CONTRACTS-NOMINAL CONSIDERATION

Authors

Abstract

A question of considerable practical importance upon which the authorities are singularly unsatisfactory is that as to whether a consideration which is nominal merely is legally sufficient to support a promise and make it binding. The question is one which strikes at the very root of the doctrine of consideration. Is consideration in essence a mere formality-something of value in the eyes of the law given, suffered, or done in exchange for the promise as a formal element in the formation of a contract-or is it of the substance of the transaction, i.e., something of value in the eyes of the law given, suffered, or done as the real price or motive, or some part at least of the real price or motive, which induces the making of the promise? In practice the question comes up quite frequently in connection with so called option agreements and in agreements of guaranty. In such cases it is not unusual for the promisee to pay a small sum such as $1 as consideration, it being clearly understood by both parties that the $1 is a mere formality to satisfy the legal requirement of consideration. Of course if the $1 is paid as the substantial price or as a part of the price for the promise, i.e., if it is at least part of the motive which induces the promisor to make the promise, as may in rare instances be the case, then the question which has been stated does not arise.

Recommended Citation

CONTRACTS-NOMINAL CONSIDERATION, 27 Mich. L. Rev. 314 (1929).
Available at: https://repository.law.umich.edu/mlr/vol27/iss3/5