Consideration is what induces parties to a contract to enter into an agreement. Valuable consideration is a type of promised payment upon which a promise can enforce a claim against an unwilling promissory. There is a difference between valuable consideration and good consideration. Good consideration may be the feeling of love and affection towards a relative.
In order to make a valid contract there are some essential which should be considered when making contract between two parties. The first and most important thing is that the consideration must move on the willingness of the promiser. In order to make the lawful consideration the person should take the desire or request of the promiser for the consideration. So if there are any conditions which are imposed on the certain condition by any third party then this will not be a valid consideration. There is another thing which must be considered when the other party may move from his promise
The consideration should contain some act, abstinence or promise which is very essential for the business. The consideration may be a positive actor a negative act. Sometimes a return promise also forms consideration. A consideration may be act that is doing of something. In this sense consideration is in negative form. For a valid consideration there must be a promise from both sides. It means that there must be a promise by one party against the promise of other party.
Consideration must move at the desire of the promisor the act or forbearance must be done at the desire of the promisor. If it is done at the instance of third party or without the desire of the promisor, it is for a consideration.
Purpose of Consideration
The purpose of a consideration is to establish the agreement that the parties have made their rights and duties in accordance with that agreement.
The courts may not create a consideration for the parties. When the parties have no express or implied agreement on the essential terms of a consideration, there is no contract. Courts are only empowered to enforce contracts, not to write them, for the parties. A contract, in order to be enforceable, must be a valid. The function of the court is to enforce agreements only if they exist and not to create them through the imposition of such terms as the court considers reasonable.
In some states, law prescribes that a statement to the effect that the executor of an instrument executed it for the purpose and consideration stated in the instrument should be included in a certificate of acknowledgement. If the statement is not included, the certificate of acknowledgement will be considered void. However, words having similar meaning can be provided in the certificate. This would amount to substantial compliance of the law regarding acknowledgement of instruments.
The literal use of statutory language is not required to ratify validity of a certificate of acknowledgement. Generally, the guiding rule is that if substantial compliance as to essentials is present in an acknowledgement certificate then the certificate is sufficient. In the U.S., law upholds certificates of acknowledgement when substance is found. The validity of a certificate will not be questioned by technical or non-substantial objections.
[i] Drew County Bank & Trust Co. v. Sorben, 181 Ark. 943 (Ark. 1930)
[ii] Bank of Hampton v. Wright, 35 F.2d 321 (8th Cir. Ark. 1929)
[iii] In re Universal Storage & Transfer Co., 4 F. Supp. 425, 429 (D. Md. 1933)
In an assignment, valuable consideration is considered an essential element to support a promise to an assignment. Thus, one of the factors determining the validity and justifiability of an assignment is the consideration for a transaction. An agreement to transfer property will be enforceable as an equitable assignment only if supported by valuable consideration.
A consideration for an assignment need not appear on the face of the instrument. A valuable consideration can be inferred from the terms of the agreement. A consideration can also be implied.
- In re Estate of Musselman, 494 Pa. 571, 576 (Pa. 1981)2.
- 2. Harris v. Clark, 3 N.Y. 93 (N.Y. 1849)
- 3. F. H. Vahlsing, Inc. v. Hartford Fire Ins. Co., 108 S.W.2d 947, 951 (Tex. Civ. App. 1937; Brager v. Blum, 49 B.R. 626, 629 (E.D. Pa. 1985)
- 4. Abraham v. Abraham, 203 Neb. 384, 390 (Neb. 1979)
Definition of consideration
Section2 (d) of the Indian Contract Act defines consideration as follows:
“when at the desire of the promisor, the promise or any other person has done or abstained from doing or does or abstain from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”
Pollock on Contract, 13th edn.,p.113
Consideration is simply something of value received by a promisor from a promisee. It can take the form of a right, interest or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered or undertaken by the other.
Something of value, such as money or personal services, given by one party to another in exchange for an act or promise.
Consideration is a legal concept meaning something of value that is given in exchange for a performance or a promise to perform.
Lush J. in Currie v Misa (1875) LR 10 Exch 153 refered to consideration as consisting of a detriment to the promisee or a benefit to the promisor:
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Types of Consideration
The check must have been tendered for either wages or present consideration. The offense of Deposit Account Fraud is analogous to a theft of the item or services received through the fraudulent presentation of worthless paper when immediate payment is expected. Anything that temporally separates the exchange will negate the concept of present consideration.
Present consideration includes:
A. Goods or services tendered for check.
B. Rent that is presently or past due.
C. Child support, pursuant to Court order or written agreement.
D. State taxes, whether or not past due.
F. A written waiver of mechanic’s or material men’s lien rights
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Generally, past consideration is not a valid consideration and has no legal value. Past consideration therefore cannot be used as a basis when claiming damages. Roscorla v Thomas. There are two exceptions to this rule they include;
- Where it was paid at the request of the offeror.
- Where both parties had earlier on contemplated payment.
Future considerations is a euphemism used in discussing transactions that usually refers to a small amount of money paid by a team to obtain a player’s contract.
In theory, when a player is acquired for future considerations, it means that, at the end of the season, the acquiring team will send another player of equivalent value to the team that traded the original player. However, in practice, when a player is said to be traded for future considerations, it almost always mean that his contract was sold for an amount of cash too inconsequential to be worthy of mention.
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Essentials of a valid Consideration
Consideration must move at the desire of the promisor:
The act or forbearance must be done at the desire of the promisor. If it is done at the instance of third party or without the desire of the promisor, it is for a consideration. Act done at the desire of a third party is not a consideration. Act must be done voluntarily at the desire of the promisor.
