Consideration

Definition

Consideration is a fundamental element of a contract that refers to something of value exchanged between parties, which can be a promise, an act, or forbearance. It establishes the framework of mutual obligation and reinforces the idea that both parties must provide something tangible or intangible to make the agreement enforceable. Consideration ensures that contracts are not one-sided and reflects the intention to enter into a binding agreement.

5 Must Know Facts For Your Next Test

1. Consideration must be present for a contract to be legally binding; without it, the contract may be deemed unenforceable.
2. Consideration can take many forms, including money, services, goods, or promises to perform or refrain from certain actions.
3. A promise made without consideration is generally not enforceable, as it lacks the necessary element of exchange.
4. Consideration must be adequate but does not need to be equal; courts typically do not assess the fairness of the consideration unless it is grossly inadequate.
5. In some cases, past consideration (something given before the contract) cannot serve as valid consideration for a new agreement.

Review Questions

• How does consideration function as a vital component in establishing the enforceability of contracts?
  • Consideration acts as the backbone of contract enforceability by ensuring that both parties have provided something of value in exchange for promises or actions. Without this mutual exchange, contracts risk being seen as mere gifts rather than binding agreements. It signifies the intention of parties to create legal obligations and serves as evidence that they entered into an agreement willingly and with full understanding.
• What are some examples of consideration in different types of contracts, and how do these examples highlight its role?
  • In a sales contract, consideration could be money exchanged for goods; in a service contract, it might be payment for services rendered. Each example demonstrates that consideration can vary widely depending on the nature of the agreement but consistently represents an essential exchange that reinforces both parties' commitments. This diversity showcases consideration's flexibility in accommodating various contractual arrangements while maintaining its fundamental purpose.
• Evaluate how considerations might differ in online contracts compared to traditional contracts, particularly regarding enforceability and mutual consent.
  • In online contracts, considerations may involve digital products or services instead of physical goods, making it crucial to establish clear terms of what is being exchanged. The enforceability of online agreements often hinges on whether there is clear mutual assent, which can be complicated by clickwrap or browsewrap agreements where users may not fully understand what they are agreeing to. The nature of digital interactions also raises questions about adequate consideration and whether users are truly aware of their obligations, potentially impacting how courts view these agreements in comparison to traditional contracts.

Related terms

Breach of Contract: A breach of contract occurs when one party fails to fulfill their obligations under the agreement, leading to potential legal remedies for the aggrieved party.

Mutual Assent: Mutual assent is the agreement between parties to enter into a contract, often demonstrated through an offer and acceptance, which is essential for establishing consideration.

Capacity:

Capacity refers to the legal ability of parties to enter into a contract, which is necessary alongside consideration for the agreement to be valid.