Home Consideration

Consideration

Agreements that Lack Consideration and Areas of Concern

Agreements that Lack Consideration and Areas of Concern

If consideration is lacking after contract negotiations, then the bargains worked out by the two would-be parties to a contract are referred to as agreements that lack consideration. An agreement can lack consideration for several reasons.
If a monetary exchange is not believed to be bargained for the courts may determine that the money exchanged does not constitute adequate consideration between the two parties. Money may also be invalidated as a form of consideration in the event the exchange of money is not believed to have been arrived at as the result of an equitable or exhaustive bargain.
In agreements that lack consideration, after court rulings which involve would-be consideration constituted by action or the forbearance of action these acts can be discounted under two circumstances.
The first is if there was a preexisting duty to commit the action or if there was a preexisting duty to forbear the commission of the act. If John promises his fifteen-year-old son he will pay him $500 if he does not smoke marijuana, then a contract will not exist because a contract cannot be formed to compel an individual to commit an action that they are prohibited by law from committing. 
However, if John promises his fifteen-year-old son $500 if the son does not smoke marijuana or chew gum between 4 P.M. and 4:10 P.M. for five years, then a legal contract with adequate consideration has been formed. The difference between these two similar agreements is that in the second, John’s son agrees to forbear from committing an act in which he is legally permitted to engage. However, if the son smokes marijuana or chews gum before the contract is concluded, then the contract would become invalidated.
An agreement also lacks consideration if the consideration of one party is provided in return for an action which the other committed prior to entering into the contract. If Kathy pulls Karen out of a burning car, Karen cannot be forced into an agreement where she provides consideration for Kathy’s rescuing her. Consideration can only be for future actions. Whatever happened happened, and whatever has been done is done and so cannot be used as the consideration in a contract. 
Past consideration on behalf of either party is invalid for being submitted as grounds for a contractual discussion. If the consideration offered by one of the parties is for an action that has already occurred, then the corresponding agreement that lacks consideration will be found to be unenforceable. 

Definition of Consideration

Definition of Consideration

Consideration is the one of the most essential elements of a valid contract. One theory about consideration is known as the “bargain theory.” Bargain theory holds that both parties involved in the contract believe the consideration to be arrived at as the result of their bargain. This understanding of consideration is closely related to the concept that the consideration must be derived from a bargain for exchange. 
The concept of a bargain for exchange is essential because it ensures that contractual terms are more likely to be understood by both parties to the contract if they are forced to agree to the terms.
That the consideration must be bargained for also increases the probability that both parties will remember what they agreed to as consideration for the deal, as well as decrease the chances that the terms of consideration will be challenged if the contract is ever disputed. This bargaining requirement often means that the only times consideration arises as a source of contention in contract disputes is when determining if the requisite level of consideration has been reached by both parties.
No attention is paid to whether or not the consideration called for in a contract represents a fair-market value for the exchange of goods and services stipulated in the contract. Rather, only three elements are needed for the consideration requirement of contractual negotiations to be met. The parties to the contract must bargain to determine an appropriate consideration, the consideration must include a mutual exchange, and the consideration must have some intrinsic value.
Whether the consideration in the contract is adequate is not normally of concern when a contract is being evaluated in a court of law. A contract which calls for an exchange of goods for a single dollar may or may not be regarded as adequate consideration. For instance, Liz agrees to give Tom her car if Tom gives her a dollar because she needs to sell the car. This is an adequate consideration because Tom gains the car and Liz gains the dollar as well as relief from caring for the car.
If Liz agrees to sell Tom her car for a dollar because it is Tom’s birthday, this will not be counted as a contract and will instead be legally defined as a gift. A court would determine that this is not an adequate level of consideration because it has not been arrived at through a bargaining process. Normally a court will only concern itself with determining if consideration is adequate if there are allegations of fraud. 

What You Need to Know About Enforceable without Consideration

What You Need to Know About Enforceable without Consideration

Business law recognizes very few circumstances under which a contract can or will be ruled to be enforceable without consideration being present. Three of these circumstances include when a promise has been made to repay a debt which the statute of limitations would normally prevent a creditor from collecting payment on, promises which cause detrimental reliance which is also known as promissory estoppel to come into effect, or pledges to make a donation to a charity.
Contract laws allow a creditor to force payment on a debt that they are owed which has already passed the normal statute of limitation that would prevent to collection of in the event that the debtor has either agreed to pay the past debt in writing or has already paid part of the debt. 
A debtor who has made a promise to repay a past due debt makes an enforceable promise to the creditor. This promise is not reciprocal, and does not need any consideration to be effective. The promise may result in an extension of the statute of limitations which resumes from the date when the promise is made. The other possibility is that the promise to repay a portion of the debt allows the creditor to sue in an attempt to recoup all or part of the losses.
Contract laws may enforce a contract that lacks mutual consideration in the event that a clear and concrete promise has been made, the person to whom the promise was made as depended on the promise coming true in a substantial, definite, and justifiable manner, and the failure to enforce the promise would be unjust. 
This is the principle of promissory estoppel. If Erin tells Amanda that Erin will pay Amanda $200 a week so that Amanda will not have to work any more, which results in Amanda quitting her job, promissory estoppel would force Erin to provide the payment because Amanda relied on the promise Erin had made. This is true even though Amanda provided Erin with no consideration. Erin’s failure to provide this payment would damage Amanda because of Amanda’s detrimental reliance on Erin’s promise.
Charitable donations are sometimes considered gifts, but are occasionally governed by contract laws. A charitable donation can be matched to a consideration if the donor has negotiated for the funds to be used in a particular way or to be dispensed in the name of or on behalf of the donor. Contract laws commonly recognize the dedication of memorials after the person making a charitable donation or named by the donor as sufficient evidence of consideration. 
Detrimental may also come into play when dealing with the collection of pledges by a charitable organization. If a hospital collects enough pledges to support the building of a new wing and as a result obtains land, hires contractors to build the hospital, and retains architects and engineers to design the new wing, the hospital has undertaken a substantially detrimental change in its financial position by taking on expenses which it would not have if it did not believe that it was going to receive the pledges. 
As a result of the hospital’s detrimental reliance upon these pledges it believed it was getting, promissory estoppel would cause the promised funds to become enforceable.

