Cecily Zamora
Consideration is an essential aspect of contract law. It refers to the benefit or value each party to a contract receives. This is often payment in exchange for goods or services, but it can also be anything of value, such as equipment or work. Consideration is what each party agrees to give in a contract to get what they want as a result of the relationship. It is a promise, performance, or forbearance bargained by a promisor in exchange for their promise. Without valid consideration, a contract is not legally binding, and it cannot be enforced in court.
| Characteristics | Values |
|---|---|
| Definition | Consideration is a concept of English common law and is a necessity for simple contracts but not for special contracts (contracts by deed). |
| Importance | Consideration is an essential part of a contract. Without it, the agreement is not legally binding. |
| Types | The most common types of consideration in contract law include executory, past, and pre-existing. |
| Examples | A promises to paint B's house for $500. A's consideration is the service of painting B's house, and B's consideration is $500 paid to A. |
| A signs a contract with B such that A will not repaint his own house in any colour other than white, and B will pay A $500 per year to keep this deal up. A's consideration to B is the forbearance in painting his own house in a colour other than white, and B's consideration to A is $500 per year. | |
| An NFL football player who is an active member of the Tennessee Titans team will agree to avoid reckless activities in exchange for a set salary. | |
| Validity | Consideration must be something which the promisor is not already bound to do. |
| Consideration must be real. | |
| Consideration need not be adequate. |
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What You'll Learn
Consideration is a vital part of a contract
Consideration is the benefit each party to a contract receives. It is the exchange of something of value, such as goods, money, services, or promises. It can also be an act of forbearance, where one party agrees to refrain from doing something they are legally entitled to do. For example, an NFL football player may agree to avoid reckless activities in exchange for a set salary.
Consideration must be something that the promisor is not already bound to do by law. It must be offered freely and not under threat, and the receiving party must benefit from it. It is important to note that consideration does not have to be equal in value on both sides of the contract, and it can be minimal. For example, a contract for the sale of goods for £10 is still enforceable, despite the commercial imbalance.
Consideration must be present when the contract is formed, and it must be clearly communicated in the contract. It is the only absolutely necessary language in a contract, aside from "both (or all) parties agree". If a contract is modified, fresh consideration must be included unless supported by practical benefits or legal exceptions.
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It doesn't have to be money
Consideration is an essential part of contract law. It is the benefit or profit that each party gets or expects to get from the contract. This is usually in the form of an exchange of goods or services for money. However, consideration does not have to be monetary and can take various other forms.
Consideration is what each party is promising or agreeing to do. It must be something of value, and it cannot be illegal. For example, a contract may include a promise to perform a service or a promise to refrain from doing something (forbearance). In the case of forbearance, an adult may promise to refrain from smoking, which is enforceable only if they are thereby surrendering a legal right.
Consideration can also be in the form of an exchange of practical benefits or detriments. For example, an NFL football player may agree to avoid reckless activities, such as automobile racing and downhill skiing, in exchange for a set salary. Here, the player is agreeing to refrain from certain activities that could lead to injuries and affect their performance in exchange for monetary compensation.
Another example of consideration without money is a promise to do something that one is not legally obligated to do. For instance, if a client promises to give you $500 to celebrate your first full year in business, a court probably wouldn't enforce this promise because staying in business for a year wasn't bargained for. However, if you relied on the client's promise and took some action, such as purchasing equipment, the court may provide a remedy under the legal theory of "promissory estoppel".
In summary, while consideration in contract law often involves money, it does not have to be monetary and can include various other forms of value, such as services, promises, forbearance, or practical benefits or detriments.
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It can be a promise, performance, or forbearance
Consideration is an indispensable element for the formation of a contract. It is the inducement, motive, or price that causes a party to enter into an agreement or contract. It is the proof that each party is bringing something of value to the agreement.
Consideration can take the form of a promise, performance, or forbearance. A promise is a future act or forbearance that is bought in exchange for the promise of the other party. This can be seen as the price paid for the promise. A promise can also be a return promise, such as "I promise to do X if you promise to do Y".
