If consideration is lacking after contract negotiations, then the bargains worked out by the two would-be parties to a contract are referred to as agreements that lack consideration. An agreement can lack consideration for several reasons.
If a monetary exchange is not believed to be bargained for the courts may determine that the money exchanged does not constitute adequate consideration between the two parties. Money may also be invalidated as a form of consideration in the event the exchange of money is not believed to have been arrived at as the result of an equitable or exhaustive bargain.
In agreements that lack consideration, after court rulings which involve would-be consideration constituted by action or the forbearance of action these acts can be discounted under two circumstances.
The first is if there was a preexisting duty to commit the action or if there was a preexisting duty to forbear the commission of the act. If John promises his fifteen-year-old son he will pay him $500 if he does not smoke marijuana, then a contract will not exist because a contract cannot be formed to compel an individual to commit an action that they are prohibited by law from committing.
However, if John promises his fifteen-year-old son $500 if the son does not smoke marijuana or chew gum between 4 P.M. and 4:10 P.M. for five years, then a legal contract with adequate consideration has been formed. The difference between these two similar agreements is that in the second, John’s son agrees to forbear from committing an act in which he is legally permitted to engage. However, if the son smokes marijuana or chews gum before the contract is concluded, then the contract would become invalidated.
An agreement also lacks consideration if the consideration of one party is provided in return for an action which the other committed prior to entering into the contract. If Kathy pulls Karen out of a burning car, Karen cannot be forced into an agreement where she provides consideration for Kathy’s rescuing her. Consideration can only be for future actions. Whatever happened happened, and whatever has been done is done and so cannot be used as the consideration in a contract.
Past consideration on behalf of either party is invalid for being submitted as grounds for a contractual discussion. If the consideration offered by one of the parties is for an action that has already occurred, then the corresponding agreement that lacks consideration will be found to be unenforceable.