Business Law Chapter 15 - Chapter 15 Consideration Elements...

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Chapter 15: Consideration Elements of Consideration Consideration: o Legally sufficient value that an offeror bargains for and an offeree gives in exchange for the offeror’s offer. o Agreements won’t be enforced unless they are supported by consideration. Recall Contract = Offer + Acceptance + Consideration + Capacity + Legal Purpose o Consideration is the “give and take” of the contract (i.e. quid pro quo = something for something). o It is the price, the value give, or legal detriment suffered, by each party necessary as an element for a valid contract. o For an agreement to be enforceable, each party to the agreement has got to be either giving something or foregoing a legal right. The actual definition of “consideration” is the legal value bargained for and given in exchange for a promised act. Knowing what constitutes legal value is the key to understanding if consideration to support a contract is present. Consideration (legal value): o Contracting parties can give legal value in a number of different ways. To give legal value, you must either – Do, or promise to do, something you have no previous legal obligation to do or Not do or agree not to do, something you have a legal right to do. As mentioned, legal value can be doing, or promising to do, something you have no previous legal obligation to do. This could include – o Promise to pay money o Promise to transfer ownership to goods (i.e. personal property or land (i.e. real property). o Promise to provide services. o Example – Tom offered to pay John $100 for his watch. Tom’s offer would be supported by consideration as Tom did not have a previous legal obligation to pay John $100 for his watch. Another way to provide legal value sufficient to constitute consideration is to give up something you had a legal right to do. Example – Tom offers John $100 if John agrees to give up smoking cigars for a month. o If John agrees there will be a contract supported by consideration.
o John agreed to give Tom $100 which John previously had no obligation to do. o Tom agreed to give up smoking cigars, which he had a legal right to do. o This forbearance, or giving something up, can constitute legal value. Something that you give up in exchange for the other party’s legal value must be something you had a legal right to do. If we agree that I’ll give you $100 to stop smoking crack cocaine – something you have no legal right to do in the first place because crack is illegal, they you haven’t actually provided legal value to make my promise enforceable. Even if you stop smoking crack cocaine you will not be able to enforce my promise to pay you $100.

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