Consideration

Definition

Consideration refers to something of value that is exchanged between parties in a contract. It is an essential element for forming a legally binding agreement, ensuring that both sides have made a commitment and received something in return. Consideration can take various forms, such as money, services, or goods, and it must be present for a contract to be enforceable under the law.

5 Must Know Facts For Your Next Test

1. Consideration must be present in every valid contract, otherwise, the contract may be deemed unenforceable.
2. It can be in the form of a promise to perform a service, provide goods, or pay money.
3. Past consideration is not valid; consideration must be given in exchange for the current promise.
4. Consideration does not need to be equal in value, but it must have some legal value to satisfy the requirement.
5. Both parties must agree on the consideration for it to be valid; unilateral changes may invalidate the contract.

Review Questions

• How does consideration function as a fundamental element of a valid contract?
  • Consideration functions as a fundamental element of a valid contract by ensuring that each party has made a commitment and received something of value in return. Without consideration, there is no incentive for either party to fulfill their obligations, making the contract unenforceable. Essentially, it is what differentiates a binding agreement from mere promises or informal arrangements.
• What are the implications of past consideration on the validity of a contract?
  • The implications of past consideration on the validity of a contract are significant because past consideration is not recognized as valid under contract law. This means that if one party offers something that has already been provided in exchange for a new promise, that promise lacks enforceability. For a contract to be valid, consideration must occur concurrently with the promise being made, ensuring that both parties are engaged in a mutual exchange.
• Evaluate how different forms of consideration can affect the negotiation process between parties.
  • Different forms of consideration can significantly affect the negotiation process between parties by influencing perceived value and willingness to reach an agreement. For instance, if one party offers cash while another proposes services or goods, negotiations may focus on how these forms compare in value and relevance to each party's needs. The type of consideration can also impact trust and expectations; cash might suggest immediacy and security, while services might require more complex discussions about quality and delivery timelines. Understanding these dynamics helps negotiators craft agreements that satisfy both sides and pave the way for successful collaborations.

Related terms

Contract: A contract is a legally enforceable agreement between two or more parties that outlines their rights and obligations.

Breach of Contract:

A breach of contract occurs when one party fails to fulfill their obligations as outlined in the agreement.

Legality: Legality refers to the requirement that the terms of a contract must not violate any laws or public policies.