What Is Consideration In Contract Law?
Have you ever heard of consideration in contract law? If not, you’re not alone. Consideration is a legal term that refers to the exchange of something of value in order to form a contract. It is an important concept in contract law and serves as the basis for enforceable agreements. In this article, we will explore what consideration is, how it works in contract law, and why it’s important. By the end, you should have a better understanding of this often confusing legal principle and be able to apply it to your next contractual agreement.
What is consideration?
Consideration is an essential element of a contract. It is what each party to the contract gives up in order to receive something else of value. In order for consideration to be valid, it must be:
1) Sufficient – The value given by each party must be equal or greater than the value received.
2) Genuine – The consideration must be something that each party actually wants or needs.
3) Mutually exchanged – Each party must give and receive something of value in exchange for the other party’s consideration.
4) Unilateral – The consideration cannot be based on anything that has already been done or promised by one of the parties.
The types of consideration
There are three types of consideration in contract law: executory, past, and pre-existing.
Executory consideration is an obligation that one party to a contract agrees to perform in the future. This type of consideration is typically found in real estate contracts, where the buyer agrees to pay the purchase price and the seller agrees to transfer ownership of the property.
Past consideration is something that has already been done and cannot be changed. For example, if someone mows your lawn and you agree to pay them $20 for their work, the Consideration would be $20. The person cannot go back and ask for more money because they have already performed the service.
Pre-existing consideration is a preexisting obligation that one party to a contract agrees to perform. An example of this type of consideration would be if you agree to mow someone’s lawn every week for $20, and they agree to pay you every Friday. In this case, the Consideration would be $20 per week.
Why is consideration necessary?
When two parties are entering into a contract, they must each bring something of value to the table, known as consideration. Consideration is necessary in order to create an enforceable contract because it establishes that there was an exchange of goods or services between the parties, and each party received something of value in return.
Without consideration, a contract can be deemed void or unenforceable. For example, if one party promises to pay the other party $100 for mowing their lawn but never does so, the court may find that there was no consideration exchanged and refuse to enforce the contract. In order for a contract to be binding, both parties must have given something of value in exchange for what they are receiving under the terms of the agreement.
When is consideration not necessary?
Consideration is not necessary when there is already a contract in place, or when the parties are simply reaffirming their commitment to the contract. In these cases, consideration can be implied from the existing contractual relationship between the parties.
What are the consequences of a lack of consideration?
If one party to a contract fails to act with consideration, the contract may be voidable. This means that the party who did not act with consideration may not be able to enforce the contract against the other party. Additionally, the party who did not act with consideration may be liable for damages if the other party can prove that they suffered a loss as a result of the lack of consideration.
To conclude, consideration is an important part of contract law and helps to ensure that both parties benefit from the agreement. Consideration can be in the form of money, goods or services and it must be something of value. As mentioned earlier, consideration should not involve any sort of duress and should be mutually beneficial for both parties involved. So if you are entering into a contractual agreement with another party, it’s important to understand how consideration works so that all parties are happy with their end result!