|
(Note, Consideration under English law is dealt with separately)
Consideration is a central concept in the common law of contracts. Consideration is a bargained-for benefit to the promisor or detriment to the promisee. Courts will not inquire as to the adequacy of consideration. However, the court will reject "consideration" that was not truly bargained for. Occasionally the court may refer to "adequate" or "valuable" consideration, but in reality the court is not examining the adequacy of consideration, but whether or not it was bargained for. Another term for this sort of non-bargained-for payment is nominal consideration.
For example, in Fischer v. Union Trust Co., 101 N.W. 852, the court held that $1.00 paid in exchange for the sale of real property within the city of Detroit in 1902 was not "bargained for" by the seller, and thus the transaction was void. The point was NOT that the amount of money involved was too small to be adequate consideration, but that the seller did not convey the property in exchange for the buyer's promise to pay $1.00. There was no consideration, not because $1.00 was too small an amount to "count", but because the $1.00 offered the seller by the buyer did not induce the seller to part with the property.
Certain other stipulations regarding consideration include the following:
- Past consideration is not valid. Something that is already done is done, and it does not change the legal position of the promisor. Any goods or services to be exchanged must be exchanged at or after the time of contract formation. However, a promise to pay a pre-existing debt or obligation IS enforceable.
- Preexisting duty does not count as consideration. A security guard cannot enter into a contract to stop a thief for extra payment when his job is to stop that thief anyway. In English Law, the security guard can enter into such a contract, the consideration being his increased exposure to legal action.
- An illusory promise, or one which the promisor actually has no obligation to keep, does not count as consideration. The promise must be real and unconditional.
- Liquidated debt, or a payment which is fixed and undisputed, cannot be negotiated for consideration. Unliquidated debt, or a payment which is disputed, can be used for consideration.
- In some circumstances, the concept of estoppel can be used as a defence where there is a lack of consideration.
While the concept of consideration is not generally accepted in civil law systems some recognize the similarity between consideration and cause, as some civil codes recognize that all contracts must have a cause, though this is not generally accepted.
|
