Lack of Consideration vs. Failure of Consideration

In contact law, the term “consideration” refers to something of value that is exchanged between or promised by the parties in order to form a valid, enforceable contract.  Consideration is a fundamental element of every enforceable contract.

When a promise is given by one party to another, without anything being bargained for or given in exchange for it, the promise is without consideration and, therefore, there is no valid contract formed between the parties.  Failure of consideration, on the other hand, means that a performance for which the promisor bargained has not been rendered.  In other words, failure of consideration includes instances where a proper contract was entered into when the agreement was made, but because of supervening events, the promised performance fails, rendering the contract unenforceable.

In a breach of contract claim, while failure of consideration can be asserted by the defendant as an affirmative defense, the lack of consideration is not an affirmative defense, but a defense that asserts the plaintiff’s inability to establish the elements of the breach of contract cause of action.  This distinction was aptly explained by the court in Belew v. Rector, 202 S.W. 3d 849 (Tex. App. 2006):

TEX.R. Civ. P. 94 requires that affirmative defenses be pleaded and provides several examples of matters, including failure of consideration, which constitute an affirmative defense. Lack of consideration is not listed in Rule 94.[4]

An affirmative defense is “a denial of the plaintiff’s right to judgment even if the plaintiff establishes every allegation in its pleadings.”  An affirmative defense allows the defendant to introduce evidence to establish an independent reason why the plaintiff should not prevail; it does not rebut the factual proposition of the plaintiff’s pleading.

Lack of consideration does not fall within the definition of affirmative defense because it does not provide an independent reason to find against the plaintiff — it goes directly to the plaintiff’s cause of action. Consideration is a fundamental element of every valid contract.


General Ins. Co. of America v. Carnicero Dynast Corp., 545 P.2d 502, 504-05 (UT 1976):

There is a distinction between lack of consideration and failure of consideration. Where consideration is lacking, there can be no contract. Where consideration fails, there was a contract when the agreement was made, but because of some supervening cause, the promised performance fails.  Thus, failure of consideration is an affirmative defense as set forth in Rule 8(c). However, consideration or a substitute therefor must be established as part of plaintiff’s prima facie case in a contract action. The defense of lack of consideration, a negative, is properly pleaded under Rule 8(b).

Burges v. Mosley, 304 S.W. 3d 623, 628-29 (Tex. App. 2010):

Consideration is a fundamental element of every valid contract.  Consideration is a present exchange bargained for in return for a promise and consists of benefits and detriments to the contracting parties.  The detriments must induce the parties to make the promises, and the promises must induce the parties to incur the detriments.

Lack of consideration occurs when the contract, at its inception, does not impose obligations on both parties.  The contract lacking consideration lacks mutuality of obligation and is unenforceable . . . Failure of consideration, an affirmative defense, occurs when, because of some supervening cause after a contract is formed, the promised performance fails.   Above, we explained that there is a “lack of consideration” where a purported contract lacks mutuality of obligation. Thus, there is a clear distinction between “lack of consideration” and “failure of consideration.”

Hensel v. U.S. Electronics Corp., 262 A.2d 648, 651 (Del. 1970):

There is a distinction between lack of consideration and failure of consideration. If there is lack of consideration, then there was never a contract in existence unless it was under seal. If there is failure of consideration, even though the contract be under seal, then the contract is unenforceable because some supervening cause has made performance impossible.

LYON v. DBHI, LLC, C.A. No. U607-12-063 (Del. Jan. 27, 2010):

There is a distinction between the terms “failure of consideration” and “lack of consideration.”  Failure of consideration occurs when the bargained-for consideration is not rendered by one of the parties, while lack of consideration refers to the complete absence of a bargained-for consideration.  Failure of consideration is included as an affirmative defense and required to be asserted under CCP Civil Rule 8(c), because it does not challenge the formation of a contract, but only subsequent performance by a party.  Conversely, a lack of consideration is not an affirmative defense, because a lack of bargained-for consideration is an argument that attacks the validity of the contract itself.  Thus, Lyons was not required to assert an argument for lack of consideration as an affirmative defense under CCP Civil Rule 8(c), and did not waive his right to argue lack of consideration at trial.

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