- Official section
- National V.A.2: Elements necessary for a valid contract
- Broker weight
- 19% of the national broker portion
- Expected scored items
- Contracts account for about 17 of 100 items
Illinois exam glossary
Consideration
Consideration is easier to see when you ask what each side bargained to give, do, promise, or refrain from doing. In a purchase contract, the exchanged promises usually do the work. Earnest money is important, but treating the deposit as the only consideration creates the wrong answer on many exam questions.
Last updated: August 1, 2026
What does this exam area cover?
Short answer: Consideration is a bargained-for exchange of promises, acts, or forbearance. A buyer's promise to pay and a seller's promise to convey ordinarily support a bilateral real estate contract. Consideration need not be equal in market value, but a mere gift promise, an entirely optional promise, a past act not exchanged for the promise, or performance of only a preexisting duty can fail. Earnest money is a deposit governed by the contract, not the sole test for consideration.
This guide follows the PSI Illinois Candidate Information Booklet effective June 24, 2026, Illinois Supreme Court and appellate decisions on consideration, Illinois Pattern Civil Jury Instructions chapter 700 revised November 2025, and 740 ILCS 80/3, all checked through August 1, 2026. Deeds, sealed instruments, charitable subscriptions, settlement, guaranties, employment restrictions, UCC modifications, promissory estoppel, equitable relief, and contract-specific clauses can apply different rules.
What is on the official outline?
- Topic
- Find the bargain
- What to know
- exchange, inducement, sought by promisor, given by promisee, negotiation, reciprocal obligation, transaction, and objective purpose
- Best exam move
- Ask whether each item was requested in exchange for the return promise or performance.
- Topic
- Identify promises
- What to know
- promise to sell, purchase, pay, convey, finance, close, repair, deliver possession, release, and perform
- Best exam move
- A promise can be consideration when it creates a real legal commitment.
- Topic
- Identify acts
- What to know
- payment, conveyance, delivery, improvement, service, inspection, surrender, performance, requested act, and completion
- Best exam move
- An act supports the bargain when it was requested as the price of the other promise.
- Topic
- Identify forbearance
- What to know
- refrain, delay, waive claim, settle, release, not compete, not sue, legal right, disputed claim, and promised restraint
- Best exam move
- Giving up a legal right can be consideration even when no cash changes hands.
- Topic
- Require both sides
- What to know
- mutual exchange, buyer, seller, optionor, optionee, promisee, promisor, benefit, detriment, and enforceability
- Best exam move
- A bilateral contract needs real consideration supporting the obligations on both sides.
- Topic
- Separate earnest money
- What to know
- deposit, escrow, good faith, remedy fund, liquidated damages, due date, holder, return, forfeiture, and consideration
- Best exam move
- The deposit is not the exclusive consideration; read its payment and remedy clauses separately.
- Topic
- Reject gift promises
- What to know
- gratuitous promise, donative intent, no exchange, future gift, reliance, deed, delivery, and enforceability
- Best exam move
- A promise to make a gift is not supported merely because the recipient says thank you.
- Topic
- Test illusory promises
- What to know
- complete discretion, optional performance, cancel anytime, no restriction, satisfaction, good faith, reasonable efforts, and real commitment
- Best exam move
- If the promisor remains entirely free to perform or not, the apparent promise may be illusory.
- Topic
- Distinguish contingencies
- What to know
- financing, inspection, attorney review, appraisal, objective event, condition precedent, discretion, notice, good faith, and reasonable efforts
- Best exam move
- A defined contingency can condition a real obligation without making it illusory.
- Topic
- Reject past acts
- What to know
- already completed, later promise, no prior request, moral obligation, prior service, past benefit, and new bargain
- Best exam move
- An act cannot be bargained for in exchange for a promise made only after the act was completed.
- Topic
- Apply preexisting duty
- What to know
- existing contract, legal duty, same performance, modification, extra payment, new obligation, concession, dispute, and consideration
- Best exam move
- Doing only what one already owes ordinarily supplies no new exchange for a modification.
- Topic
- Support modifications
- What to know
- changed price, extended closing, added repair, new credit, additional property, mutual release, fresh promise, written amendment, and signature
- Best exam move
- Identify a new burden, benefit, reciprocal change, or other lawful basis supporting the revised bargain.
- Topic
- Analyze disputed claims
- What to know
- good-faith dispute, settlement, compromise, forbearance to sue, release, accord, satisfaction, known claim, and consideration
- Best exam move
- A genuine disputed claim can support settlement even if later shown weaker than expected.
