Contracts where a legally worthless clause is associated with a legally binding clause are generally still enforceable. Agreement to abstain: An agreement to abstain from something for which you have the right and capacity may be consideration. A party that is already legally required to provide money, object, service or forbearance will not provide anything in return if it simply promises to maintain that obligation. [32] [33] [34] This legal obligation may arise from the law or from the obligation of a previous contract. In return, everything has value. Remember that a valid contract must include an exchange of value between the supplier and the target recipient. The value should be the incentive or incentive for the other party entering into the agreement. That is, it must be the subject of the agreement between the parties. A promise to donate is not binding because the party receiving the gift does not give value in exchange for the promise. If the existence of consideration is unclear, the court will review the transaction as a whole to determine whether the consideration is terminated and whether the contract is enforceable. Suppose A is a screenwriter and B runs a film production company. A said to B, “Buy my script.” B says, “How about that – I`m going to pay you $5,000 so your film won`t be produced by someone else for another year. If I produce your film this year, I will give you $50,000 more, and no one else will be able to produce it.
If I don`t produce your film this year, then you can be free. If the two subsequently come into conflict, the question of whether a contract exists is answered. B had an option contract – he could decide if he wanted to produce the script or not. B`s counterpart was the $5,000 drop and the $50,000 opportunity. A`s consideration was the exclusive rights to the film`s script for at least one year. The same applies if the consideration is a service that the parties had previously contractually agreed. For example, A agrees to cancel B`s house for $500, but halfway through work, A tells B that he won`t finish unless B increases the payment to $750. If B agrees and A then leaves the job, B A will only have to pay the $500 originally agreed, as A was already contractually obligated to cancel the house for that amount. Agreement not to sue: An agreement not to sue the other party may be a sufficient consideration if there are reasonable grounds to authorize a lawsuit. In Currie v.
Misa [1], the court stated that consideration was a “right, interest, profit, advantage or abstention, disadvantage, loss, liability”. Thus, consideration is a promise of something of value given by a promisor in exchange for something of value given by a promisor; and generally, the thing that has value is a good, money or a stock. Clemency, like that of an adult who promises to abstain from smoking, is enforceable only if a legal right is waived. [2] [3] [4] However, even if a court decides that there is no contract, there may be possible recovery under quantum meruit doctrines (sometimes called quasi-contract) or the waiver of promissory notes. Consideration is a concept of English common law and is a necessity for simple contracts, but not for special contracts (Contracts by Deed). The concept has been adopted by other common law jurisdictions. The general rule is that the past counterparty does not have the negotiated exchange element of the contractual counterparty. Past considerations refer to events that occurred prior to an engagement and were not intended to obtain the commitment. [4] Past considerations are generally not an appropriate contractual consideration because, by definition, one cannot negotiate that something will happen when it has already happened. For example, Nancy Farmer finds Frank`s escaped bull. Nancy brings the bull home and takes care of it by providing shelter and food, with the intention of charging the owner for this care once the owner is found. When farmer Frank learns of Nancy`s generosity, he promises to pay her reasonable compensation for her efforts.
Although Farmer Frank`s offer to pay Nancy is backed by past considerations (Nancy`s care for the bull has already taken place), Frank received a material benefit from Nancy when she took the bull and took care of him. Nancy never intended to take care of Farmer Frank`s bulls as a gift. [5] Therefore, the material benefit rule applies and the contract is enforceable. For example, if A B offers $200 to buy B`s villa, luxury sports car, and private jet, there are still considerations on both sides. A`s consideration is $200, and B`s consideration is the villa, car, and jet. In the United States, courts generally leave their own contracts to the parties and do not intervene. The old English rule of consideration asked whether one party gave the other party the value of a peppercorn. As a result, contracts in the U.S. have sometimes resulted in the transfer of a nominal counterparty, typically citing $1. Thus, licensing agreements that contain no money at all often quote in exchange “for the sum of $1 and other good and valuable counterparties.” Basically, a counterparty is established when both or more parties change positions, for example. B by promising something you are not legally obliged to do, or by advertising not to do something you are legally free to pursue. For example, a company may promise to remove a website that is confusingly similar to your company`s website, which is not required by law, in exchange for dropping your trademark infringement lawsuit against them (over which you have a right).
In this scenario, each party gains something valuable – or counterpart – from the deal. The consideration is the negotiated exchange of “legal damage” between the contracting parties. Accepting a “legal disadvantage” means agreeing to do something you are not obliged to do, or agreeing to refrain from doing something you are legally entitled to. The latter type of consideration is called “tolerance.” An exception to this rule is when there is an obligation to a third party. An action taken before making a promise to make a payment or provide another service can sometimes be in exchange for the promise. For this to be true, three conditions must be met (Pao On v Lau Yiu Long [1980]): However, the promise will only be enforceable up to $100,000, as the hospital relies on the promise to that extent. The hospital would not be entitled to the full benefit of the promise; that is, the total million.. .