Consideration
A Definition of Consideration
Consideration is said to exist when the promisor receives some benefit for his promise and the promisee gives up something in return; it is the bargained-for price you pay for what you get. That may seem simple enough. But as with much in the law, the complicating situations are never very far away. The “something” that is promised or delivered cannot be just anything, such as a feeling of pride, warmth, amusement, or friendship; it must be something known as a legal detriment, an act, forbearance, or a promise of such from the promisee. The detriment need not be an actual detriment; it may in fact be a benefit to the promisee, or at least not a loss. The detriment to one side is usually a legal benefit to the other, but the detriment to the promisee need not confer a tangible benefit on the promisor; the promisee can agree to forego something without that something being given to the promisor. Whether consideration is legally sufficient has nothing to do with whether it is morally or economically adequate to make the bargain a fair one. Moreover, legal consideration need not even be certain; it can be a promise contingent on an event that may never happen. Consideration is a legal concept, and it centers on the giving up of a legal right or benefit.
And a concise definition of Consideration …
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Consideration
What is Consideration?
Listening Activity
Understanding a “Consideration Section”
Writing Activity
Additional Links, Cases, & Resources
Vocabulary
Start here with …
… the purpose of consideration.
Part 1
Area of law: Contract Law
Listening task: Which sounds best to you? And why?
The Purpose of Consideration
The first requisite of a valid contract is an agreement: offer and acceptance. In this chapter, we assume that agreement has been reached and concentrate on one of its crucial aspects: the existence of consideration. Which of the following, if any, is a contract?
1. Betty offers to give a book to Lou. Lou accepts.
2. Betty offers Lou the book in exchange for Lou’s promise to pay twenty-five dollars. Lou accepts.
3. Betty offers to give Lou the book if Lou promises to pick it up at Betty’s house. Lou agrees.
In American law, only the second situation is a binding contract, because only that contract contains consideration, a set of mutual promises in which each party agrees to give up something to the benefit of the other.
Part 2
Area of law: Contract Law
Listening task: Can you paraphrase the history of contract law in 1 minute?
The question of what constitutes a binding contract has been answered differently throughout history and in other cultures.
For example, under Roman law, a contract without consideration was binding if certain formal requirements were met. And in the Anglo-American tradition, the presence of a seal—the wax impression affixed to a document—was once sufficient to make a contract binding without any other consideration. The seal is no longer a substitute for consideration, although in some states it creates a presumption of consideration; in forty-nine states, the Uniform Commercial Code, the UCC, has abolished the seal on contracts for the sale of goods. (Louisiana has not adopted UCC Article 2.)
Whatever its original historical purposes, and however apparently arcane, the doctrine of consideration serves some still-useful purposes. It provides objective evidence for asserting that a contract exists; it distinguishes between enforceable and unenforceable bargains; and it is a check against rash, unconsidered action, against thoughtless promise making.
Texts on Consideration
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Part 3
Area of law: Contract Law
Listening task: Identify the two elements of consideration.
The first, as just outlined, is whether the promisee has incurred a legal detriment—given up something, paid some “price,” though it may be, for example, the promise to do something, like paint a house.
The second element is whether the legal detriment was bargained for: did the promisor specifically intend the act, forbearance, or promise in return for his promise?
Applying this two-pronged test to the three examples given at the outset of the chapter, we can easily see why only in the second is there legally sufficient consideration.
1. Betty offers to give a book to Lou. Lou accepts.
In the first, Lou incurred no legal detriment; he made no pledge to act or to forbear from acting, nor did he in fact act or forbear from acting.
2. Betty offers Lou the book in exchange for Lou’s promise to pay twenty-five dollars. Lou accepts.
3. Betty offers to give Lou the book if Lou promises to pick it up at Betty’s house. Lou agrees.
In the third example, what might appear to be such a promise is not really so. Betty made a promise on a condition that Lou comes to her house; the intent clearly is to make a gift.
General Vocabulary
What would you call these Contracts? a, b & c
a. ______________________
NOW, THEREFORE, it is agreed that in consideration of the Title Company _____ its title insurance policy to Buyer effective as of the date closing occurs without making exception therein to matters which may arise between the last effective date of the title insurance commitment issued by the Title Company in connection with Buyer’s title insurance (the “Effective Date”) and the date the documents creating the interest being insured have been filed for record and which matters may constitute an _____ on or affect said title, Seller agrees to promptly defend, remove, bond or otherwise dispose of any encumbrance, lien or objectionable matter to title caused by the acts of Seller, its agents or representatives which may arise or to be filed, as the case may be, against the Real Property during the period of time between the Effective Date and the date of recording of all closing _____ , and to hold harmless, and indemnify the Title Company against all expenses, costs, and reasonable attorneys’ ____, which may arise out of Seller’s failure to so remove, bond or otherwise dispose of any said _____, encumbrances or objectionable matters caused by the acts of Seller, its agents or representatives; provided, however, the Title Company shall use good _____ and diligent efforts to cause all documents to be recorded as soon as possible but, in any event, no later than three (3) business days after the date hereof and Seller shall have no obligations or liability hereunder with respect to any objections to title which may arise or be filed after such three (3) business day period nor shall Seller.
