Contracts and Sales Multistate Bar Practice Exam

When will courts typically inquire into the adequacy of consideration?

1. When the contract is deemed unconscionable

2. When one party has a significantly lower bargaining power

3. When consideration is completely devoid of value

4. When the parties are not in equal standing

The correct answer is: When consideration is completely devoid of value

Courts typically inquire into the adequacy of consideration when consideration is completely devoid of value. This principle is rooted in the idea that a valid contract requires legal consideration, which means that each party must provide something of value in the transaction. If the consideration given by one party is so minimal that it has no legal value (for example, a promise to give one dollar for something worth thousands), it raises a red flag for the court. Judges generally do not assess whether the bargain is fair or whether one party received better value than the other; instead, they look for the presence of consideration. Therefore, the inquiry is focused on whether the consideration is enough to support the contract, rather than judging the fairness or equity of the exchange. This approach encourages parties to enter into agreements with the autonomy to negotiate terms, which is a fundamental principle in contract law. In contrast, other scenarios presented, such as unconscionability or disparities in bargaining power, focus more on the fairness and the conditions under which the contract was formed rather than solely examining the adequacy of consideration.