(To learn more about what else goes into a legally binding contract, check out Nolo's article Contracts: The Basics.). In addition to providing evidence that a contract exists, consideration also has the cautionary function of guarding the promisor against ill-considered action; the deterrent function of discouraging transactions of questionable utility; and a channelling function of enabling interested persons to distinguish particular types of transactions. The exchange of value is interpreted broadly to not only include money, but property, a promise, doing something, or even not doing something. Let's say you backed into your neighbor's golf cart and damaged it. If litigation ensues and a court finds the contract lacks consideration, the court can rule that the contract is unenforceable. In some states, the information on this website may be considered a lawyer referral service. Consideration is needed when drafting deeds transferring property. Consideration or a valid substitute is required to have a contract. The court in Currie v Misa declared consideration to be a “Right, Interest, Profit, Benefit, or Forbearance, Detriment, Loss, Responsibility”. It is one of the six elements that must be present for a contract to be enforceable. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. In some situations, courts will step in and declare that a contract is unenforceable because it lacks consideration. A legally binding contract needs three main elements: an offer, consideration, and acceptance. The agreement is unenforceable because Maria's employer cannot do what it promised (or threatened) to do. Quid pro quo meaning “something in return” is a Latin phrase associated with consideration. Consideration will not be deemed sufficient by the court when: 1… This definition, however, leaves unanswered the question of what is sufficient consideration. The attorney listings on this site are paid attorney advertising. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. Our editors will review what you’ve submitted and determine whether to revise the article. The concept of consideration has been adopted by other common law jurisdictions, including the US. Inducement is an objective test, whereas magnitude of consideration is a subjective test. The bargained-for promise is illusory. In other words, saying there is consideration doesn't necessarily mean there is consideration. A Consideration is where anything of value is promised to another person when making a trade, and continuing to make a contract. Law of Obligations Lecture 3 17/10/18 Consideration Component parts of a contract: Offer Acceptance Consideration Intention to create legal relations Certainty What is ‘Consideration’? Copyright © 2021 MH Sub I, LLC dba Nolo ® Self-help services may not be permitted in all states. Past. Legal scholars agree that generally, a contract doesn't need to include anything other than a statement that "the parties agree." During certain periods of history, nominal consideration was held to be sufficient—even a cent or a peppercorn. In legal terms, consideration in the contract law refers to a promise of something valuable by someone for som… A better approach would have been to provide Maria with some benefit or compensation if she signed the agreement, rather than threatening to fire her if she didn't. ”Section 2 (d) of the Contact Act 1872 defines contract as “When at the desire of the promissory, the promise or any other person has done or abstained from doing or does or abstains from doing or promise to do or abstain from doing. This article covers the basics of the consideration requirement, including real-world examples of consideration. Since consideration is the price of a promise, it is … The promise amounts to a gift, not a contract. Be on the lookout for your Britannica newsletter to get trusted stories delivered right to your inbox. When it comes to consideration contract law, then a valid contract must include it, and it should be provided to every party involved in the dealings. 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