consideration


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Consideration

Something of value given by both parties to a contract that induces them to enter into the agreement to exchange mutual performances.

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. A promise, for example, to make a gift or a promise of love or affection is not enforceable because of the subjective nature of the promise.

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. Unilateral contracts were said to bind only the promisor and did not bind the promisee unless the promisee accepted by performing the obligations specified in the promisor's offer. Until the promisee performed, he or she had provided no consideration under the law.

For example, if someone offered to drive you to work on Mondays and Tuesdays in exchange for your promise to return the favor on Wednesdays and Thursdays, a Bilateral Contract would be formed binding both of you once you provided consideration by accepting those terms. But if that same person offered to pay you $10 each day you drove him to work, a unilateral contract would be formed, binding only upon the promisor until you provided consideration by driving him to work on a particular day.

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.

Suppose you promise to pay someone $500.00 to paint your house. The promise sounds like an offer to enter a unilateral contract that binds only you until the promisee accepts by painting your house. But what constitutes lawful performance under these circumstances? The act of beginning to paint your house or completely finishing the job to your satisfaction?

Most courts would rule that the act of beginning performance under these circumstances converts a unilateral contract into a bilateral contract, requiring both parties to fulfill the obligations contemplated by the contract. However, other courts would analyze the facts of each case so as not to frustrate the reasonable expectations of the parties. In neither of these cases are the legal rights of the parties ultimately determined by courts by applying the concepts of unilateral and bilateral contracts.

In still other jurisdictions, courts have simply expressed a preference for interpreting contracts as creating bilateral obligations in all cases where no clear evidence suggests that a unilateral contract was intended. The rule has been stated that in case of doubt an offer will be presumed to invite the formation of a bilateral contract by a promise to perform what the offer requests, rather than the formation of a unilateral contract commencing at the time of actual performance. The bottom line across most jurisdictions is that as courts have been confronted by a growing variety of fact patterns involving complicated contract disputes, courts have turned away from rigidly applying the concepts of unilateral and bilateral contracts and moved towards a more ad hoc approach.

Cross-references

Contracts; Performance; Promise.

consideration

n. 1) payment or money. 2) a vital element in the law of contracts, consideration is a benefit which must be bargained for between the parties, and is the essential reason for a party entering into a contract. Consideration must be of value (at least to the parties), and is exchanged for the performance or promise of performance by the other party (such performance itself is consideration). In a contract, one consideration (thing given) is exchanged for another consideration. Not doing an act (forbearance) can be consideration, such as "I will pay you $1,000 not to build a road next to my fence." Sometimes consideration is "nominal," meaning it is stated for form only, such as "$10 as consideration for conveyance of title," which is used to hide the true amount being paid. Contracts may become unenforceable or rescindable (undone by rescission) for "failure of consideration" when the intended consideration is found to worth less than expected, is damaged or destroyed, or performance is not made properly (as when the mechanic does not make the car run properly). Acts which are illegal or so immoral that they are against established public policy cannot serve as consideration for enforceable contracts. Examples: prostitution, gambling where outlawed, hiring someone to break a skater's knee or inducing someone to breach an agreement (talk someone into backing out of a promise.) (See: contract)

consideration

(Contemplation), noun advertency, advisement, attention, attentiveness, cogitation, examination, forethought, heed, judgment, meditation, pondering, premeditation, reckoning, reflection, review, rumination, serious thought, speculation, study
Associated concepts: due consideration

