Legal Definitions - inadequate consideration

Definition: Inadequate consideration refers to a situation where the value of the consideration exchanged in a contract is not fair or reasonable under the circumstances of the agreement. Consideration is something of value that is bargained for and received by a promisor from a promisee, and it is necessary for an agreement to be enforceable.

Example: A agrees to sell his car to B for $1. This is an example of inadequate consideration because the value of the car is much higher than $1. The transaction may be considered a gift or a fraud, and it may not be enforceable.

Explanation: In this example, the value of the car is not commensurate with the amount of consideration exchanged. The consideration is inadequate because it does not reflect the fair value of the car. As a result, the transaction may not be enforceable, and it may be considered a gift or a fraud. Inadequate consideration can render a contract unenforceable because it suggests that the parties did not enter into the agreement with a meeting of the minds or with the intention to create a legally binding contract.