This is “Summary and Exercises”, section 7.5 from the book The Legal Environment and Business Law: Master of Accountancy Edition (v. 1.0).
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Most agreements—including contract modification at common law (but not under the Uniform Commercial Code [UCC])—are not binding contracts in the absence of what the law terms “consideration.” Consideration is usually defined as a “legal detriment”—an act, forbearance, or a promise. The act can be the payment of money, the delivery of a service, or the transfer of title to property. Consideration is a legal concept in that it centers on the giving up of a legal right or benefit.
An understanding of consideration is important in many commonplace situations, including those in which (1) a debtor and a creditor enter into an accord that is later disputed, (2) a duty is preexisting, (3) a promise is illusory, and (4) creditors agree to a composition.
Some promises are enforceable without consideration. These include certain promises under the UCC and other circumstances, including (1) contracts barred by the statute of limitations, (2) promises by a bankrupt to repay debts, and (3) situations in which justice will be served by invoking the doctrine of promissory estoppel. Determining whether an agreement should be upheld despite the lack of consideration, technically defined, calls for a diligent assessment of the factual circumstances.
An example of valid consideration is a promise
An unliquidated debt is a debt
The rule that if one party to a contract has not made a binding obligation, the other party is not bound is called
Examples of promises enforceable without consideration include