- Topic
- Measure legal sufficiency
- What to know
- benefit, detriment, responsibility, promise, act, forbearance, legal value, court question, and exchange
- Best exam move
- Legal sufficiency asks whether something of legal value was exchanged, not whether the deal was financially wise.
- Topic
- Treat adequacy carefully
- What to know
- market value, unequal bargain, bad deal, freedom of contract, gross inadequacy, shock conscience, unfairness, oppression, and unconscionability
- Best exam move
- Do not compare values routinely, but recognize exceptional gross inadequacy combined with inequitable circumstances.
- Topic
- Use nominal value carefully
- What to know
- one dollar, recital, token, actual payment, sham, option, deed, seal, exchange, and proof
- Best exam move
- A printed recital does not substitute for a real bargained exchange where one is required.
- Topic
- Support option contracts
- What to know
- option fee, keep offer open, fixed period, separate contract, exercise, purchase price, irrevocable offer, refundability, and deadline
- Best exam move
- Consideration supports the promise not to revoke; exercise follows the option's exact terms.
- Topic
- Apply Frauds Act section 3
- What to know
- writing, consideration omitted, oral proof, disproof, land contract, party charged, signed memorandum, and enforceability
- Best exam move
- Consideration need not be recited in the writing, but it must still exist and be legally provable.
- Topic
- Separate failure of consideration
- What to know
- formation, promised exchange, later nonperformance, failure, breach, total failure, partial failure, rescission, and damages
- Best exam move
- No consideration at formation differs from a party's later failure to deliver promised consideration.
- Topic
- Protect brokerage practice
- What to know
- earnest money receipt, escrow, option fee, amendment, accurate recital, no legal conclusion, approved form, delivery, record, and attorney referral
- Best exam move
- Document what was promised and paid, but send disputed sufficiency and enforceability questions to counsel.
Which distinctions produce the most mistakes?
- Terms
- Consideration vs. earnest money
- Difference
- Consideration is the legal exchange supporting promises. Earnest money is a transaction deposit governed by the contract.
- Question cue
- Exchange versus deposit.
- Terms
- Benefit vs. legal detriment
- Difference
- A benefit accrues to one party. A legal detriment is an act, promise, responsibility, or forbearance undertaken by the other.
- Question cue
- Value received versus legal burden assumed.
- Terms
- Sufficiency vs. adequacy
- Difference
- Sufficiency asks whether legal value exists. Adequacy compares the economic value of the exchange.
- Question cue
- Something bargained versus equal bargain.
- Terms
- Promise vs. illusory promise
- Difference
- A promise commits the promisor. An illusory promise leaves performance completely optional.
- Question cue
- Real duty versus no duty.
- Terms
- Contingency vs. illusory discretion
- Difference
- A contingency ties performance to a defined event or standard. Illusory discretion lets one side walk away for any reason without constraint.
- Question cue
- Conditional duty versus optional promise.
- Terms
- Present exchange vs. past consideration
- Difference
- A present exchange is bargained for when promises are made. Past consideration was completed before the later promise and not induced by it.
- Question cue
- In exchange now versus already done.
- Terms
- New consideration vs. preexisting duty
- Difference
- New consideration adds or changes a legal obligation. A preexisting duty merely repeats what is already owed.
- Question cue
- Fresh burden versus same duty.
- Terms
- No consideration vs. failure of consideration
- Difference
- No consideration means the exchange was absent at formation. Failure of consideration concerns promised performance that later did not occur.
- Question cue
- Formation defect versus performance failure.
- Terms
- Option consideration vs. purchase price
- Difference
- Option consideration buys the right to decide during the option period. Purchase price is paid for the property under the exercised sale agreement.
- Question cue
- Right to choose versus property price.
- Terms
- Forbearance vs. waiver
- Difference
- Forbearance is refraining from exercising a right and can be promised as consideration. Waiver is intentional relinquishment of a known right and has its own rules.
- Question cue
- Promised restraint versus surrendered right.
- Terms
- Consideration vs. mutual assent
- Difference
- Consideration supplies the exchange. Mutual assent supplies objective agreement to the terms.
- Question cue
- Why promises bind versus what was agreed.
- Terms
- Consideration vs. motive
- Difference
- Consideration is what was bargained for. Motive is a party's personal reason for making the deal.
- Question cue
- Exchange term versus private purpose.
The V-A-L-U-E check
- Verify the bargain: identify what each promise sought and what the other side gave or promised in return.
- Assign legal value: classify each item as a promise, act, forbearance, benefit, detriment, responsibility, deposit, or gift.