Consideration may move from the promisee or any other person — Stranger to a contract:
A consideration may move from promisee or any other person. Consideration from a third party is a valid consideration. Under English law, however, consideration must move from the promises only.
Consideration may be past present or future:
Law as to past consideration where the promise has done or abstained from doing something, it is a case of a past consideration: In India, a past consideration is sufficient to sustain a valid contract. If given at a request of a promisor it will support a subsequent promise.
Consideration need not be adequate:
Consideration need not be adequate but must be of some value in the eyes of law Court will not sit to decide the adequacy of consideration. Adequacy of consideration is for the parties consider at the time of making the agreement and not for the Court when it is sought to be enforced.
Consideration must be real and not illusory:
It is sufficient if the consideration is of slight value as long as it is not unreal and illusory.
Performance of exiting obligations is no consideration:
The performance of an act by a person who is already bound to perform the same either as a pubic duty or under the existing contractual obligation cannot be consideration for a contract.
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by V S Rama Rao on October 17, 2008
Exceptions to Consideration (No Consideration and No Contract)
The general rule of law is “no consideration, no contract”, i.e., in the absence of consideration there will be no contract. However, the law recognizes the following exceptions to the rule of consideration are enforceable even if these have been made without consideration.
1. promise made out of material love and affection.
An agreement expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection, between parties standing in a near relation to each other, is enforceable without consideration. It should be noted that nearness of relation does not necessarily mean that the agreement has been made out of natural love.
2. promise made to compensate for voluntary services.
A promise to compensate, wholly or in part, a person who has voluntarily done something for the promisor, or something which the promisor was legally compellable to do, is enforceable without consideration. This rule, in fact, recognizes past consideration which was given without request or desire of the promisor.
3. Written promise to pay a time-barred debt.
A promise made in writing to pay a debt barred by the Law of Limitation is enforceable even without consideration.
4. Gift, etc. actually made:
5. To create agency:
Under Sec. 185, no consideration is necessary to create an agency.
Currie v. Misa’s case that suffering responsibility is a good consideration.
[Rejlukhy v. Bhoothnath]
Legal rules of consideration
Consideration must move at the desire of the promisor:
In order to constitute consideration the act or abstinence forming the consideration for the promise must be done at the desire or request of the promise. Thus an act does or services rendered voluntarily, or at the desire of the third partly, will hot amount of valid consideration so as to support a contract.
Consideration may move from promise or any other person:
Consideration need not move from the promise alone but may proceed from third person. Thus as long as there is a consideration for a promise, it is immaterial who has furnished it. It may move from the promise or from any other person.
Consideration need to be adequate:
It means that consideration is that it must be something to which the law attaches a value. The consideration need not to be adequate to the promise for the validity of an agreement. The law only consists on the presence of consideration and not on the adequacy of it.
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Consideration – in Acceptance of Contract
The issue of Consideration
This involves an analysis of the different types of promises and the ways in which the court can ascertain which promises are intended to be taken seriously enough to be enforceable by the courts.
The notion of exchange – consideration must move from the promisee
To find out if a promise is enforceable, one must look to see what the other party – the person to whom the promise was given – has done in return for it. If I promise to do something, has the other party done anything for it – promised to pay, actually paid, delivered something to me etc.
Benefit and \ or detriment
Consideration is often spoken of as a benefit to the promisor or a detriment to the promisee. Some will make the point that a mere promise from one party is neither a detriment to that party, nor is it a benefit to the other.
The Logical Problem
The promise might, of course, become a benefit or a detriment if it is enforceable. But its being a benefit or detriment is a condition of its enforceability, and therefore, one should be able to establish that it is a benefit or detriment, independently of that.
The privities rule
The general rule is that only those who are parties to a contract can enforce it or have rights under it. Other people might benefit indirectly from the contract being enforced, but the third parties cannot bring legal action in their own name to have it enforced.
Agency is different
The normal agency relationship is not really a qualification to this, because the agent is bringing the principal into a contractual relationship with the other party. The Agent as such is not a party to the contract.
Currie v. Misa’s case that suffering responsibility is a good consideration
A consideration founded on love or affection; usually found in a gift deed. In most cases good consideration is not considered sufficient to form a contract.
Consideration may be an act of doing or abstaining from doing something or it may be an act of forbearance or abstinence. To repeat, a person may promise to do seething or not to do something or not to do something, or refrain from doing something or a promise. An act, abstinence or promise is called a consideration for the promise.
Consideration need need not be adequate but must be of some value in the eyes of law Court will not sit to decide the adequacy of consideration. Adequacy of consideration is for the parties consider at the time of making the agreement and not for the Court when it is sought to be enforced. To do or not to do something in return is consideration. Similarly, the party may drive benefit, suffer loss or damage or inconvenience, it will yet be regarded in law as a consideration for the promise. It is sufficient if the consideration is of slight value as long as it is not unreal and illusory.
Consideration is an essential element for the formation of a contract. 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. In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other’s performance, the performance is consideration for the promise, while the promise is consideration for the performance.
Consideration must have a value that can be objectively determined. Traditionally, courts have distinguished between unilateral and bilateral contracts by determining whether one or both parties provided consideration and at what point they provided the consideration. Bilateral contracts were said to bind both parties the minute the parties exchanged promises, as each promise was deemed sufficient consideration in itself.
Modern courts have de-emphasized the distinction between unilateral and bilateral contracts. These courts have found that an offer may be accepted either by a promise to perform or by actual performance. An increasing number of courts have concluded that the traditional distinction between unilateral and bilateral contracts fails to significantly advance legal analysis in a growing number of cases where performance is provided over an extended period of time.
West’s Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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