What Is Consideration Law of Contract

Suppose A is a film screenwriter and B runs a film production company. A said to B, “Buy my script.” B says, “How about that – I`m going to pay you $5,000 so your film won`t be produced for another year. If I produce your film this year, I will give you $50,000 more, and no one else will be able to produce it. If I don`t produce your film this year, then you can leave. If the two subsequently come into conflict, the question of whether a contract exists is answered. B had an option contract – he could decide if he wanted to produce the script or not. B`s counterpart was the downward amount of $5,000 and the possibility of $50,000. A`s counterpart was the exclusive rights to the film script for at least one year. In Currie v.

Misa [1], the court stated that consideration was a “right, interest, profit, advantage or abstention, disadvantage, loss, liability”. Therefore, the consideration is a promise of something of value given by a donor in exchange for something of value given by a promisor; And generally, the question of value is a good, money or a stock. Act with indulgence, . B as an adult who promises to quit smoking, is only enforceable if you thus waive a legal right. [2] [3] [4] For example, let`s say your neighbor admires your bike. You know you`re moving soon, so offer yourself (an “offer” is part of a contract) to sell it to him for $100 (in return). She accepts your offer (acceptance is also part of a contract), but can only pay you when she goes to the bank. So you scribble a short note describing your two intentions to make this agreement and give it a copy of the note. You now have a binding contract because the elements of a contract are there, including this “negotiated” exchange. Here are some of the scenarios where a valid consideration is not required: 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. A party that is already legally required to provide money, object, service or forbearance will not take into account if it simply promises to comply with this obligation. [32] [33] [34] This legal obligation may arise from the law or from an obligation under a previous contract. 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.” If one of the parties does not provide the promised consideration, the other party may terminate the contract. The defaulting party may also be sued for damages or certain services. 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? Systems based on Roman law (including Germany [22] and Scotland) do not need to be taken into consideration, and some commentators consider this unnecessary and have proposed abandoning the doctrine of consideration[23] and replacing it as the basis of treaties. [24] However, legislation, not judicial development, has been presented as the only way to eliminate this deep-rooted common law doctrine. Lord Justice Denning said that “the doctrine of consideration is too entrenched to be overturned by a crosswind”. [25] 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 be true, three conditions must be met (Pao On v Lau Yiu Long [1980]): Consider the uncle`s situation above. If the same uncle had instead made the following offer to his 13-year-old nephew: “If you don`t smoke cigarettes, drink alcohol, swear or play cards for money before your 21st birthday, then I`ll pay you $5,000.” On the day of the nephew`s 21st birthday, he asks the uncle to pay, and this time, in the next trial, the nephew can win. [35] Although the promise not to drink and play alcohol before the age of 21 was not a valid consideration (it was already prohibited by law), most states allow smoking at 18 and swearing, while some consider it vulgar, is not illegal at any age. Although smoking is prohibited by law until the age of 18, it is legal for people over the age of 18, and therefore the promise to renounce it completely has legal value. However, the uncle would still be exempt from liability if his nephew drank alcohol, even if this consideration is worthless because it has been combined with something of legal value; Therefore, compliance with the entire collective agreement is required. .