Isabella Carter
Legally sufficient consideration is an essential element of a contract. It refers to something of value given, promised, or performed to convince a party to make and keep an agreement. For consideration to be valid, it must meet specific requirements, such as being bargained for and having some value, no matter how small, in the eyes of the law. Courts typically accept a fair and honest exchange of value as consideration for a contract, and the value exchanged does not need to be equal on both sides. However, moral obligations or past actions are insufficient for a binding contract. A contract without consideration may be deemed invalid in a legal dispute, and a court may refuse to enforce its terms.
| Characteristics | Values |
|---|---|
| Type of consideration | Services, money, jewels, other goods, performance, forbearance, property with legal value, or a promise |
| Value of consideration | Value does not have to be monetary, but it must be sufficient, fair, and have some value, no matter how small, in the eyes of the law |
| Bargaining | The parties must bargain for the consideration and exchange of value in their contract |
| Past actions | Insufficient for a binding contract |
| Moral obligations | Insufficient for a binding contract |
| Pre-existing legal duty | Insufficient for a binding contract |
| Contract modification | A modified contract is a new agreement that requires new consideration, unless it is made in good faith under UCC |
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What You'll Learn
A promise to do something that one has no prior legal duty to do
A promise to do something that one is not already legally obligated to do can constitute legally sufficient consideration. This is because, for a contract to be enforceable, there must be an exchange of something of legal value between the parties involved, and this value can be created by a promise to do something that the promisor is not already legally bound to do.
Consideration is a crucial part of a valid contract. It typically involves a mutual agreement or exchange, where each party gives up something to the benefit of the other. This can be a promise, performance, forbearance, or property with legal value. Importantly, the value does not have to be monetary, but it must be recognised as having some value by most people. For example, if one party agrees to pay for something, the other party must generally agree to provide what was bargained for.
However, it is important to note that a promise alone may not always be sufficient consideration. The promise must also be bargained for and exchanged fairly, without undue influence on either party. Additionally, the promise must be clear and definite, and it must induce the promisee to rely on it.
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The performance of an action that one is not obligated to undertake
The performance of an action that one is not legally obligated to undertake can constitute legally sufficient consideration. This is a fundamental principle in contract law, where valid consideration is essential for a contract to be enforceable.
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Refraining from an action that one has a legal right to undertake
In the context of contract law, refraining from an action that one has a legal right to undertake is known as a forbearance agreement. These agreements often arise when one party wants to prevent the other party from taking a particular action, such as filing a lawsuit or competing in the same market.
For a contract to be legally valid, it must include consideration, which is a promise, performance, or forbearance bargained by a promisor in exchange for their promise. In other words, each party must bring something of value to the contract. This value can be monetary, but it doesn't have to be—it can be any action or good that is considered valuable by most people.
A promise by one party to pay another for refraining from an action that they have a legal right to undertake is generally enforceable if it is supported by valid consideration and the parties intended to be legally bound. However, if the promise lacks consideration, it may not be enforceable. This is because, in the case of refraining from a legal right, there may be a lack of sufficient consideration as the party promising payment is essentially paying to avoid doing what they are entitled to do.
Additionally, courts often view these types of agreements as against public policy because they can be seen as encouraging someone not to exercise their legal rights, which may go against the principle of justice and fairness. Furthermore, if one party is pressured or coerced into agreeing to refrain from an action in exchange for payment, the contract may be deemed voidable due to duress.
In summary, a promise to pay another party to refrain from an action that they have a legal right to undertake can be a legally sufficient consideration as long as it meets the requirements of consideration, intent to be legally bound, and absence of duress.
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Moral obligations or past actions are insufficient
Moral obligations or past actions cannot be considered legally sufficient consideration. This is because, for a contract to be valid, it must involve an exchange of value between the parties. This exchange of value, or consideration, must be something that is bargained for and agreed upon by both parties.
In the case of Mills v. Wyman, the plaintiff cared for the defendant's adult son without prior request. The defendant promised to reimburse the plaintiff, but this promise was deemed unenforceable as it lacked legal consideration. This case highlights that moral obligations alone do not constitute valid consideration.
For a contract to be legally enforceable, the consideration must be sufficient and must have some value, no matter how small, in the eyes of the law. This value does not have to be monetary and can be anything that is considered valuable by most people, such as services, money, jewels, or other goods. However, the value must be fair to both parties, even if it is not equal in value to the goods or services being provided.
Additionally, past performance or actions cannot be considered legally sufficient consideration as there is no exchange involved. For example, if a person has already performed a service before the contract is formed, that past performance cannot be considered valid consideration. This is because consideration requires a mutual exchange of value, and past actions do not fulfil this requirement.
Therefore, moral obligations and past actions are insufficient for a binding contract as they do not involve the necessary exchange of value that is required for legally sufficient consideration.
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A mutual agreement to arbitrate disputes
Consideration is a promise, performance, or forbearance bargained by a promisor in exchange for their promise. It is the main element of a contract, and without consideration by both parties, a contract cannot be enforced. For example, if someone uses money to purchase an apple, the apple is the merchant's consideration, and the money is the buyer's consideration.
For consideration to be valid, it must meet certain requirements. The promises or exchanges must be mutually agreed upon, and whatever each party promises must be legally recognized as having some value. This value does not have to be monetary but can be anything generally perceived as valuable. The promise to do or not do something is often considered something of value for contract consideration purposes. In the context of a mutual agreement to arbitrate disputes, the value exchanged is the agreement to resolve disputes through arbitration rather than litigation.
However, it is important to note that not all courts enforce the rule of "mutuality" in arbitration agreements. Some courts may require that both parties agree to submit claims to arbitration for it to constitute valid consideration. Additionally, the consideration must be sufficient and bargained for fairly and without undue influence. In the case of a mutual agreement to arbitrate disputes, if one party's continued employment is not considered valuable enough to constitute consideration, the agreement may be deemed unenforceable for lack of consideration.
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Frequently asked questions
Legally sufficient consideration refers to something of value given, promised, or performed to convince a party to make and keep an agreement.
A legally binding contract requires a valid offer, acceptance, and consideration. In Anglo-American tradition, a seal was once sufficient to make a contract binding without any other consideration. However, this is no longer the case, and consideration is now a crucial part of a valid contract.
Legally sufficient considerations include 'forbearance of a legal act' and 'a promise to do a legal act'. Forbearance refers to refraining from doing something that one has a legal right to do, such as agreeing not to sue over a dispute. A promise to do a legal act is a commitment to perform a lawful activity. Other examples include services, money, jewels, or other goods.
Moral obligations or past actions are insufficient for a binding contract. For example, a promise to reimburse someone for caring for an adult son without a prior request was deemed unenforceable as it lacked legal consideration. Additionally, performing a pre-existing legal duty or something that one is already legally obligated to do does not constitute valid consideration.
If there is a partial or complete failure of consideration, the contract may be terminated by the parties. The party whose consideration has failed may be ordered to pay equitable monetary damages, such as the cost of getting the contract performed by a substituted party.
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