Legal Definitions - bargain theory of consideration

The bargain theory of consideration is a foundational principle in contract law that helps determine whether a promise is legally enforceable. It states that for a promise to be considered a valid part of a contract, there must be an exchange where each party gives something of value (either a promise to do something, a promise not to do something, or an actual action) *in return for* the other party's promise or action. Essentially, what one party offers must be the "price" or "inducement" for what the other party offers, creating a mutual exchange or "bargain."

This theory emphasizes that the parties must have intended to exchange their promises or performances for each other. It's not enough for one party to simply make a gift or perform a favor; there must be a reciprocal arrangement where each side's contribution motivates the other's.

• Example 1: Home Renovation Project

  Imagine a homeowner, Sarah, wants to remodel her kitchen. She contacts a contractor, David, who promises to complete the renovation according to specific plans and within a certain timeframe. In return, Sarah promises to pay David $25,000 upon completion. Here, David's promise to renovate is given in exchange for Sarah's promise to pay, and Sarah's promise to pay is given in exchange for David's promise to renovate.

  Illustration: This scenario perfectly illustrates the bargain theory. The renovation service is the "consideration" David provides for Sarah's payment, and Sarah's payment is the "consideration" she provides for David's service. Both parties' promises are mutually induced; they are the "price" for each other, forming a legally binding bargain.

• Example 2: Online Course Enrollment

  A student, Alex, enrolls in an online coding bootcamp. The bootcamp provider promises to grant Alex access to all course materials, live instruction, and career support services for six months. In return, Alex promises to pay a tuition fee of $3,000.

  Illustration: The bootcamp's promise of educational services and support is the consideration offered to Alex, and Alex's promise to pay the tuition fee is the consideration offered to the bootcamp. Each party's promise is made specifically to obtain the other party's promise, demonstrating the "bargained-for" exchange required by the theory.

• Example 3: Sale of a Collectible Item

  An antique dealer, Mr. Henderson, offers to sell a rare vintage watch to a collector, Ms. Chen, for $10,000. Ms. Chen agrees to purchase the watch at that price. Mr. Henderson promises to transfer ownership of the watch, and Ms. Chen promises to pay the agreed-upon sum.

  Illustration: The vintage watch is the consideration Mr. Henderson provides, and the $10,000 payment is the consideration Ms. Chen provides. Both the transfer of the watch and the payment are specifically bargained for and exchanged between the parties. Neither party would provide their item or money without the expectation of receiving the other's, fulfilling the requirements of the bargain theory of consideration.