Performance, in law, is the act of doing that which is required by a contract. Each party to the contract is bound to perform promises according to the stipulated terms. A performance can be a past, present, or future act that is exchanged for the promise.
Forbearance is the act of refraining from doing something. This can take the form of "I will give up X in exchange for Y". Forbearance must be bargained for and cannot be something that a party never had a right to forbear in the first place. For example, a promise to forbear from suing is a valid form of consideration, but simply refraining from suing and then claiming forbearance is not valid.
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It must be something of value
Consideration is a vital component of contract law. It is a concept of English common law and is necessary for simple contracts but not for special contracts (contracts by deed). In essence, it refers to something of value that is exchanged between the parties to a contract. This value can be monetary, but it can also take other forms such as services, promises, or forbearance. For example, an NFL player may agree to avoid reckless activities in exchange for a set salary. Here, the player's consideration is their forbearance from certain activities, and the team's consideration is the salary.
Consideration is essential for a contract to be legally binding and enforceable in court. It is the proof that each party is bringing something of value to the agreement and is legally obligated to fulfil their promise. This ensures that both parties uphold their end of the bargain and provides a record of the exchange. The absence of consideration renders a contract void.
It is important to note that the value exchanged does not have to be equal, and the courts are not concerned with the adequacy of consideration as long as it exists. For example, a contract for the sale of goods for £1.00 is still enforceable, as the courts focus on the existence of consideration rather than its commercial merits. Similarly, a promise to pay a smaller sum of money cannot discharge a larger debt, as there is no fresh consideration for the payment of a smaller sum.
Consideration must also be something that the promisor is not already bound to do. A promise to perform an existing legal obligation does not constitute valid consideration, as it adds nothing to the previous existing legal consideration. For instance, filing tax returns cannot be fresh consideration, as companies are already legally required to do so.
While the economic benefit is often considered, it is not always necessary. The courts may look for some value in an economic sense, even if it is minuscule. This value can be reciprocal, creating a benefit for one party and a burden for the other. For example, the benefit of receiving money is the burden of paying money for the other party.
In some cases, a contract without consideration may still be enforceable through deeds or discretionary remedies under specific circumstances. For example, if someone promises to give you money to buy equipment for your business but does not fulfil their promise, English common law may protect you if you relied on this promise to your detriment.
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It can be executory, past, or pre-existing
Consideration is an essential aspect of forming a valid contract. It is the benefit a party receives from the deal negotiated in the contract. In other words, it is something of value exchanged in a contract. This can include money, services, or promises.
Consideration can be executory, past, or pre-existing. Executory consideration consists of a promise to do something in return for a like promise. It is an exchange of promises, such as a promise to carry out work in return for a promise of payment. Most contracts take the form of executory consideration. Executory considerations are those that will be given or performed in the future. For example, you pay a certain amount of money to a seller with the promise that they will transfer ownership of a property to you on a given date.
Past considerations are those that involve actions already executed with the promise of something in exchange. For instance, if someone agrees to house-sit for $50 a night for five nights, the homeowner would owe them $250 upon their return. The amount asked for cannot be changed as the service has already been performed and the amount has already been agreed upon. According to English law, past consideration is not considered good consideration.
Pre-existing considerations typically involve obligations that are ongoing. For example, if you have agreed to pay someone $10 a day to walk your dog until an agreed-upon end date, the consideration would be $10 a day.
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Frequently asked questions
Consideration is a legal term used to describe the benefit each party to a contract receives. This is often payment in exchange for goods or services, but it can be anything of value, such as equipment or work. It is an essential part of a contract, without which the agreement is not legally binding.
Consideration must be something of value exchanged in a contract. This can include money, services, or promises. It is commonly referred to as one of the six or seven elements of a contract. It must be something that has value in the eyes of the law and can be minimal, such as £1.
An example of consideration is an NFL player who agrees to avoid reckless activities in exchange for a set salary. The player is bringing value to the contract by agreeing not to partake in activities that could cause injury and the other party receives value from this forbearance.
