Consideration in contract law is the value or benefit given by each party in exchange for the other party’s value or benefit—such as money in exchange for products or services, or mutual promises exchanged. Consideration is often referred to as the bargained-for exchange in which one consideration is exchanged for another consideration.
A mere promise to do or refrain from doing something that lacks consideration in the form of a value or benefit provided by the other party (a return promise) is not a contract and is generally not enforceable. One exception to this rule may be if one party promises to do or refrain from doing something, and the second party relies on that promise to its detriment (by spending money, for example), the detrimental reliance may create an enforceable contract.
And if the consideration for a contract is so insubstantial that it is worthless, the contract is said to be illusory and is not enforceable.
In Texas, as in other states, consideration is a fundamental component of a legally binding contract. Consideration refers to something of value that is exchanged between the parties involved in the contract. This can be in the form of money, goods, services, or a promise to act or refrain from acting. The key aspect is that the consideration must be bargained for and involve a mutual exchange. Without valid consideration, a contract may be deemed unenforceable. However, Texas recognizes the doctrine of promissory estoppel, which means that if one party makes a promise and the other party relies on that promise to their detriment, the promise may be enforceable even without consideration. This is to prevent injustice due to the relying party's reasonable assumption that the promise would be fulfilled. Lastly, if the consideration is nominal or so insignificant that it can be considered illusory, the contract may not be enforceable in Texas because it lacks the substance of a true exchange. Contracts with illusory promises do not meet the requirement for consideration and therefore may not be legally binding.
