What is a bare contract?
UPDATED: March 26, 2012
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A bare contract is a contract that is not legally enforceable because it is missing an essential legal requirement for contracts called consideration. A bare contract essentially refers to a promise that one person made to another that the law will do nothing to enforce.
Understanding a Bare Contract
A contract is a legally enforceable agreement made between two parties. Essentially, this means that a contract is an agreement that the court will enforce and is a private legal obligation that two parties create for themselves. Contracts take two forms in the United States: bilateral contracts or unilateral contracts.
In a bilateral contract, the two parties to the contract exchange promises. For instance, Ann might promise to paint Tim's house and Tim will promise to pay Ann $100 in exchange. Each party has to do what was promised or can be sued for breach of contract. If Ann doesn't paint and Tim has to hire someone else who charges $200, Tim could sue Ann for the $100 in damages he incurred because of her broken promise. Likewise, if Tim didn't pay, Ann could sue for her $100 in damages.
In a unilateral contract, on the other hand, only one person makes a promise; the other party has to act on the basis of the promise for the contract to become legally binding. For instance, in a unilateral contract, Tim would promise to pay Ann $100 but Ann would make no reciprocal promise to paint his house. Ann would bind Tim to the contract (obliging him to pay) only by actually painting the house.
Both unilateral and bilateral contracts may generally either be written or oral (although there are certain kinds of contracts that are enforceable only if written). This means that as long as a formal agreement exists and the court can interpret and determine what the contractual obligations were, the court can take action when one party breaches his obligations under the contract.
Of course, people make agreements or promises that do not rise to the level of a contract. When a person promises his spouse that he will mow the lawn next weekend, this promise doesn't necessarily give his spouse the right to file a breach of contract lawsuit if the lawn is not mowed.
In order to distinguish promises - which are not enforceable in court - from contractual agreements, the law has carved out a number of requirements for contracts. One such requirement is referred to as consideration. Consideration is essentially a mutual exchange of something of value. Without this mutual exchange of consideration, the contract is considered a bare contract and will not be enforced.
Determining if a Contract is a Bare Contract
Determining if a contract is a bare contract, and thus not legally enforceable, will need to be done on a case-by-case basis. In order to make this determination, it is important to look at whether there is a mutual exchange of something that was bargained for and exchanged during the making of the contract.
If Tim simply promises Alice $100 and Alice does not have to do anything to get it, then Tim has given something of value (a promise of $100) but Alice has not given anything in return, so there is no consideration and the contract is a bare contract. Likewise, if Alice simply shows up and paints Tim's house with no promise from Tim that he would give her any money, then there is no consideration and no contractual obligation on Tim's part to give Alice anything.
When assessing whether something of value exists that can constitute consideration for a contract, there is no requirement that the things exchanged by the parties to the contract be of equal value. For instance, if Tim promised Alice $1 and Alice promised to paint his entire house, Alice would become contractually obligated to do the painting once she had accepted the deal because Tim did give her something.
Examples of Bare Contracts
Although the mutually exchanged items of value that serve as consideration do not have to be equal, the consideration given can be imaginary and cannot be something that seems to have value when really it is worth nothing at all. When this occurs, the contract will be considered a bare contract despite the appearance of consideration.
For instance, if Tim offered Ann $100 in exchange for Ann refraining from drinking until she turned 18 and if Ann in turn did not drink until she was 18, at first glance this contract appears enforceable: Tim gave Ann $100 and Ann gave up the opportunity to drink. However, this would be a bare contract and not be a valid legal agreement that was enforceable. The reason being Ann didn't actually give any consideration or anything of value. She was already obligated not to drink by the laws of the U.S., which does not allow alcohol consumption until age 21. Her obligation not to drink was a prior obligation and a prior obligation cannot be consideration for a contract.
An illusory promise is another example of something that cannot constitute consideration for a contract. As such, contracts based on illusory promises are bare contracts as well. An illusory promise is a promise that seems like a promise but which really doesn't create any obligation at all. For example, if Tim promised Ann $100 to paint and Ann promised to paint "as much of the house as she deemed dirty", then Ann hasn't really promised anything at all since she might decide that none of the house was in need of any painting.
As these examples show, determining whether there is adequate consideration for a contract can be tricky. It is often best to seek competent legal advice from an experienced attorney when there is doubt regarding whether a contract is a bare contract or not.
What Happens if a Contract is a Bare Contract?
Those who have entered into a bare contract do not have an enforceable contract, but this does not mean that they have no legal options at all. In certain cases, the court may effectively enforce a bare contract based on equity (fairness). As such, if you believe you have a contractual agreement, you should always consult with an experienced attorney to determine your best course of action and to explore all your potential legal options.