What is Legal Consideration (Contract Law)?

Adam Keilen Contract Law

Why does Consideration matter? A valid contract must have consideration, or a valid substitute. If a contract lacks consideration, the court might not uphold the agreement.

What is Consideration? Consideration is a legal detriment, meaning something that was bargained for or given in exchange for a promise, in other words, “this for that.Higgins v Monroe Evening News, 404 Mich 1, 272 NW2d 537 (1978). Generally, consideration is a right, benefit, profit, interest, forbearance, detriment, payment, responsibility given, something suffered or undertaken, or something else that represents a legal value. 17A Am Jur 2d Contracts §113. Courts do not analyze the adequacy of consideration; any consideration, even minor consideration, is sufficient to make a valid contract. Plainly, the courts don’t consider whether the contract or agreement was a good deal; as it relates to consideration, the courts will only consider whether something of legal value was given. So, you need a legal value, and a bargained for exchange for a valid agreement.

Example. Dano owns a house (notably, a beautiful home with rose bushes he added early in 2014); Brady, fearing that he might soon be without a home, would like to purchase Dano’s house. Dano and Brady enter into a contract to sell the house. Dano’s consideration is the house, the legal value he is giving up as part of the contract. Brady’s consideration is payment, money, the legal value he is giving up as part of the contract. Thus, both parties have legal consideration, and the contract will be valid in court.

The Take Away. For a valid contract, both parties need consideration, usually meaning both parties give up something of legal value.

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