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.
The existence of consideration is what distinguishes an enforceable contract from a promise to make a gift. Because a gift is a voluntary, gratuitous transfer of property from one person to another—without something of value promised in return—the failure to fulfill a promise to make a gift is not enforceable as a breach of contract, as there is no consideration for the promise to make the gift.
In South Dakota, as in other states, consideration is a fundamental component of a legally binding contract. Consideration refers to something of value that is exchanged between parties when entering into a contract. It can be a payment, service, or a promise to perform or refrain from a particular action. The consideration must be something that the parties agree upon and is the reason for entering into the contract. Without consideration, a contract may not be enforceable. South Dakota recognizes the concept of 'bargained-for exchange,' where each party's consideration is given in response to the other's. However, if a promise is made without consideration, it is generally not enforceable unless there is detrimental reliance, meaning one party has relied on the promise to their detriment. This could potentially create an enforceable obligation under the doctrine of promissory estoppel. Contracts with illusory or insubstantial consideration may be deemed unenforceable in South Dakota because they lack the necessary element of a bargained-for exchange. Lastly, promises to make a gift are not enforceable as contracts in South Dakota because they lack consideration; a gift is a voluntary transfer without an exchange of value.