so when one or both of the values exchanged are
uncertain or difficult to measure....
e. Effects of gross
inadequacy. Although the requirement of consideration may be met despite a great difference in the values exchanged, gross inadequacy of
consideration may be relevant in the application of other rules. Inadequacy "such as shocks the
conscience" is often said to be a "badge of fraud," justifying a denial of specific performance. See
§364(1)(c). Inadequacy may also help to justify rescission or cancellation on the ground of lack of
capacity..., mistake, misrepresentation, duress or undue influence....
(c) of this Section negates any supposed requirement of "mutuality of obligation." Such a requirement has sometimes been asserted in
the form, "Both parties must be bound or neither is bound." That statement is obviously
erroneous as applied to an exchange of promise for performance; it is equally inapplicable to contracts
governed by §§82-94 ....