Where promises between two parties does not qualify as consideration?
Consideration in contracts refers to the benefit each party receives in exchange for what it gives up in the contract. It is a vital element in a contract. 3 min read Show
1. Consideration in
Contracts Updated November 17, 2020: Consideration in ContractsConsideration in contracts refers to the benefit each party receives in exchange for what it gives up in the contract. It is a vital element that must be present in a contract in order to make it legally binding on the parties. A contract, whether oral or in writing, becomes invalid if there is no consideration involved. Essential Elements of ConsiderationIn order to form a valid contract, consideration must meet the following conditions:
Types of ConsiderationThere are two types of consideration:
Consideration Need Not Be MonetaryConsideration can be in the form of money, property, promise, services, or something else. It can be something as simple as a promise to do or not to do something. For example, if you enter into a contract with your neighbor wherein he agrees not to sue you for the damage you caused to his property, and in return, you agree to pay him a sum of $800, then the amount of $800 is the consideration your neighbor gets, whereas his promise to not sue you is the consideration you get from the contract. Disproportionate ConsiderationConsideration can be as big or small as the parties mutually agree to exchange between themselves. For example, when you go to buy a dress, it's between you and the seller to agree upon the price. When a valid consideration is present, courts rarely interfere to decide whether the deal is unfair or disproportionate. However, if a party is tricked into an unfair deal by hiding some important information or otherwise acting in bad faith, then it can affect the legal validity of the contract. Is It Mandatory to Mention the Word 'Consideration'?Most contracts contain a line or two to the effect that a valid and sufficient consideration forms the basis of the contract. However, just mentioning something in the contract does not prove the existence of valid consideration. Likewise, a consideration does not become invalid if it doesn't find a mention in the contract. No What Happens When a Contract Lacks Consideration?If there is no consideration present in a contract, the contract becomes invalid, and the courts may refuse to enforce the contract. Sometimes, a contract may lack consideration though it may seem at the surface that the parties are exchanging something of value. Following are some of the scenarios where there is no valid consideration involved:
Failure to Provide ConsiderationIf a party fails to provide the promised consideration, the other party can cancel the contract. The defaulting party can also be sued for damages or specific performance. The following instances are tantamount to failure of consideration:
It is worth noting that a promise to do something illegal or immoral does not serve as a valid consideration. If you need help with consideration in contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb. Was this document helpful? Share it with your network! The Best Lawyers For Less Hire the top business lawyers and save up to 60% on legal fees Talk to a Top Lawyer for Free Content Approved Want High Quality, Transparent, and Affordable Legal Services? Can a promise be consideration?A promise to do something in the future may constitute valid consideration. However, past consideration is generally not sufficient to support a contract.
What are the two exceptions to the requirement of consideration?Legal scholars agree that generally, a contract doesn't need to include anything other than a statement that "the parties agree." The exception is for contracts that only one party signs, such as assignments, option agreements, or promissory notes.
What kind of promises are not enforceable under contract? Illusory Promises: If the terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to dQ (or refrain from doing) anything, the promise is unenforceable for lack of sufficient consideration.
What is one example of an agreement that lacks consideration?This lesson takes a look at one type of agreement that lacks consideration: gift promises. Consideration is often described as the bargained-for-exchange.
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