Contract Law 10 I Nominal Consideration: The Seal and the Model Written | Summary and Q&A

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July 21, 2017
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Contract Law 10 I Nominal Consideration: The Seal and the Model Written

TL;DR

Nominal consideration, such as a payment of $1, is contentious as to whether it is sufficient to fulfill the consideration requirement in a contract.

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Questions & Answers

Q: Why do some argue that nominal consideration should be sufficient for a contract?

This argument is based on the idea that courts should not inquire into the adequacy of consideration, only whether it exists. According to this view, payment of a very small sum should fulfill the consideration requirement.

Q: What is the more modern approach to nominal consideration?

Contemporary courts reject nominal consideration as sufficient because it does not meet the modern conception of consideration, which requires a genuine bargain or inducement. A large disparity in value may indicate that the consideration was not genuinely bargained for.

Q: Are contracts with nominal consideration valid under the restatement rules?

No, according to the second restatement, contracts with nominal consideration are considered sham consideration and do not fulfill the requirement for a valid contract.

Q: What is the significance of the Edwin Farnam Green case?

This case illustrates the widely accepted contemporary approach to consideration. It held that $1 is not sufficient consideration and that parties must actually provide valuable consideration for a contract to be valid.

Summary & Key Takeaways

  • Nominal consideration is the payment of a very small sum, like $1, to satisfy the consideration requirement in a contract.

  • Some courts argue that nominal consideration should be sufficient, as courts typically do not judge the fairness of the bargain struck by the parties.

  • However, contemporary courts reject nominal consideration, deeming it insufficient to create a valid contract.

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