- Locate defects: screen past acts, illusory promises, preexisting duties, sham recitals, lack of authority, illegality, and failure of exchange.
- Use special transaction rules: separate earnest money, option fees, modifications, settlements, deeds, contingencies, and Frauds Act proof.
- Evaluate consequence: distinguish no consideration at formation from later breach or failure, then refer contested legal remedies.
- Fact
- Buyer promises payment; seller promises conveyance
- Likely classification
- Consideration
- Exam reason
- Reciprocal promises
- Fact
- Buyer gives earnest-money deposit
- Likely classification
- Deposit
- Exam reason
- Important but not the only consideration
- Fact
- Seller promises a gift
- Likely classification
- No bargained exchange
- Exam reason
- Gratuitous promise
- Fact
- Buyer performs a requested act
- Likely classification
- Possible consideration
- Exam reason
- Act exchanged for promise
- Fact
- Act completed before any promise
- Likely classification
- Past consideration
- Exam reason
- Not induced by later promise
- Fact
- Party repeats an existing duty
- Likely classification
- Usually no new consideration
- Exam reason
- No fresh legal detriment
How do the rules work in scenarios?
Reciprocal sale promises
Scenario: The buyer promises to pay $375,000 and close, while the seller promises to convey marketable title to the described property.
- The promises were exchanged for each other.
- Each party undertook a legal obligation.
- A separate earnest-money payment is not necessary to identify this exchange.
Answer: The reciprocal promises provide consideration.
Late earnest money
Scenario: A signed bilateral purchase contract requires a $5,000 deposit within two business days, but the buyer delivers it on day four.
- The buyer's and seller's sale promises can already supply consideration.
- The late deposit can be a breach, waiver, notice, cure, or remedy issue under the clause.
- The delay does not automatically prove that no contract formed.
Answer: Analyze the deposit clause separately from the existence of consideration.
Past landscaping
Scenario: After a neighbor landscaped an owner's yard without requesting payment, the owner promises to convey a vacant lot as thanks.
- The landscaping was completed before the promise.
- It was not requested as the price of the later conveyance promise.
- Gratitude or moral obligation does not turn the past act into a present bargain.
Answer: The old landscaping is past consideration and ordinarily does not support the new promise.
Illusory purchase promise
Scenario: A writing says the buyer will purchase only if the buyer later feels like buying, with no deadline, standard, or good-faith limit.
- The buyer retains unlimited choice whether to perform.
- No objective contingency or reasonable-efforts duty constrains that choice.
- The apparent promise supplies no real commitment.
Answer: The buyer's promise is illusory on the stated facts.
Option fee
Scenario: An owner promises to keep a $600,000 offer open for 30 days in exchange for the buyer's nonrefundable $2,500 option fee.
- The owner undertakes not to revoke during the stated period.
- The buyer provides the $2,500 in exchange for that commitment.
- Exercise and purchase-price payment remain separate steps.
Answer: The $2,500 supports the option promise if the agreement's other requirements are met.
Preexisting repair duty
Scenario: A signed contract already requires the seller to repair the roof. The buyer later promises an extra $4,000 solely for the seller to perform that same repair.
- The seller already owes the roof repair under the contract.
- Promising the identical performance adds no legal detriment.
- New consideration or another recognized modification basis would be needed.
Answer: The preexisting duty ordinarily does not support the buyer's new payment promise.
Unequal values
Scenario: A knowledgeable owner voluntarily agrees to sell vacant land for $90,000, and a later appraisal estimates $110,000. No unfairness or consent defect is stated.
- The parties exchanged real promises and the stated price.
- Consideration need not equal appraised value dollar for dollar.
- A later difference alone does not establish the exceptional gross-inadequacy case.
Answer: The value difference does not by itself make consideration legally insufficient.
What are the common exam traps?
- Trap
- Defining consideration as money only
- Correction
- A promise, act, forbearance, benefit, or legal detriment can supply the exchange.
- Trap
- Treating earnest money as the sole consideration
- Correction
- Reciprocal promises to sell and buy ordinarily support the purchase contract.
- Trap
- Voiding every late deposit automatically
- Correction
- Read the deposit, notice, cure, waiver, default, and remedy language.
- Trap
- Requiring equal market value
- Correction
- Legal sufficiency usually does not require equivalent economic values.
- Trap
- Saying adequacy never matters
- Correction
- Gross inadequacy combined with unfair or oppressive circumstances can support equitable relief.
- Trap
- Accepting a sham one-dollar recital automatically
- Correction
- A recital does not replace an actual bargained exchange when consideration is required.
