Anaya Nolan
Consideration is a vital part of contract law, and refers to the benefit or value that is exchanged between parties in a contract. It is one of the elements of a contract, and is essential for a contract to be valid and enforceable. Consideration can take many forms, including money, goods, services, or a forbearance to act. It is important to note that the existence of a contract does not automatically mean there is consideration, and that the concept of consideration can vary between different legal systems.
| Characteristics | Values |
|---|---|
| Definition | Consideration is a common law doctrine comprising numerous rules that help parties prove/disprove the existence of an alleged contract. |
| Number of Elements | Six or seven elements of a contract. |
| Essential for | Simple contracts but not for special contracts (contracts by deed). |
| Enforceability | A contract without consideration is not enforceable. |
| Types | Executory, past, and pre-existing. |
| Forms | Money, service, giving up an existing benefit, refraining from engaging in a particular activity or behavior. |
| Validity | Must be bargained for. |
| Reciprocity | No requirement for reciprocity or equivalence in value. |
| Jurisdiction | Adopted by other common law jurisdictions apart from England, including India, Pakistan, and Bangladesh. |
| Removal | Legislation is touted as the only way to remove this common law doctrine. |
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What You'll Learn
Consideration is a necessity for simple contracts
Consideration is an essential part of a valid contract. It is a common law doctrine that helps parties prove or disprove the existence of an alleged contract. In other words, it is what makes a contract a contract.
Consideration is a promise of something of value given by one party in exchange for something of value given by the other party. This value can be monetary, such as the payment of money, or non-monetary, such as the provision of a service or the forbearance of an action. For example, if a person purchases an apple, the apple is the merchant's consideration, and the money is the person's consideration.
Consideration must be present from both sides, and it must be bargained for. This means that each party to the contract must either make a promise to the other party, perform an act, or agree not to do something. The consideration does not have to be "reciprocal" or equivalent in value, as long as it has some legally-recognised value.
In the US, the common law standard for consideration is the change affecting legal status test (CALS). This requires that the parties asserting the existence of a contract show that they had certain legal rights prior to making promises to one another, that they changed these legal rights when making promises to one another, and that these changes in legal rights were bargained for.
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It is not required for special contracts
Consideration is a key concept in English common law, and it is generally considered one of the six or seven essential elements of a contract. It is the exchange of something of value between the promisor and the promisee. This value can take many forms, including money, goods, services, or forbearance to act. For example, if a person buys an apple, the apple is the merchant's consideration, and the money paid for it is the buyer's consideration.
However, consideration is not required for special contracts, also known as contracts by deed. In these cases, the contract is still valid without the need for both parties to provide something of value. This is an exception to the general rule that contracts require consideration to be enforceable.
The concept of consideration is not universal, and there are differences in its interpretation and application across various legal systems. For instance, Roman law systems, including those in Germany and Scotland, do not require consideration for a valid contract. Similarly, Indian contract law, which is followed in India, Pakistan, and Bangladesh, has a different approach to consideration. According to the Indian Contract Act of 1872, valid consideration exists when the promisee does or abstains from doing something at the desire of the promisor. This means that each party receives something of value in return for entering into the contract.
In English law, the requirement for consideration stems from the traditional common law foundation of "assumpsit," which was the normal action for breach of a simple contract until 1884. Additionally, 18th-century French writer Pothier's ideas on the agreement between parties as the essential legal and moral foundation of a contract also influenced the development of the consideration doctrine in English law.
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It is a promise, performance, or forbearance
Consideration is an essential part of a valid contract. It is a promise, performance, or forbearance bargained by a promisor in exchange for their promise. Each party to the contract must typically do one of the following: make a promise to the other party, perform an act (such as providing a service), or agree not to do something.
For example, if a person uses money to purchase an apple, the apple is the merchant's consideration, and the money is the person's consideration. The merchant is providing a service by selling the apple, and the person is paying for it.
Consideration must be present from both sides, and it must be bargained for. However, there is no requirement that the "bundles" of consideration from each party be "reciprocal" or equivalent in "value". For instance, if A signs a contract with B to paint B's house for $500, A's consideration is the service of painting, and B's consideration is the $500 paid to A.
A contract without consideration is generally not enforceable. However, a contract without consideration may be enforceable if it has a substitute, such as promissory estoppel or detrimental reliance.
The concept of consideration is a common law doctrine that helps parties prove or disprove the existence of an alleged contract. It is commonly referred to as one of the six or seven elements of a contract.
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It must be present from both sides
Consideration is a vital part of a contract. It is the benefit a party receives from the deal negotiated in the contract. It is a promise of something of value given by one party in exchange for something of value given by the other party. This value can be monetary, or it can be any other thing that has value according to the law, such as goods, services, or an act. For example, if A signs a contract with B to paint B's house for $500, A's consideration is the service of painting, and B's consideration is the $500 paid to A.
Consideration must be present from both sides for a contract to be enforceable. This is known as a "bargained-for" exchange. Each party must either make a promise to the other party, perform an act, or agree not to do something. This promise, performance, or agreement not to do something is typically in exchange for the other party's promise, performance, or agreement not to do something.
The Indian Contract Act, 1872, which is still in force in India, Pakistan, and Bangladesh, defines valid consideration as when the promisee does or abstains from doing something at the desire of the promisor. In other words, each party receives something in return for entering into a contractual obligation.
In the US, the common law standard is the change-affecting legal status test (CALS). According to this standard, the party asserting the existence of a contract must show that they had certain legal rights prior to making promises to one another, and that these legal rights changed when they made promises to one another. This change in legal rights was bargained for, with each party's promise to change rights inducing the other party's promise to change legal rights.
It is important to note that the bundles" of consideration from each party do not need to be equivalent in value. For example, if one party values their rights to smoke, eat meat, and drive at $5,000, that is between the two parties. The role of contract law is to enforce this set of promises as long as they meet the legal requirements.
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It can be in forms other than money
Consideration is a vital part of a contract, as it is the benefit a party receives from the deal negotiated in the contract. It is the main element of a contract, and without it, a contract cannot be enforceable. It is commonly referred to as one of the six or seven elements of a contract.
Consideration can take many forms, and it is not always monetary. For example, a contract may include an agreement to refrain from engaging in a particular activity or behaviour. This is known as forbearance, which can be a legally-recognised form of consideration, so long as one is surrendering a legal right. An example of this would be an NFL football player agreeing to avoid reckless activities in exchange for a set salary.
Consideration can also take the form of a service, where one party agrees to perform a service for the other. This could be an agreement to paint someone's house in exchange for a sum of money.
The law recognises many types of consideration, and generally speaking, if a party accepts a promise, performance, or forbears from doing something, this may be found to have some legally-recognised value. This broad view of "value" is consistent with the principle of "freedom of contract" as set forth in Article I, Section 10, Clause 1 of the United States Constitution.
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