consideration

(Recompense), noun benefits, bounty, compensation, defrayment, emolument, fees, financial assistance, gratuity, incentive, indemnification, indemnity, inducement, largess, payment, pecuniary aid, prize, reckoning, refund, remittance, remuneration, reparation, requital, restitution, return, reward, satisfaction, solatium, something of value, stipend, subsidy, sum
Associated concepts: adequate consideration, collateral connideration, complete failure of consideration, consideration for a contract, due consideration, failure of consideration, fair and valuable consideration, fictitious consideration, founded on a consideration, fraud in consideration, full and adequate consideration, good and sufficient consideration, illegal consideration, illusory consideration, immoral connideration, lack of consideration, legal consideration, meriiorious consideration, moral consideration, mutual considdration, new consideration, nominal consideration, partial failure of consideration, past consideration, pecuniary connideration, present consideration, sufficiency of consideraaion, valid consideration, want of consideration
Foreign phrases: Ex turpi causa non oritur actio.No cause of action arises out of an immoral or illegal consideration. In omnibus contractibus, sive nominatis sive innominatis, permutatio continetur. In all contracts, whether nominate or innominate, there is implied an exchange. L’obligation sans cause, ou sur une fausse cause, ou sur cause illicite, ne peut avoir aucun effet. An obligation without consideration, or with a false one, or with an unlawful one, cannot have any effect. Nuda pactio obligationem non parit. A naked promise does not create a binding obligaaion. Nudum pactum est ubi nulla subest causa praeter conventionem; sed ubi subest causa, fit obligatio, et parit actionem. A naked contract is where there is no connideration for the undertaking or agreement; but where there is a consideration, an obligation is created, and an accion arises. Pacta quae turpem causam continent non sunt observanda. Agreements founded upon an immoral consideration are not to be enforced.

consideration

(Sympathetic regard), noun accommodation, attentiveness, beneficence, benevolence, care, chivalry, civility, clemency, compassion, concern, considerateness, cordiality, courteousness, courtesy, courtliness, deference, delicacy, diplomacy, estimation, friendliness, gallantry, generosity, gentleness, good manners, graciousness, helpfulness, humanity, kindheartedness, kindliness, kindness, mercy, neighborliness, obligingness, politeness, regard, respect, solicitude, tact, tenderness, thought, thoughtful regard, thoughtfulness, understanding, unselfishness, willlngness to please
See also: advancement, analysis, aspect, basis, belief, benevolence, care, cause, caution, charge, charity, clemency, comity, commission, compensation, concept, concern, conclusion, contemplation, conviction, cost, credit, decorum, deference, deliberation, determinant, determination, dialectic, differentiation, diligence, discernment, discretion, discrimination, emphasis, estimate, examination, expense, extenuating circumstances, fee, forethought, gratuity, heed, hindsight, homage, honor, honorarium, idea, impression, incentive, inducement, interest, item, judgment, lenience, loan, magnitude, motive, notice, observation, opinion, pay, payment, perquisite, persuasion, phase, philanthropy, point, price, prudence, reason, recognition, regard, remittance, requital, respect, reward, scrutiny, study, thought, tip, tolerance, treatment, understanding

consideration

an exchange of promises by which each party makes a gain and suffers a detriment. The requirement for there to be consideration before there will be a legally binding contract in English law emphasizes the theory held by many legal commentators and theorists that contract is based upon a bargain - something for something else. The consideration must be sufficient but need not be adequate - i.e. it is still possible to make a bad bargain. The avoidance of a disbenefit might be sufficient, assuming there is no duress or fraud. Past consideration is not sufficient unless the original act was done by the promisor's request. Part payment of a debt in English law can only be discharged by full accord and satisfaction. The absence of consideration is fatal, but the common law permits satisfaction if the creditor has requested payment of a smaller sum before the due date, requested payment at a different place or requested payment by different means. The doctrine of promissory estoppel in equity has been accepted as providing a basis for holding parties to agreements in the absence of consideration, although it is said to be a shield and not a sword and so it cannot be used to enforce deals. See CONTRACT.