- Trap
- Calling a gift promise a contract
- Correction
- Donative intent without an exchanged legal value ordinarily lacks consideration.
- Trap
- Treating past service as a current bargain
- Correction
- An act already completed independently of the promise is ordinarily past consideration.
- Trap
- Letting optional performance count as a promise
- Correction
- A wholly illusory promise creates no real commitment.
- Trap
- Calling every contingency illusory
- Correction
- Objective conditions, reasonable efforts, and good-faith standards can constrain real duties.
- Trap
- Paying extra for the identical existing duty
- Correction
- Doing only what is already owed ordinarily supplies no new consideration.
- Trap
- Confusing consideration with motive
- Correction
- The legal exchange differs from the personal reason for entering the deal.
- Trap
- Confusing no consideration with later breach
- Correction
- Formation without an exchange differs from failure to perform a promised exchange.
- Trap
- Using option fee as the purchase price
- Correction
- The option fee buys the decision period; the contract decides whether it credits toward price.
- Trap
- Letting the broker decide legal sufficiency
- Correction
- Document the promised exchange and refer a contested enforceability question to counsel.
Can you answer these original practice questions?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. What is consideration?
- A bargained-for exchange of promises, acts, or forbearance
- Only cash
- Only earnest money
- The appraised value
Show answer and explanation
Answer: A bargained-for exchange of promises, acts, or forbearance
The exchange may create a benefit, detriment, or responsibility.
2. What ordinarily supplies consideration in a bilateral sale contract?
- The buyer's and seller's reciprocal promises
- Only the broker's commission
- Only a recorded deed
- Only the appraisal
Show answer and explanation
Answer: The buyer's and seller's reciprocal promises
The buyer undertakes to purchase and pay while the seller undertakes to convey and perform.
3. Is earnest money always required for consideration?
- No
- Yes
- Only if cash
- Only after closing
Show answer and explanation
Answer: No
The parties' real promises can support the contract.
4. What is an illusory promise?
- A statement leaving performance entirely optional
- A promise with a defined financing condition
- A signed deed
- A completed act
Show answer and explanation
Answer: A statement leaving performance entirely optional
It appears to promise but creates no actual legal commitment.
5. What is past consideration?
- An act completed before and independently of the later promise
- A current reciprocal promise
- An option fee
- A future closing duty
Show answer and explanation
Answer: An act completed before and independently of the later promise
It was not bargained for as the price of the later promise.
6. What does the preexisting-duty rule address?
- Doing only what one is already obligated to do
- Giving up a disputed claim
- Paying an option fee
- Making a new reciprocal promise
Show answer and explanation
Answer: Doing only what one is already obligated to do
Identical existing performance ordinarily supplies no fresh legal detriment.
7. Must consideration equal fair market value?
- No, not ordinarily
- Yes, exactly
- Yes, within one dollar
- Only for leases
Show answer and explanation
Answer: No, not ordinarily
Exceptional gross inadequacy plus unfairness is a different equity issue.
8. What does option consideration buy?
- The binding right to decide within the option period
- Automatic title
- A property-tax exemption
- Immediate possession
Show answer and explanation
Answer: The binding right to decide within the option period
The purchase price and exercise process remain separate.
9. Under Illinois Frauds Act section 3, must consideration be recited in the writing?
- No, it may be proved or disproved by other legal evidence
- Yes, always in numerals
- Yes, only in cash
- No, because it need not exist
Show answer and explanation
Answer: No, it may be proved or disproved by other legal evidence
The rule concerns proof, not elimination of the consideration requirement.
10. A promised exchange existed, but one party later did not perform. What issue arises?
- Failure of consideration or breach
- Automatic absence of formation
- A tax deed
- An easement
Show answer and explanation
Answer: Failure of consideration or breach
Later nonperformance differs from having no bargained exchange at formation.
How should you study this area?
- Session
- Session 1
- Focus
- Find exchanged value
- Proof you are ready
- Classify 40 promises, acts, forbearances, benefits, legal detriments, gifts, deposits, and motives.
- Session
- Session 2
- Focus
- Separate earnest money
- Proof you are ready
- Review 30 paid, unpaid, late, waived, disputed, increased, returned, and forfeited deposit facts against reciprocal promises.
- Session
- Session 3
- Focus
- Spot defective exchange
- Proof you are ready
- Solve 35 illusory-promise, past-act, preexisting-duty, gift, sham-recital, and no-mutuality scenarios.
- Session
- Session 4
- Focus
- Handle special bargains
- Proof you are ready
- Audit 30 option, modification, settlement, forbearance, release, contingency, deed, and nominal-value facts.
