What is an executory consideration?

Executory consideration refers to an exchange of promises where both parties commit to performing certain actions or fulfilling specific obligations in the future. This is a fundamental principle in contract law because it establishes the basis upon which a contract is formed. In executory contracts, neither party has yet fulfilled their promise, and the consideration is recognized in terms of future actions or deliverables.

This concept is particularly significant in enforcing the agreement, as it creates a reciprocal obligation between parties. For instance, when one party agrees to provide a service in exchange for payment to be made at a later date, that arrangement exemplifies executory consideration.

Contextually, the incorrect options highlight distinct aspects of consideration that do not align with the definition of executory consideration. Consideration from the past (the first option) does not qualify because, in contract law, consideration must be given for the promises made in the present or future, not past actions. The idea of inadequate consideration (the third option) pertains to whether the value exchanged is appropriate but does not define the timing or nature of the consideration itself. Lastly, the notion of tangible consideration (the fourth option) refers to the physical aspect of what is exchanged, which does not specifically relate to the promise-based nature of executory consideration.