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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.
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)
considerationan 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.