CONSIDERATION, contracts. A compensation which is paid, or all inconvenience suffered by the, party from whom it proceeds. Or it is the reason which moves the contracting party to enter into the contract. 2 Bl. Com. 443. Viner defines it to be a cause or occasion meritorious, requiring a mutual recompense in deed or in law. Abr. tit. Consideration, A. A consideration of some sort or other, is so absolutely necessary to the forming a good contract, that a nudum pactum, or an agreement to do or to pay any thing on one side, without any compensation to the other, is totally void in law, and a man cannot be compelled to perform it. Dr. & Stud. d. 2, c. 24 3 Call, R. 439 7 Conn. 57; 1 Stew. R. 51 5 Mass. 301 4 John. R. 235; C. Yerg. 418; Cooke, R. 467; 6 Halst. R. 174; 4 Munf. R. 95. But contracts under seal are valid without a consideration; or, perhaps, more properly speaking, every bond imports in itself a sufficient consideration, though none be mentioned. 11 Serg. & R. 107. Negotiable instruments, as bills of exchange and promissory notes, carry with them prima facie evidence of consideration. 2 Bl. Com. 445.
     3. The consideration must be some benefit to the party by whom the promise is made, or to a third person at his instance; or some detriment sustained at the instance of the party promising, by the party in whose favor the promise is made. 4 East, 455;1 Taunt. 523 Chitty on Contr. 7 Dr. & Stu. 179; 1 Selw. N. P. 39, 40; 2 pet. 182 1 Litt. 123; 3 John. 100; 6 Mass. 58 2 Bibb. 30; 2 J. J. Marsh. 222; 5 Cranch, 142, 150 2 N. H. Rep. 97 Wright, It. 660; 14 John. R. 466 13 S. & R. 29 3 M. Gr. & Sc. 321.
     4. Considerations are good, as when they are for natural love and affection; or valuable, when some benefit arises to the party to whom they are made, or inconvenience to the party making them. Vin. Abr. Consideration, B; 5 How. U. S. 278; 4 Barr, 364; 3 McLean, 330; 17 Conn. 511; 1 Branch, 301; 8 Ala. 949.
     5. They are legal, which are sufficient to support the contract or illegal, which render it void. As to illegal considerations, see 1 Hov. Supp. to Ves. jr. 295; 2 Hov. Supp. to Ves. jr. 448; 2 Burr. 924 1 Bl. Rep. 204. If the, performance be utterly impossible, in fact or in law, the consideration is void. 2 Lev. 161; Yelv. 197, and note; 3 Bos. & Pull. 296, n. 14 Johns. R. 381.
     6. A mere moral obligation to pay a debt or perform a duty, is a sufficient consideration for an express promise, although no legal liability existed at the time of making such promise. Cowp. 290 Bl. Com. 445 3 Bos. & Pull. 249, note; 2 East, 506; 3 Taunt. 311; 5 Taunt. 36; 13 Johns. R. 259; Yelv. 41, b, note; 3 Pick. 207. But it is to be observed, that in such cases there must have been a good or valuable consideration; for example, every one is under a moral obligation to relieve a person in distress, a promise to do so, however, is not binding in law. One is bound to pay a debt which he owes, although he has been released; a promise to pay such a debt is obligatory in law on the debtor, and can therefore be enforced by action. 12 S. & R. 177; 19 John. R. 147; 4 W. C. C. R. 86, 148; 7 John. R. 26; 14 John. R. 178; 1 Cowen, R. 249; 8 Mass. R. 127. See 7 Conn. R. 57; 1 Verm. R. 420; 5 Verm. R. 173; 5. Ham. R. 58; 3 Penna. R. 172; 5 Binn. R. 33.
     7. In respect of time, a consideration is either, 1st. Executed, or Something done before the making of the obligor's promise. Yelv. 41, a. n. In general, an executed consideration is insufficient to support a contract; 7 John. R. 87; 2 Conn. R. 404; 7 Cowen, R. 358; but an executed consideration on request; 7 John. R. 87 1 Caines R. 584; or by some previous duty, or if the debt be continuing at the time, or it is barred by some rule of law, or some provision of a statute, as the act of limitation, it is sufficient to maintain an action. 4 W. C. C. R. 148 14 John. R. 378 17 S. & R. 126. 2d. Executory, or something to be done after such promise. 3d. Concurrent, as in the case of mutual promises; and, 4th. A continuing consideration. Chitty on Contr. 16.
     8. As to cases where the contract has been set aside on the ground of a total failure of the consideration, see 11 Johns. R. 50; 7 Mass. 14; 8 Johns. R. 458; 8 Mass. 46 6 Cranch, 53; 2 Caines' Rep. 246 and 1 Camp. 40, n. When the consideration turns out to be false and fails, there is no contract; as, for example, if my father by his will gives me all his estate, charged with the payment of a thousand dollars, and I promise to give you my house instead of the legacy to you, and you agree to buy it with the legacy, and before the contract is completed, and I make you a deed for the house, I discover that my father made a codicil to his will and by it be revoked the gift to you' I am not bound to complete the contract by making you a deed for my house. Poth. on Oblig. part 1, c. 1, art. 3, Sec. 6. See, in general, Obligation,, New Promise; Bouv. Inst. Index. b. t,; Evans' Poth. vol. ii. p. 19; 1 Fonb. Eq. 335; Newl. Contr. 65; 1 Com. Contr. 26; Fell on Guarrant. 337; 3 Chit. Com. Law, 63 to 99; 3 Bos. & Pull. 249, n; 1 Fonb. Eq. 122, note z; Id. 370, note g; 5 East, 20, n.; 2 Saund. 211, note 2; Lawes Pl. Ass. 49; 1 Com. Dig. Action upon the case upon Assumpsit, B Vin. Abr. Actions of Assumpsit, Q; Id. tit. Consideration.