Important Details Regarding Minors and Contracts

Important Details Regarding Minors and Contracts

Minors have limited ability to enter into a contract agreement. A minor in a contract law case is anyone under the age of eighteen. There are several circumstances under which a person below the age of eighteen may have the full legal capacity to enter into a contract. If a person is married while under eighteen years of age, they usually are held to the full capability to enter into contracts, although this is determined on a State by State basis.
Emancipation may also cause an individual to cease to be considered a minor. Emancipation is a legal process which takes place when an individual who has not yet reached the normal age of majority can be declared to no longer be a minor if they are paying their own bills, supplying their own place of residence, and are no longer reliant upon their parent or legal guardian in any way.
A minor who has been emancipated has all the contractual rights and obligations of a person who has reached the age of majority. Unless the minor has been emancipated, they have distinct contractual rights.
The first right granted to minors in contract law cases is the right to disaffirm. Disaffirming occurs when the minor states, either in a verbal declaration or by their actions, that they no longer intend to be bound by the terms of the contract to which they are a party. Upon reaching the age of majority, the minor may choose to disaffirm the contract they were entered into while in the minority. If they do not disaffirm the contract within a reasonable period of time, they are considered to have ratified the contract.
There are several restrictions placed in contract law cases on when a minor is permitted to disaffirm a contract agreement. The minor must disaffirm the contract agreement within a reasonable amount of time of reaching the age of majority. A minor is not allowed to utilize their right to disaffirm if they have falsely stated their age or if the contract agreement was engaged in order to obtain services or goods deemed essential to their survival.
An increasing number of states are restricting the ability of a minor to disaffirm a contract if they have benefitted from the contract in any way. A minor disaffirming a contract is required to make every effort to restore the other party to the status they were in prior to the assumption of the contract. The courts do recognize that a minor who has disaffirmed a contract involving a good they are no longer in possession of are usually not held responsible for compensating the other party.
Contract law cases generally do not extend a minor’s liability to a guardian or parent. The only time a guardian assumes legal liability for a contract agreement their ward enters into in contract law cases is if the guardian co-signs the contract.

Understanding Settlement of Claims

Understanding Settlement of Claims

In the event of a dispute over how much consideration is due to a party to a contract, a settlement of claims can be attempted to be reached in several ways when dealing with legal contracts. Contracts law recognizes accords and satisfactions, releases from contract, and covenants not to sue as valid means of settling disputed claims.
Accord and satisfaction is the first way that a claim by one attempting to force another to act may be settled. This method of settling the disputes which may arise out of legal contracts have two elements. The first is that the parties reach an accord as to the terms which will modify the original offer and agreement. An accord lays out the new terms by which the parties agree to be bound. The terms of the accord supplant those of the original legal contracts. 
A satisfaction is the execution of an accord. Under contracts law a satisfaction cannot be implemented unless the parties have reached an accord. The accord and satisfaction must exchange some consideration that was not present in the original contract which the satisfaction is abridging.
A release from legal contracts is another method to settle a disputed contractual claim. Each release contains particular terms which comprise promises not to file a future lawsuit in a court focused on contracts law in relation to the claim that is settled in the release.
In order for a release to be granted the full weight of law, the release is usually required to be in writing and contain the signatures of the concerned parties or their duly appointed representatives, must be agreed upon by the parties as the result of an understanding which they have reached in good faith, and must be accompanied by some form of consideration that is distinct from the consideration which was present in the contract from which the parties are being released.
Releases from legal contracts are usually accompanied by the tearing up of the original contract, although this is not required. A release is called a release because it occurs when one party grants as consideration their forbearance of their right to seek redress of an infringement in a court of law in exchange for some other form of consideration.
Common contracts law claim settlements include covenants not to sue. A covenant not to sue is similar to a release, except that it does not include the sacrifice of the right to pursue recuperation for perceived infractions by legal means.
In the event that the party that gave up their ability to sue for compensation as the consideration into the covenant believes the other party is in violation of the terms of the covenant, they are not prevented from filing a suit claiming both a breach of the original contract as well as the covenant. Unlike releases and accord and satisfactions, covenants not to sue do not replace the terms of the original contract. Instead they supplant them.

What Does Uncertain Performance Mean

What Does Uncertain Performance MeanIf a contract is said to lack consideration due to uncertain performance this can mean three different things in business law. Although all three ideas are distinct, each results in an unenforceable contract. The consideration requirement can be met if one of the parties to the contract forfeits their right to purchase their widgets or sell their gizmos to another company. However, illusory promises may result if one of the parties reserves the right to exchange the widgets or gizmos with another company not involved in the contract. If this reservation of rights is present in a contract, the contract becomes unenforceable because it would lack consideration.