268 Words
b. ______________________
NOW, THEREFORE, in consideration of the sum of XXX Dollars ($XXX.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Assignor hereby _____ unto Assignee, all of the right, title and interest of Assignor in and to the Leases; its successors and assigns from and after the date hereof, subject to the terms, covenants and conditions of the Leases.
2. Assignee _____ the performance of all of the obligations of Assignor under the Leases to be performed from and after the date hereof. Assignee agrees to _____, protect, defend and hold Assignor harmless from and against any and all claims, demands, liabilities, losses, costs, damages or expenses including, without limitation, reasonable attorneys’ fees and costs (collectively, “Claims”) arising out of or resulting from any breach or default by Assignee in its obligations under the terms of the Leases from and after the date hereof, including, without limitation, any breach or default by Assignee or failure by Assignee to comply with any applicable law from and after the date hereof with respect to the security deposits under the Leases that are being transferred to Assignee on the date hereof.
3. Assignor hereby agrees to indemnify, protect, defend and hold Assignee harmless from and against any and all Claims _____ out of or resulting from any breach or default by Assignor in its obligations under the terms of the Leases prior to the date hereof including, without limitation, any breach or default under the Leases or failure by Assignor to _____ with any applicable laws prior to the date hereof with respect to the security deposits under the Leases.
This Assignment shall be binding on and inure to the benefit of the parties hereto, their heirs, executors, administrators, successors in interest and assigns.
This Assignment may be executed in separate counterparts, which, together, shall constitute one and the same fully executed Assignment.
323 Words
c. ______________________
In consideration of the mutual covenants contained _____ and other good and valuable consideration, the receipt and sufficiency of which are _____ acknowledged, the parties agree as follows:
1. Contracts. Assignor _____ transfers and assigns to Assignee any and all right, title and interest which Assignor may have in the contracts, if any, listed in Exhibit B attached hereto and made a part hereof (collectively, the “Contracts”). By executing this Assignment, Assignee hereby accepts and agrees to perform all of the terms, covenants and conditions of the Contracts on the part of Assignor therein required to be performed, from and after the date hereof, but not prior thereto. Assignor agrees to indemnify, defend and hold Assignee harmless with respect to all liabilities and obligations of Assignor under the Contracts arising or accruing prior to the date _____ . Assignee hereby assumes all liabilities and obligations of Assignor under the Contracts arising or accruing from and after the date hereof and agrees to indemnify, defend and hold Assignor harmless with respect thereto.
2. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties _____ .
3. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of the State of Texas.
4. No Representations. This assignment is made without any representation or warranty, express or implied, except for those representations and warranties, if any, expressly set forth in that Real Estate Purchase and Sale Agreement between Assignor and [[_____________________________]]dated as of [[_____________, 201__]] (the “Agreement”), all of which are subject to the limitations set forth in the Agreement.
275 Words
General Vocabulary Review
Nouns
instruments
fees
liens
faith
encumbrance
Verbs
assigns
assumes
indemnify
comply
arising
Archaic
herein
hereby
hereof
hereto
hereby
3 Examples of Consideration Clauses
Sale of Goods
NOW, THEREFORE, it is agreed that in consideration of the Title Company issuing its title insurance policy to Buyer effective as of the date closing occurs without making exception therein to matters which may arise between the last effective date of the title insurance commitment issued by the Title Company in connection with Buyer’s title insurance (the “Effective Date”) and the date the documents creating the interest being insured have been filed for record and which matters may constitute an encumbrance on or affect said title, Seller agrees to promptly defend, remove, bond or otherwise dispose of any encumbrance, lien or objectionable matter to title caused by the acts of Seller, its agents or representatives which may arise or to be filed, as the case may be, against the Real Property during the period of time between the Effective Date and the date of recording of all closing instruments, and to hold harmless, and indemnify the Title Company against all expenses, costs, and reasonable attorneys’ fees, which may arise out of Seller’s failure to so remove, bond or otherwise dispose of any said liens, encumbrances or objectionable matters caused by the acts of Seller, its agents or representatives; provided, however, the Title Company shall use good faith and diligent efforts to cause all documents to be recorded as soon as possible but, in any event, no later than three (3) business days after the date hereof and Seller shall have no obligations or liability hereunder with respect to any objections to title which may arise or be filed after such three (3) business day period nor shall Seller.
Real Estate Sale Agreement
NOW, THEREFORE, in consideration of the sum of XXX Dollars ($XXX.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
- Assignor hereby assigns unto Assignee, all of the right, title and interest of Assignor in and to the Leases; its successors and assigns from and after the date hereof, subject to the terms, covenants and conditions of the Leases.
