“For good and valuable consideration” is a recital — a factual statement placed near the top of a contract or deed — announcing that both parties exchanged something the law recognizes as value. You’ll see it most often in real estate deeds, settlement agreements, and business contracts. The phrase itself doesn’t create consideration, and it won’t save a deal that lacks it. If nothing of value really changed hands, a court will look past the words to what actually happened.
What “Good” and “Valuable” Each Mean
The phrase bundles two historically distinct concepts. “Good consideration” refers to natural duty and affection, the kind of motivation behind a parent giving property to a child. “Valuable consideration” means something with economic worth: money, property, services, or a promise to act or refrain from acting.
Only valuable consideration makes a contract enforceable in the traditional sense. Good consideration on its own — love, gratitude, family loyalty — generally won’t support a binding agreement. When a document recites “for good and valuable consideration,” it’s covering both bases at once, but the valuable part is what courts care about.
Why the Phrase Shows Up in Contracts and Deeds
The recital does a few practical things. It creates a written acknowledgment that both parties gave something up, which matters if someone later claims the deal was a one-sided gift. In settlement agreements, it confirms that each side’s promise — one pays, the other drops the claim — is the consideration supporting the deal.
In real estate, deeds routinely recite a nominal amount along with the phrase, often “$10 and other good and valuable consideration.” That formulation confirms an exchange occurred without disclosing the actual purchase price on the public record. It’s a privacy convention as much as a legal one.
The limits are important. The phrase is boilerplate. If the underlying exchange doesn’t hold up, the recital is empty language. Courts look past the wording to the substance of what changed hands, and this is where people get into trouble — assuming the magic words substitute for a genuine bargain.
What Actually Counts as Consideration
Consideration is the thing of value each side gives up to make a contract binding. Under the Restatement (Second) of Contracts, a performance or return promise qualifies only when it is “bargained for”: one party seeks it in exchange for a promise, and the other provides it in exchange for that promise.1H2O. Restatement Second Contracts 71 – Consideration The exchange can take several forms:
- Money or property, the most straightforward form.
- Services, meaning work the other party wants done.
- A new promise to do something you’re not already obligated to do.
- Forbearance, meaning giving up a legal right you’d otherwise be free to exercise.
The core test is whether the exchange was genuinely bargained for. A gift doesn’t count. A promise to hand someone money out of generosity, with nothing expected in return, isn’t consideration.
Courts also distinguish between sufficiency and adequacy. Consideration must be sufficient, meaning it has some legal value, but courts generally refuse to police whether it’s adequate, meaning proportionate to what the other side gave. The Restatement is explicit: once consideration exists, there’s no additional requirement that the values be equivalent. Sell a car worth $20,000 for $500 and the deal still binds. The exception is when the imbalance is so extreme that it suggests fraud, duress, or a complete absence of genuine agreement.2H2O. Restatement Second Contracts 79 – Adequacy of Consideration, Mutuality of Obligation
Nominal Consideration: The One-Dollar or Ten-Dollar Recital
Some contracts recite a token exchange, usually one or ten dollars, as the entire consideration. Whether that works depends heavily on context. In property transfers within families or corporate restructurings, nominal consideration can serve as a formality that technically satisfies the bargained-for requirement, and some courts accept it without further scrutiny.
Other courts dig deeper. If the dollar is window dressing for what’s really a gift, the nominal amount won’t create an enforceable contract. The question becomes whether the parties genuinely treated the exchange as a bargain or used the token amount to make a gift look like a sale. Anyone relying on nominal consideration, especially in real estate, should understand that a court may look behind the number. The safer approach is to include at least some meaningful exchange beyond the token.
What Doesn’t Count
Three common failures destroy what looks like valid consideration.
Past Consideration
A promise made in response to something already done isn’t enforceable. If your neighbor fixed your fence last week and you then promise to pay $500 for the work, your promise lacks consideration because the neighbor’s work wasn’t bargained for in exchange for your promise. The work was already complete before any deal was struck. This catches people off guard in informal arrangements where someone does a favor first and payment is discussed later. Agree on terms before the work starts.
Illusory Promises
A promise so vague that it doesn’t actually commit the promisor to anything isn’t consideration. A seller who agrees to “sell all the inventory he wants to” hasn’t promised anything, because he could choose to sell nothing. Genuine consideration requires that both sides give up some freedom. If one party retains the absolute ability to walk away without consequence, the mutuality that consideration demands is missing.
The Pre-Existing Duty Rule
Promising to do something you’re already legally required to do doesn’t create new consideration. If a contractor is under contract to build your deck for $10,000 and then demands $12,000 midway through, without offering additional work or a change in scope, the extra $2,000 promise isn’t supported by new consideration. The contractor was already obligated to finish at the original price.
There is a carve-out. If the contractor encounters genuinely unanticipated circumstances, such as discovering the foundation needs unexpected structural reinforcement, a modification can be enforceable even without entirely new consideration, provided the adjustment is fair given the changed conditions.
When the Recital Isn’t Backed by Real Consideration
A contract without consideration is generally unenforceable. Either party can walk away, and a court won’t compel performance or award damages for breach. If money or property has already changed hands, the party who gave more than they received may recover the difference through a restitution claim — not because the contract is valid, but because letting one side keep an unearned windfall would be unjust. Restitution looks at the actual benefit conferred rather than the contract terms.
The absence of consideration can also unravel downstream arrangements. A lender who financed the deal, or a beneficiary named in the agreement, may lose the rights they thought they had when the underlying contract collapses. Courts evaluating a challenge look at what the parties actually exchanged, not what the document says. Market value, the parties’ relative bargaining positions, and the surrounding circumstances all factor into whether a genuine bargain existed.
Tax Consequences of a Below-Value Exchange
Consideration doesn’t just affect enforceability. It carries tax consequences. When property changes hands for less than its fair market value, the IRS treats the gap as a gift. A transfer to an individual is a gift if “full consideration (measured in money or money’s worth) is not received in return.”3Internal Revenue Service. Frequently Asked Questions on Gift Taxes Sell a family member a house worth $400,000 for $100,000, and the $300,000 difference is a taxable gift.
In 2026, the annual gift tax exclusion is $19,000 per recipient.4Internal Revenue Service. Whats New – Estate and Gift Tax Transfers below that threshold don’t require a gift tax return. Married couples can combine their exclusions to give up to $38,000 per recipient annually.3Internal Revenue Service. Frequently Asked Questions on Gift Taxes A below-market transfer exceeding the exclusion triggers a filing obligation and may reduce the donor’s lifetime estate and gift tax exemption.
The IRS defines fair market value as the price a willing buyer and willing seller would agree to, with neither under pressure and both reasonably informed.3Internal Revenue Service. Frequently Asked Questions on Gift Taxes When the consideration stated in a contract falls well below that standard, the tax consequences apply regardless of what the recital says.
The strongest protection is making sure the consideration is real, specific, and documented at the time the contract is signed, not papered over with boilerplate afterward.