A recent decision released by the Tennessee Court of Appeals reminds us that Tennessee law presumes the presence of consideration in all contracts reduced to writing. Here is the portion of the opinion discussing that law on this subject:
[Plaintiff] argues that the claims commission erred in finding that the contract was
illusory and not supported by sufficient consideration. “A party attempting to prove the
existence of a contract ‘is required to show that the agreement on which he relies was
supported by adequate consideration[.]’” Rode Oil Co. v. Lamar Advert. Co., No. W2007-
02017-COA-R3-CV, 2008 WL 4367300, at *10 (Tenn. Ct. App. Sept. 18, 2008) (quoting
Calabro v. Calabro, 15 S.W.3d 873, 876 (Tenn. Ct. App. 1999)). As such, consideration
is a “necessary element to the formation of a legal contract, and in general a contract that
is unsupported by consideration is unenforceable.” Regions Bank v. Bric Constructors,
LLC, 380 S.W.3d 740, 761 (Tenn. Ct. App. 2011) (citing Campbell v. Matlock, 749 S.W.2d
748, 751-52 (Tenn. Ct. App. 1987)). Stated differently, it “is a necessary ingredient for
every contract.” Estate of Brown, 402 S.W.3d 193, 200 (Tenn. 2013) (citing Bratton v.
Bratton, 136 S.W.3d 595, 600 (Tenn. 2004)). “The absence of consideration ‘renders the
contract, undertaking, or promise void and unenforceable as between the parties.’” Rode
Oil Co., 2008 WL 4367300, at *10 (citation omitted).Pursuant to Tennessee Code Annotated section 47-50-103, however, there is “a
rebuttable presumption that ‘[a]ll contracts in writing signed by the party to be bound, or
the party’s authorized agent and attorney, are prima facie evidence of a consideration.’”
Cumberland Props., LLC v. Ravenwood Club, Inc., No. M2010-01814-COA-R3-CV, 2011
WL 1303375, at *10 (Tenn. Ct. App. Apr. 5, 2011) (quoting Tenn. Code Ann. § 47-50-
103). “Thus, the party claiming a lack of consideration for a validly executed contract has
the burden of overcoming this presumption.” Estate of Brown, 402 S.W.3d at 200 (citing
Douglas v. Gen. Motors Acceptance Corp., 326 S.W.2d 846, 850 (Tenn. 1959)). The
contract at issue was signed by the parties. Therefore, there is prima facie evidence of
consideration. Tenn. Code Ann. § 47-50-103. The question, then, is whether the State put
forth any evidence to rebut the presumption of proper consideration.
Pharma Education Conference, Inc. v. State of Tennessee, No. W2021-00999-COA-R3-CV, p. 6 (Tenn. Ct. App. Mar. 13, 2023).
Despite the presumption, the appellate court affirmed the Claims Commissioner’s finding that the promises of Plaintiff under the alleged agreement were illusory and thus no binding agreement existed. The opinion has a great summary of the law on illusory contracts.