What Is Consideration under Law of Contract

Consideration is the central term in the common law of contracts and, in most cases, required for a contract to be enforceable. Consideration is the price you pay for someone else`s promise. It can take many forms: money, property, a promise, the fulfillment of an action, or even the omission of an action. If you agree to do something you weren`t legally obligated to do, you can say you`ve thought about it. For example, Jack agrees to sell his car to Jill for $100. Jill`s $100 payment (or promise to do so) is in exchange for Jack`s promise to give the car to Jill, and Jack`s promise to give the car to Jill is in exchange for Jill`s $100 payment. Most contracts contain one or two lines indicating that valid and sufficient consideration is the basis of the contract. However, the mere mention of something in the contract does not prove the existence of a valid consideration. Similarly, consideration does not become invalid if it is not mentioned in the contract.

No In general, a conditional consideration is a valid consideration. In general, consideration in the past is not a valid consideration and has no legal value. Previous considerations are considerations that have already flowed from promising to promising. That is, the act or tolerance of the promise is older than the promise of the promise. The consideration in the past cannot therefore be used as a basis for claiming damages. [36] There are two common theories that attempt to explain the reasoning. The first is the “benefit-disadvantage theory”, in which a contract must be either to the advantage of the promisor or to the detriment of the propromissor to form a counterparty (although the disadvantage for the propromistress is the essential and immutable test of the existence of a counterparty and not whether it can be represented by an advantage for the enhancer[4]). The second is the “theory of negotiation”, in which the parties subjectively consider the contract as the product of an exchange or negotiation. Windfall theory has largely replaced advantage-disadvantage theory in modern contract theory, but judges often cite both and can use both models in their decisions. These theories usually overlap; In standard contracts, such as . B a contract to buy a car, there will be both an objective advantage and a disadvantage. However, there are some contracts that fulfill one but not the other.

For example, an agreement where the promisor feels subjectively relieved but has in fact acquired no legal rights might meet the bargain theory, but not the advantage-disadvantage theory. Alternatively, an agreement in which an actor can take adverse action in response to an offer without having considered the agreement a good deal would not be considered a contract under the law. In some jurisdictions, contracts that require such nominal consideration or “pepper” are maintained unless a particular contract is considered unscrupulous. In other jurisdictions, however, the court will reject “quid pro quo” that has not been heard. Occasionally, courts in these jurisdictions may refer to a “reasonable” or “valid” consideration, but in reality, the court does not consider the suitability of the consideration, but whether it was negotiated. The traditional notion that courts do not deal with the relevance of consideration, an old term in English common law, does not coincide with the advantage-disadvantage theory (in which the courts implicitly analyze whether the parties receive a sufficient advantage), but with the theory of negotiation (in which only the subjective intentions of the parties are taken into account). In general, courts do not consider whether the agreement between two parties was financially fair – only whether each party passed on a legal obligation or obligation to the other party. [29] [30] The determining issue is the existence of a consideration, not the relevance of the consideration.

The values between the consideration provided by each contracting party to a contract need not necessarily be comparable. The following cases amount to a failure of the counterparty: If one party does not provide the promised consideration, the other party may terminate the contract. The defaulting party may also be sued for damages or certain services. Long court cases and writings abound on the subject, which is a consideration. In short, there are two other important things to know. First, the consideration does not have to be money. It can be something of value, so it can be another object or service. For example, let`s say your neighbor admires your bike. You know you`re moving soon, so offer yourself (an “offer” is part of a contract) to sell it to him for $100 (in return). She accepts your offer (acceptance is also part of a contract), but can only pay you when she goes to the bank.

So you scribble a short note describing your two intentions to make this agreement and give it a copy of the note. You now have a binding contract because the elements of a contract are there, including this “negotiated” exchange. The reformulation (second) of contracts states that the elements of consideration are as follows: At common law, it is a prerequisite that both parties offer consideration before a contract can be considered binding. The doctrine of consideration is not relevant in many jurisdictions, although current commercial relations have regarded the relationship between a promise and an act as an expression of the nature of contractual considerations […].