Isabella Carter
The concept of legal value is a critical component of contract law. Legal value, also known as consideration, refers to something of value exchanged between parties in a contract. This can be a benefit to one party or a detriment to the other. For a contract to be enforceable, there must be a bargained-for exchange where each party receives something of legal value. This can include goods, money, services, or a forbearance of a legal right. However, it is important to note that a contract for an illegal action or product cannot be enforced, and a promise to refrain from doing an unlawful act is not sufficient legal value to support a contract.
| Characteristics | Values |
|---|---|
| Contractual purposes | Consideration includes the value that has been agreed upon, whether that be an action or an item |
| Consideration | Must be real, competent, and having some value in the eyes of the law |
| Consideration | Must be something which the promisor is not already bound to do |
| Consideration | Need not be of legal value to be enforceable |
| Contract | Must adhere to the law in the jurisdiction where it's signed |
| Contract | Cannot be for an illegal action or product |
| Contract | Must have an exchange of value |
| Contract | Must be supported by legal value if the promisor suffers a legal detriment or the promisee receives a legal benefit |
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What You'll Learn
A promise to make a gift
For a promise to be legally enforceable, it typically needs to meet the elements of a valid contract. This includes an offer, acceptance of the offer, consideration (something of value exchanged between the parties), mutual assent (a meeting of the minds), capacity to enter into a contract, and legality of purpose. In the context of a promise to make a gift, some of these elements may be missing, which could render the promise unenforceable.
For example, if a person promises to give their friend a book as a gift, there may be no consideration exchanged between them. The promise is simply a gratuitous promise to give something without expecting anything in return. In this specific context, the promise would not constitute a valid contract and thus, would not be legally enforceable.
However, it is important to note that there are exceptions and nuances to this general concept, and the enforcement of promises can vary based on legal jurisdictions and specific circumstances.
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Promising to refrain from an illegal act
In contract law, a promise to refrain from doing something illegal is considered an illegal consideration. This means that the promise does not hold any legal value and cannot support a contract. The principle behind this is that contracts must be based on lawful considerations.
For a contract to be legally valid, it must involve the exchange of something of value between the parties. This is known as "consideration". Consideration can take various forms, such as goods, money, services, or a desired action or outcome. It is important to note that the value exchanged does not need to be monetary; it can also be an exchange of services or some other form of value, as long as it is agreed upon by both parties.
However, a promise to refrain from an illegal act does not constitute legal value because it is inherently unlawful. For example, if someone promises to pay another person to commit a crime, that agreement is not valid as it is based on illegal consideration. Similarly, a promise not to report a crime in exchange for something is also unenforceable because it involves an unlawful act.
In addition, a promise to refrain from doing something that one is already legally obligated to refrain from does not constitute legally sufficient consideration. For instance, if an uncle promises to pay his 13-year-old nephew $5,000 if the nephew refrains from drinking alcohol before the age of 18, the promise is not legally valid because the nephew is already legally prohibited from drinking alcohol at that age.
Therefore, a promise to refrain from an illegal act does not constitute legal value and cannot form the basis of a valid contract.
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A promise based on past consideration
The traditional rule is that a promise based on past consideration is an unenforceable donative promise. However, there are three major exceptions to this rule. Firstly, a promise to pay a debt barred by a statute of limitations is enforceable even without new consideration. Secondly, a promise to perform a voidable obligation is enforceable despite the absence of new consideration, as long as the new promise is not subject to the same defence that made the original obligation voidable. Thirdly, promises to pay debts discharged by bankruptcy are enforceable.
The emerging modern rule is that a promise based on past consideration is enforceable as long as the promise is based on a material benefit that was previously conferred by the promisee on the promisor, and the benefit gave rise to a moral obligation to make compensation. However, even under this modern view, a promise to make compensation for a past benefit will not be enforceable if that benefit was given as a gift, as there is no moral obligation to repay the value of a gift.
In the context of contract law, a promise based on past consideration may be considered a gratuitous promise, which is a promise made without receiving anything in return. For a contract to be legally valid, there must be an exchange of value, which can be monetary or economic in nature, or related to a desired action or outcome. This exchange of value is known as consideration, and it is an essential element of a binding contract.
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Nominal consideration
In a bilateral contract, both promises are considered sufficient consideration. For instance, if A contracts to buy a car from B for $5,000, A's consideration is the promise of $5,000, and B's consideration is the promise of the car. A unilateral contract, on the other hand, involves one party making a promise based on the other party's performance or action. Here, the consideration is the performance or action that the party agrees to undertake.
While nominal consideration can support a contract that is enforceable, it must still be acceptable according to the terms and conditions of the contract. It is considered a slight formality of a contrived exchange. For example, Party A offers $5,000 to Party B and requests a pencil in return. Party B's promise is insignificant compared to Party A's larger gift, but the addition of a return item makes the agreement enforceable by law.
Courts may scrutinise nominal consideration, particularly when it involves nominal values like "$1," to determine if there was a legitimate intent to exchange value. If the exchange is merely a facade, the consideration is deemed invalid. However, it is important to note that the values exchanged in a contract need not be comparable, and courts generally focus on the presence of consideration rather than its adequacy.
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Contracts involving criminal activity
A contract is deemed illegal if it involves unlawful activities, violates public policy, or lacks essential legal elements. For example, a contract for the sale or distribution of controlled substances, such as drugs or drug paraphernalia, is illegal. Likewise, agreements for illegal activities, such as prostitution, gambling, or hiring underage workers, are also unlawful.
For a contract to be valid, it must include essential components such as offer, acceptance, consideration, and the legal capacity of both parties. Consideration refers to the agreed-upon value, whether it be an action or an item. This value can be monetary, or it can be related to a desired action or outcome. For example, property, services, and even protection from harm can all be considered contractual considerations. While consideration need not be equal in value, it must possess some value in the eyes of the law.
Additionally, all parties involved in the contract must be legally competent, of sound mind, and without the influence of drugs or alcohol. Minors and mentally impaired individuals are not considered legally competent to contract. Contracts involving criminal activity often lack these essential components, making them invalid and unenforceable in a court of law.
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