Consideration Doctrine and the Updating Problem

Richard Warner

Restatement -- bargain theory 1. A contract is a legally enforceable promise

(§1). 2. A promise is legally enforceable only when

there is consideration for it (§ 17(1) - (2)). 3. The consideration may be another promise

or a performance (§3, §71). 4. A promise or performance is consideration

when it is "bargained for" (§71(1) ). 5. A promise or performance is bargained for

"if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise" (§71(2)).

$3000

Nothing from Charley

One way exchange

Two way exchange

Personal, private

CommercialParadigm examples of consideration

In Re Zappos

A hacker attacked Zappos and attempted to download personal information about Zappos’ customers.

Some of the customers sued on statutory and common law theories.

The Zappos online agreement contains an arbitration clause, and In Re Zappos concerns the enforceability of that clause.

The Consideration Problem

The terms of use agreement said: "We reserve the right to change this Site and

these terms and conditions at any time. ACCESSING, BROWSING OR OTHERWISE USING THE SITE INDICATES YOUR AGREEMENT TO ALL THE TERMS AND CONDITIONS IN THIS AGREEMENT, SO PLEASE READ THIS AGREEMENT CAREFULLY BEFORE PROCEEDING."

The Court’s Argument In effect, the agreement allows Zappos to

hold its customers and users to the promise to arbitrate while reserving its own escape hatch.”

For example: “If a consumer sought to invoke arbitration pursuant to the Terms of Use, nothing would prevent Zappos from unilaterally changing the Terms and making those changes applicable to that pending dispute if it determined that arbitration was no longer in its interest.”

Why No Consideration?

Because this requirement is not fulfilled: A promise or performance is bargained for "if

it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.“

No promise from Zappos

Zappos Customers

Promise to arbitrate, etc

The Argument (1) Zappos’ customers promised to resolve

disputes by arbitration. (2) There is consideration for this promise only if

they gave it to get a promise or performance in return.

(3) What they actually got in return was no commitment at all to arbitration.

(4) They did not give their promise in order to get no commitment at all.

(5) There is nothing else they gave their promise for.

(5) Therefore, there is no consideration.

Is This A Good Argument?

Courts reject precisely this type of argument in other contexts.

Consider the case of Linder v. Mid-Continent. Linder had a contract with Mid-Continent

under which Linder leased a gas station to Mid-Continent. So a two-way commercial exchange: promise to

permit use in exchange for a promise to pay money.

The Argument in Linder

(1) All Linder got in exchange for her promise to rent was a commitment to pay 10 days rent.

(2) She did give her promise to get that minimal commitment in exchange.

(3) So there was nothing she gave her promise in exchange for.

(4) Therefore, there was no consideration for her promise.

Argument Rejected The court says: “Mid-Continent's option to

cancel the lease upon ten days' notice to Mrs. Lindner is not fatal to the validity of the contract. This is not an option by which the lessee may terminate the lease at pleasure and without notice; at the very least the lessee bound itself to pay rent for ten days. Even lesser duties than this are held to be a sufficient consideration to support a contract.”

But which premise in the argument is wrong?

The Third One

(1) All Linder got in exchange for her promise to rent was a commitment to pay 10 days rent.

(2) She did give her promise to get that minimal commitment in exchange.

(3) So there was nothing she gave her promise in exchange for.

(4) Therefore, there was no consideration for her promise.

One way exchange

Two way exchange

Personal, private

CommercialParadigm examples of consideration

So Is This Enough? Amazon.com: [1] Our business changes

constantly, and our Privacy Notice and the Conditions of Use will change also. . . .[2] you should check our Web site frequently to see recent changes. . . [3] our current Privacy Notice applies to all information that we have about you and your account. [4]We . . . will never materially change our policies and practices to make them less protective of customer information collected in the past without the consent of affected customers.

Like “Ten Days Rent”?

Does this work like the “ten days rent” in Linder? We . . . will never materially change our

policies and practices to make them less protective of customer information collected in the past without the consent of affected customers.