Adequacy of Consideration

In one sentence

Whether the value exchanged in a contract is fair or sufficient in the eyes of the law.

Plain English

Consideration is what each party gives up or gains in a contract. Adequacy of consideration asks whether the value is fair or reasonable. Courts generally do not police whether you got a good deal—if you agreed to trade $100 for a used bicycle, that's your choice, even if the bike is worth less. However, if the consideration is so one-sided that it shocks the conscience (called 'gross inadequacy'), it may be a sign of fraud, duress, or unconscionability, which can make a contract unenforceable.

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Example

A person agrees to sell their car worth $15,000 for $500 to a friend. The consideration is grossly inadequate, which might suggest the seller was pressured or deceived. A court might refuse to enforce this contract if the buyer cannot show the seller freely agreed to this unfair deal.

Used in a sentence

“The court examined the adequacy of consideration and found the exchange of $1 for a piece of land to be suspiciously unequal.”

Related terms

Consideration

Something of value exchanged by each party to make a contract binding.

Legal Value

Something of worth in the eyes of the law that can support a binding contract.

Bargained-for Exchange

A mutual agreement where each party gives something of value in return for something from the other.

Legal Detriment

A loss, burden, or obligation undertaken by one party in exchange for a benefit from the other.

Duress

Forcing someone to sign a contract through threats or coercion.

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

Offeror

The person who makes an offer to enter into a contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.