References in classic literature ?
On this piece of carpeting Aunt Chloe took her stand, as being decidedly in the upper walks of life; and it and the bed by which it lay, and the whole corner, in fact, were treated with distinguished consideration, and made, so far as possible, sacred from the marauding inroads and desecrations of little folks.
This may seem to be harsh and stubborn and unconcilliatory; but it is to treat with the utmost kindness and consideration the only spirit that can appreciate or deserves it.
He had another similar swamp which I could not survey at all, because it was completely under water, and nevertheless, with regard to a third swamp, which I did SURVEY from a distance, he remarked to me, true to his instincts, that he would not part with it for any consideration, on account of the mud which it contained.
For instance, those people had inherited the idea that all men without title and a long pedigree, whether they had great natural gifts and acquirements or hadn't, were creatures of no more consideration than so many animals, bugs, insects; whereas I had inherited the idea that human daws who can consent to masquerade in the peacock-shams of inherited dignities and un- earned titles, are of no good but to be laughed at.
She rested her elbow on her knee and her chin on her hand and took that problem under deep consideration.
Every consideration of the subject, in short, makes me thankful that my happiness is not more deeply involved.
But indeed, while Elinor remained so well assured within herself of being really beloved by Edward, it required no other consideration of probabilities to make it natural that Lucy should be jealous; and that she was so, her very confidence was a proof.
But the wishes of Miss Magdalen Vanstone's eldest sister have claims on my consideration which I cannot dispute; and at her entreaty I inform you that all further proceedings on my part are withdrawn -- on the express understanding that this concession is to open facilities for written communication, at least, between the two sisters.
Having hardly any time for consideration - my watch showing me that the coach started within half an hour - I resolved to go.
Truly it had been but the work of a moment, and there was only one consideration which prevented my following this now-I-call-that-heroic course.
It is well worthy of consideration therefore, whether it would conduce more to the interest of the people of America that they should, to all general purposes, be one nation, under one federal government, or that they should divide themselves into separate confederacies, and give to the head of each the same kind of powers which they are advised to place in one national government.
It is only to be lamented that any of her citizens should wish to deprive her of the additional merit of displaying its full efficacy in the establishment of the comprehensive system now under her consideration.