- Session
- Session 5
- Focus
- Classify consequences
- Proof you are ready
- Distinguish no consideration, failure of consideration, breach, unequal value, gross inadequacy, rescission, and damages in 30 problems.
- Session
- Session 6
- Focus
- Run V-A-L-U-E
- Proof you are ready
- Audit two Illinois purchase files, score at least 90 percent, and name the exact legal value on both sides of every bargain.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
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Questions students ask about Consideration: Illinois Real Estate Exam Guide
What is consideration in a contract?
Consideration is the bargained-for exchange supporting contractual promises. Illinois decisions describe it as a promise, act, or forbearance sought in exchange for the other party's promise or performance. It can be a benefit to one side or a legal detriment or responsibility undertaken by the other. It is the exchange, not merely money.
What is consideration in a real estate sales contract?
The buyer promises to purchase and pay on the agreed terms, while the seller promises to convey the described real estate and perform the seller's obligations. Those reciprocal promises ordinarily provide consideration for a bilateral purchase contract. Earnest money may support the transaction, but it is not the only consideration and should not be confused with the entire exchange.
Is earnest money required for a valid Illinois real estate contract?
Not as a universal rule. Mutual promises can furnish consideration even if no earnest-money deposit is made at signing. The contract may nevertheless require a deposit by a stated deadline, making nonpayment a performance, notice, waiver, or remedy question. Do not conclude that every missing or late deposit prevented formation without reading the clause.
Must consideration have equal economic value?
Ordinarily, courts do not reprice a voluntary bargain merely because one side later thinks the exchange was unequal. The legal question is usually whether a bargained exchange exists, not whether values match dollar for dollar. Gross inadequacy combined with unfairness, oppression, incapacity, or unconscionable circumstances can support equitable relief, so the rule is not that amount never matters.
What is nominal consideration?
Nominal consideration is a small stated value, such as one dollar, used to evidence an exchange. A recital is not magic. The transaction must still involve a real bargained-for legal exchange where consideration is required. Deeds can use different rules from executory contracts, and a broker should not assume a printed recital resolves a contested formation issue.
What is an illusory promise?
An illusory promise appears to commit a party but leaves performance entirely optional, so the promisor has not actually undertaken a legal detriment. A promise to buy if I feel like it is the classic pattern. A valid contingency is different because it uses an objective event, a duty of good faith, reasonable efforts, or a defined satisfaction standard rather than unlimited discretion.
What is past consideration?
Past consideration is an act completed before and independently of the later promise. Because the act was not bargained for in exchange for that later promise, it ordinarily does not support it. If a buyer voluntarily repaired a seller's fence last year, the seller's new promise today to convey land is not supported merely by calling the old act consideration.
What is the preexisting-duty rule?
Doing only what a party is already legally obligated to do ordinarily supplies no new consideration for a new promise. A contract modification can still be supported by a new or different obligation, a reciprocal concession, an agreed resolution of a genuine dispute, or another recognized basis. The exact contract and governing law matter.
Why does an option contract need consideration?
An option separates two promises. The optionor promises to keep an offer open for the option period, and the optionee gives consideration for that binding commitment. Exercise then forms or activates the underlying transaction according to the option terms. Without consideration or another enforceability basis, a promise merely to leave an ordinary offer open may remain revocable.
Does consideration need to appear in the land-sale writing?
Section 3 of the Illinois Frauds Act states that consideration for an agreement within the Act need not be set forth or expressed in the writing and may be proved or disproved by other legal evidence. That narrow rule does not remove the need for consideration, make incomplete terms sufficient, or authorize a broker to rely on oral side promises.
Are these official PSI questions or legal advice?
No. The questions are original. Illinois decisions, statutes, court instructions, and the exam bulletin were checked through August 1, 2026. This is exam education, not legal advice. A live consideration dispute requires the complete agreement, modifications, payments, performance history, surrounding facts, and review by a qualified Illinois attorney.
Primary sources
- PSI Illinois Candidate Information Booklet effective June 24, 2026
- Illinois Supreme Court, Melena v. Anheuser-Busch, Inc., 219 Ill. 2d 135 (2006)
- Illinois Courts, official decision defining bargained exchange and the preexisting-duty rule
- Illinois Courts, Dohrmann v. Swaney, 2014 IL App (1st) 131524, consideration and gross inadequacy
- Illinois Courts, official decision discussing consideration for a real estate option
- Illinois Courts, Pattern Civil Jury Instructions contract chapter revised November 2025
- Illinois General Assembly, 740 ILCS 80/3 proof of consideration under the Frauds Act
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.