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LSDefine
Simple English definitions for legal terms
consideration
Read a random definition: accrual basis
A quick definition of consideration:
Consideration: Consideration is what makes a contract valid. It's when two people agree to exchange something of value, like money or a promise, in order to make a deal. For example, if you give someone money to buy an apple, the apple is their consideration and the money is yours. Without consideration, a contract can't be enforced. There are different types of consideration, like promises, actions, or giving something of value. But gifts or things done in the past don't count as consideration. If there's no consideration, a contract can still be enforced if there's a substitute, like when someone relies on a promise and it would be unfair not to keep it.
A more thorough explanation:
Consideration is an important part of a contract. It refers to something of value that is exchanged between two parties in order to make the contract enforceable. This can be a promise, performance, forbearance, or property with legal value.
For example, if you buy an apple from a merchant, the apple is the merchant's consideration, and the money you pay for it is your consideration. Both parties have exchanged something of value, making the contract enforceable.
It's important to note that a gift or gratuitous promise cannot be considered as consideration because there is no bargaining involved. Additionally, past performance cannot be considered as consideration because there is no exchange.
If a contract does not have consideration, it cannot be enforced. However, there are substitutes for consideration that can make a contract enforceable:
- Promissory estoppel/detrimental reliance: If the nonperformance of the promisor will cause injustice, a contract without consideration can be enforced. For example, if a person promises to donate money to a charity and the charity relies on that promise to plan an event, the promise can be enforced even without consideration.
- Good faith modification: A modified contract is a new agreement that requires new consideration. However, if the modification is made in good faith under the Uniform Commercial Code (UCC), it can be enforced even without consideration.
Overall, consideration is an essential element of a contract that ensures both parties have exchanged something of value, making the contract enforceable.