What Is Consideration in an Agreement

There are a number of common questions about whether a counterparty is in a contract: the consideration can take the form of money, goods, promises, 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 neighbour in which he agrees not to sue you for the damage you caused to his property, and you agree in return to pay him $800, then the amount of $800 is the consideration your neighbour receives, while his promise not to sue you is the consideration you receive from the contract. An exception to this rule is when an obligation is owed to a third party. A step taken before making a promise of payment or granting another benefit can sometimes be a consideration for the promise. For this to last, three conditions must be met (Pao On v Lau Yiu Long [1980]): In general, courts do not consider whether the agreement between two parties was monetarily fair – only whether each party passed on a legal obligation or obligation to the other party. [29] [30] The determining issue is the existence of a consideration, not the relevance of the consideration. The values between the consideration provided by each contracting party to a contract need not necessarily be comparable. Regardless of the type of contract you sign, you`ll likely hear the term “consideration.” In addition to the offer and acceptance, “consideration” is one of the essential elements of a contract. But what does this really mean? In general, a conditional consideration is a valid consideration. Existing employment obligations depend to a large extent on State law. In general, all-you-can-eat employment allows the employer to fire the employee forever or even for no reason (as long as the reason, if any, is not expressly illegal) and allows the employee to dismiss for any reason. There is no obligation to continue working in the future.

So if an employee asks for a raise, there is no problem with the consideration because the employee has no legal obligation to continue working. Similarly, if an employer requires a reduction in wages, there is also no contractual issue with consideration, since the employer is not legally required to continue to employ the employee. However, some States require additional compensation in addition to the prospect of continued employment in order to enforce the conditions required by the employer in the future, in particular the non-compete obligations. Second, what you are negotiating for does not have to meet the value standards of others, and the courts have always refused to comment on this issue. In other words, if you had offered to sell your bike to your neighbor and asked for his collection of antique cigar boxes in exchange, and your neighbor had agreed to pay that amount (i.e. give you his collection of cigar boxes for the bike), it doesn`t matter if the deal may seem unfair to some. You made an offer for the bike, your neighbour accepted it for review, and you both wanted to make that deal, and you are both allowed to do so; It is therefore a viable treaty. Whether someone else thinks it`s right or wrong is irrelevant until it`s unscrupulous. The reason why both exist in common law jurisdictions is considered by leading scholars to be the result of the combination of two different sons by 19th century judges: First, the requirement of consideration was at the heart of the action of Assumpsit, who had grown up in the Middle Ages and remained the normal trial for breach of a simple treaty in England and Wales. until 1884, the old forms of action were abolished; Second, the concept of agreement between two or more parties as the essential legal and moral basis of the treaty was promoted in all legal systems by the 18th century French writer Pothier in his Traité des Obligations, which (especially after its translation into English in 1805) was widely read by English judges and jurists. The latter fit well with the fashionable theories of the will of the time, particularly John Stuart Mill`s influential ideas on free will, and was grafted onto the traditional common law requirement to support a presumption trial.

[26] If one party fails to provide the promised consideration, the other party may terminate the contract. The defaulting party may also be sued for damages or certain services. In order to enter into a valid contract, the counterparty must meet the following conditions: If you want to be sure that the agreements you enter into on a personal or professional basis contain all the appropriate elements, please use our online resource to access free and customizable contracts designed by lawyers for general services, contracts for certain services or general contracts for products. The legal definition of counterparty is based on the concept of “negotiated exchange”. This means that both parties get something they have agreed, usually something of value for something of value. Without an exchange of consideration, a promise may not be enforceable. For example, if a neighbor promises to provide you with their car for free, that promise will usually not be enforceable because it shows no consideration. On the other hand, if a neighbor offers to sell you his car for $1,000, your delivery of the money is in exchange for the validity and enforceability of the contract. In most states, a contract is not recognized as valid and enforceable unless it involves an exchange of consideration between the parties.

Consideration can be defined as a right, interest or benefit granted by one party to the other party. This is sometimes called the counterpart. The exchange of consideration causes or motivates each party to conclude the contract. Long court cases and writings abound on the subject, which is a consideration. In short, there are two other important things to know. First, the consideration does not have to be money. It can be something of value, so it can be another object or service. For example, if A B offers $200 to buy B`s villa, luxury sports car, and private jet, there are still considerations on both sides.

A`s consideration is $200, and B`s consideration is the villa, car, and jet. In the United States, courts generally leave their own contracts to the parties and do not intervene. The old English rule of consideration asked whether one party gave the other party the value of a peppercorn. As a result, contracts in the U.S. have sometimes resulted in a party providing nominal consideration, typically citing $1. Thus, licensing agreements that contain no money at all often quote in return, “for the sum of $1 and other good and valuable considerations.” It should be noted that a promise to do something illegal or immoral does not serve as a valid consideration. .