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Consideration under American law


Consideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from doing an act. In broad terms, if one agrees to do something he was not otherwise legally obligated to do, it may be said that he has given consideration. For example, Jack agrees to sell his car to Jill for $100. Jill's payment of $100 (or her promise to do so) is the consideration for Jack's promise to give Jill the car, and Jack's promise to give Jill the car is consideration for Jill's payment of $100.

In order to meet consideration's requirements, a contract must fulfill three elements. First, there must be a bargain regarding terms of an exchange. Second, there must be a mutual exchange. In other words, both parties must get something out of the contract. Third, the exchange must be something of value.

An example of this is renting of apartment. The landlord and tenant come together to discuss the terms of the exchange (most of the time, the leasing is outlined in a contract). Thus, they have fulfilled the first requirement of consideration. To meet the second element, there must be a mutual exchange. In this case, the landlord provides housing, while the tenant provides rent payment. Third, the bargain terms must be of value. The apartment is worth what the tenant hands over each month. Therefore, this contract has met its consideration requirement, because it fits all elements of consideration.

Modern contract theory has also permitted remedies on alternative theories such as promissory estoppel. Also, modifications to existing lease agreements (as opposed to the creation of a new lease agreement) do not require consideration, nor do modifications to existing sale contracts Furthermore a promise to perform a moral obligation—the classic example is of a promise to support a person injured while coming to the rescue of the promisor—is enforceable provided the promissee was harmed in conferring a benefit on the promisor and the promise is not disproportionate to the benefit. The promise to pay a debt discharged by bankruptcy, the promise to perform a conditional responsibility despite the nonoccurrence of the condition, and the promise to perform on a voidable contract form a category of moral obligations that can bind in the absence of consideration.


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