Consideration

Definition

Consideration refers to something of value that is exchanged between parties in a contract, which is essential for the formation and enforceability of an agreement. It can take many forms, such as money, services, or a promise to refrain from doing something. Without consideration, a contract may be deemed unenforceable, as it demonstrates that both parties are entering the agreement with mutual benefit in mind.

5 Must Know Facts For Your Next Test

1. Consideration must be present for most contracts to be enforceable, reflecting a bargain between the parties.
2. It can consist of tangible items like money or goods, or intangible items like services or promises.
3. Past consideration, or something that has already been done before the contract is formed, is generally not sufficient to support a new contract.
4. In some cases, contracts may be enforced without consideration under doctrines like promissory estoppel.
5. The adequacy of consideration is often not scrutinized by courts, meaning that as long as something of value is exchanged, it does not need to be equal or fair.

Review Questions

• How does consideration function in establishing enforceability in contracts?
  • Consideration serves as a crucial element for establishing the enforceability of contracts by demonstrating that both parties have agreed to exchange something of value. This mutual exchange indicates that the parties are willing to enter into a binding agreement. Without consideration, a contract may be deemed unenforceable because it lacks evidence of a true bargain or commitment from both sides.
• Discuss how e-commerce and digital contracts incorporate the concept of consideration in their agreements.
  • In e-commerce and digital contracts, consideration remains essential, though it can take unique forms such as online services, subscriptions, or digital goods. For instance, when consumers purchase software or access digital content, they provide payment (consideration) in exchange for the product or service. Courts generally treat these digital transactions similarly to traditional contracts, ensuring that consideration is present to uphold the enforceability of these agreements.
• Evaluate the implications of lack of consideration in employment contracts and its effects on at-will employment relationships.
  • In employment contracts, if there is no valid consideration provided by one party, it can lead to challenges regarding the enforceability of certain terms. In at-will employment situations, employers may terminate employees without cause unless there is an express agreement stating otherwise. If an employee claims an implied promise was made without adequate consideration backing it up, this could lead to disputes over rights and obligations within the employment relationship. Understanding how consideration applies helps clarify the expectations and limitations on both sides in at-will employment contexts.

Related terms

Breach of Contract:

The failure to fulfill the obligations stipulated in a contract, which can lead to legal remedies for the aggrieved party.

Promissory Estoppel:

A legal principle that enforces a promise made without consideration when someone relies on that promise to their detriment.

Mutual Assent: The agreement between parties on the terms of a contract, typically expressed through an offer and acceptance.