Contract law is continually evolving in order for the courts to get at purpose and intent of supposed contracts. Substantial agreement must exist and the parties must have freely intended to be legally bound.
For example, if a client tells your business partner “if you redesign my site, I’ll refer each of my clientele to you.” Courts might consider that a valid contract, enforceable as the client (the promisor) gets something of value from the promisee (business partner.)
However, if the same client says to the business partner, “redesign my site, and I will give you 1 billion dollars,” this “contract” might not hold up in court as it would be unreasonable to assume that the client could come up with a billion dollars at the end of the year.
Consideration is very important in contract law, not the amount of consideration, but actual intent. For example, if a family suffers a tragedy in their home, then they may, in their grief, agree to sell their house to their neighbor for $25.
As unlikely a scenario as that may be, it would be a valid contract, because the promisee (the family) would be given the psychological relief of selling their house. The fact that they did this for $25 has no bearing on the enforceability of the contract.
This is called the Benefit-Detriment Theory.
The most famous benefit theory case was in 1891, in the case of Hammer vs Sidway.
William E. Storey was a rich businessperson in New York who promised his nephew $5,000 (roughly the equivalent to $130,000 today) if he could abstain from alcohol, tobacco, foul language and gambling until the age of 21.
The nephew did so, and upon reaching the age of 21, wrote to his uncle who replied he would transfer the money to him, but that he would appreciate his nephew waiting to get his inheritance until later, and that he would add interest as he waited.
Unfortunately, the uncle died before transferring the money and the executor. of the estate said there was no valid consideration as the so-called conditions of the agreement, it did nothing but good for the nephew.
The New York State of Appeals Court disagreed, and ruled that the sacrifices the Nephew underwent in living up to his end of the deal were of sufficient value to having forgone the pleasures he could have experienced in drinking alcohol, smoking tobacco, using foul language or gambling.
Though closely related, the Benefit-Detriment Theory has been supplanted by the bargain theory. The bargain theory primarily views a contract as an exchange or a bargain, and as long as that is reasonably satisfied, it doesn’t much matter the value of the consideration.
For example, in the case of the family who sold their house for $25 to relieve themselves of psychological trauma. In selling their home, they achieved almost no monetary value. Yet, the psychological value, even if they sold the house for 1 cent, could be seen as a bargain for both.
Bargain theory takes into account subjective benefits, while benefit-detriment theory primarily takes into account objective benefits.