Legal Definitions - consideration, failure of

Failure of Consideration occurs in contract law when one party does not receive the promised benefit or value (known as 'consideration') that they were expecting in exchange for their own promise or performance. This situation can excuse the party who didn't receive the consideration from their contractual obligations, as the fundamental exchange that forms the basis of the agreement has not materialized as intended.

Here are some examples illustrating the concept of failure of consideration:

• Example 1: Unperformed Services

  A small business owner hires a marketing consultant to develop a new advertising campaign for a fee of $5,000, paying an upfront deposit of $1,500. The consultant promises to deliver the campaign within three weeks. However, after receiving the deposit, the consultant becomes unresponsive and fails to deliver any part of the promised campaign by the deadline.

  Explanation: The business owner's consideration was the payment of $5,000 (partially paid, partially promised). The consultant's consideration was the promise to develop and deliver the advertising campaign. Since the consultant failed to provide any of the promised services, the business owner experienced a failure of consideration. This would likely excuse the business owner from paying the remaining $3,500 and entitle them to a refund of their $1,500 deposit, as they did not receive the value they bargained for.

• Example 2: Defective Goods

  A bakery orders 50 pounds of premium, organic flour from a supplier, agreeing to pay upon delivery. When the flour arrives, the bakery discovers it is infested with weevils and completely unusable for baking.

  Explanation: The bakery's consideration was the promise to pay for the flour. The supplier's consideration was the promise to deliver 50 pounds of premium, organic flour. Although flour was delivered, it was not of the quality promised and was unfit for its intended purpose, rendering it worthless to the bakery. This constitutes a failure of consideration, allowing the bakery to refuse payment and reject the shipment, as they did not receive the valuable goods they contracted for.

• Example 3: Unavailable Amenities in a Lease

  A tenant signs a one-year lease for an apartment in a building, specifically choosing it because the lease agreement prominently advertised access to a state-of-the-art fitness center and a rooftop garden. After moving in, the tenant discovers that both the fitness center and rooftop garden have been permanently closed by the landlord due to unforeseen structural issues, and no alternative facilities are provided.

  Explanation: The tenant's consideration is the monthly rent payments. The landlord's consideration includes providing the apartment *and* access to the promised amenities. While the tenant received the apartment, a significant and material part of the agreed-upon value (the fitness center and rooftop garden access) was not provided and cannot be provided. This could be argued as a failure of consideration, potentially allowing the tenant to seek a reduction in rent or even terminate the lease, as they are not receiving the full benefit they bargained for when entering the agreement.