Contract Law Past Consideration: Everything You Need to Know
Understanding contract law past consideration such as knowing when a contract can be enforced and at what point is crucial for anyone entering an agreement.3 min read
2. Types of Consideration
3. When a Contract Lacks Consideration
Understanding contract law past consideration is a topic that anyone entering into any form of contract needs to understand. Whether you are a business owner or an individual dealing with a relative, knowing when a contract can be enforced and at what point is very important to prevent either of the parties from getting burned in the process.
What is Consideration?
Consideration in a contract is essentially providing an answer as to why the parties would enter into a specific contract or what is being received within the terms of the contract.
For a contract to be enforceable, it has to include consideration from every individual or business who is party to the contract.
The consideration is a benefit that all parties will received or expect to receive from the deal. For instance, you get a soda at the convenience store and they get your money.
Consideration is typically the result of either:
· A promise that you will do something you are not obligated to do legally, or
· A promise that you will not do something when you have the right to do so, such as file a lawsuit
If, for example, you backed into your neighbor’s car and caused damage, your neighbor is allowed by law to sue you for the cost of the damage. Consideration comes into play if he chooses not to sue you if you pay him $3000.
This form of agreement provides consideration for your contract since both parties are giving something up in exchange. You give money and your neighbor is giving up his right to sue you for the damage.
Types of Consideration
Executory Consideration- this form of consideration occurs when there are promises exchanged to perform tasks at a later time. An example is a contract in which you promise to deliver items to another person at a later date and he promises to pay you when they are delivered.
If you do not deliver them, it is considered a breached contract and the other person can sue you. If you deliver the items, your consideration is executed.
Executed Consideration- if one party to a contract makes a promise for an act by another party, it is an executed consideration when the act is done. If you offer a reward for a lost wallet and another person finds it and gives it to you, that person’s consideration is executed.
When a Contract Lacks Consideration
There are some instances when a court will enter a contract and determine that it is not enforceable due to no consideration.
One party may have been legally required to perform a task. For instance, a policeman is not allowed to claim a reward for capturing a suspect since he was already required to capture lawbreakers.
The promise is a gift rather than a contract. If a wealthy relative promise to give you money to go to college with no further obligations, that is a promise to give a gift. Should the relative change his mind, you cannot force that relative to give you the money anyway since you have not promised anything in return.
If you have made a deposit on your college tuition when you were relying on the gift from the relative and the relative knew you were doing so, a court may require him to pay you the money to make good on his original promise.
While this is not considered a true contract, the law says that promises have to be kept if another person on the other end of the promise has taken some kind of action assuming the promise would move forward. Otherwise, the person who received the promise could be contractually obligated to still attend college or stand to risk losing the money spent out of his or her own pocket based on a bad promise.
An exchange for past consideration is also not going to be ideal. If someone promises to give you $100 because you lost 50 pounds over the course of the year, the court will not require the person to follow through with that promise if he or she changes their mind since the act of losing weight was not bargained ahead of time.
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