- Assignee assumes the performance of all of the obligations of Assignor under the Leases to be performed from and after the date hereof. Assignee agrees to indemnify, protect, defend and hold Assignor harmless from and against any and all claims, demands, liabilities, losses, costs, damages or expenses including, without limitation, reasonable attorneys’ fees and costs (collectively, “Claims”) arising out of or resulting from any breach or default by Assignee in its obligations under the terms of the Leases from and after the date hereof, including, without limitation, any breach or default by Assignee or failure by Assignee to comply with any applicable law from and after the date hereof with respect to the security deposits under the Leases that are being transferred to Assignee on the date hereof.
- Assignor hereby agrees to indemnify, protect, defend and hold Assignee harmless from and against any and all Claims arising out of or resulting from any breach or default by Assignor in its obligations under the terms of the Leases prior to the date hereof including, without limitation, any breach or default under the Leases or failure by Assignor to comply with any applicable laws prior to the date hereof with respect to the security deposits under the Leases.
This Assignment shall be binding on and inure to the benefit of the parties hereto, their heirs, executors, administrators, successors in interest and assigns.
This Assignment may be executed in separate counterparts, which, together, shall constitute one and the same fully executed Assignment.
Real Estate Purchase and Sale Agreement
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
- Contracts. Assignor hereby transfers and assigns to Assignee any and all right, title and interest which Assignor may have in the contracts, if any, listed in Exhibit Battached hereto and made a part hereof (collectively, the “Contracts”). By executing this Assignment, Assignee hereby accepts and agrees to perform all of the terms, covenants and conditions of the Contracts on the part of Assignor therein required to be performed, from and after the date hereof, but not prior thereto. Assignor agrees to indemnify, defend and hold Assignee harmless with respect to all liabilities and obligations of Assignor under the Contracts arising or accruing prior to the date hereof. Assignee hereby assumes all liabilities and obligations of Assignor under the Contracts arising or accruing from and after the date hereof and agrees to indemnify, defend and hold Assignor harmless with respect thereto.
- Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties hereto.
- Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of the State of Texas.
- No Representations. This assignment is made without any representation or warranty, express or implied, except for those representations and warranties, if any, expressly set forth in that Real Estate Purchase and Sale Agreement between Assignor and [[_____________________________]]dated as of [[_____________, 201__]] (the “Agreement”), all of which are subject to the limitations set forth in the Agreement.
What kind is this?
Writing Activity
Consideration Clauses
Area of Law: Contracts
Writing Task: Set out a consideration clause for a sale of goods contract.
Length: 200 to 300 words
Does Consideration Fall Within the Scope of Intent of a Contract Law?: A Comparative View: USA, England and EU
In a world that we know today Contract Law plays major role between countries and it is of a vast importance that the contracting parties would have same understanding of their rights and arising obligations from a contract made between them. This work starts with the brief historical background of the main legal systems: Common Law and Civil Law.
General Vocabulary Review
staff
to boil down to
to have a bearing on
high-profile
to hand down
a party
a relationship of employment
a corporate advisory company
a claimant
to take place
evidence in court
to trigger off
to hear
relevant statute
further declarations
to get things in writing
to hang on
to apply law
infringement
a dispute
a straightforward case
an assignment
to draw up
jurisdiction
on the grounds of
to have copyright in
to issue a claim
to rip off
blatantly
to have a word with someone
a sole trader
personal assets
the cost
the retail price
just around the corner
in terms of
to drop dramatically
a stall
a logo
not a trace
to set up
a limited company
to bump into
in conjuction with
to spot
a sternly-worded letter
to sky dive
a partner
a written agreement
governing law
engaged in
a number of
a sum
to dismiss
trademark
full and final
to win a case
a small fortune
business premises
a bit shabby
new competition
to waive
to put a charge
to lead to
to show up
maternity leave
to deal with
the case
to harm
to add fuel to the fire
a fee
reasonable legal fees
to add insult to injury
a signature
to bear in mind
complied with
amid a storm
Indeed
just bear with me
royalty
scrutiny
to settle
to sue
to invoice / an invoice
a tenant
a landlord
self-employed
substandard work
breach of contract
to turn up
to earn a living
bankrupt
a bailiff
a battle
a solicitor
a bill
conveyancing
a mortgage lender
to borrow
a formal written warning
loopholes
clamp down
accounting
to sign and date
to sack / to fire
straight away
income
to take to court
small claims court
to take out a loan
legal interest in an asset
a claim
to hold by a third party
to seize
outcome of a case
hasn’t paid a penny
sold at auction
to follow up
to carry out
to chase up
a matter
to draw up
ownership
a total sum
to purchase
to squeeze in
MPs
extent of
to deflect
foreseeable future
wrongful
an installment
to draw conclusions
a deposit
specific performance
bits and pieces
a stamp duty
the facts
to complain
to award
to go ahead
interest and costs
to struggle
a Charging Order
to enforce a judgment
to draw a line under
to draw a line under something
to cover
to threaten
damages or losses
to blame
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About the Author
Eric Froiland
Eric is a legal English teacher from the United States and has been based out of Bogota, Colombia for the last 10 years. He is the owner and founder of Legal English Innovation SAS, which is recognized as the top legal English academy in Colombia and is an official Test of Legal English Skills (TOLES) examination center.
