When we talk about contracts, it's important to understand a key term: consideration.
Consideration is something of value that two parties exchange when making a contract. It's what makes a contract legal and binding. This can mean a promise to do something, providing a service, or delivering goods. There are two main types of contracts—bilateral contracts and unilateral contracts—and the way consideration works in them is different.
In bilateral contracts, both sides promise to do something for each other.
For example, if Person A sells their car to Person B for $10,000, both of them have responsibilities. Person A must give the car, and Person B must pay the money. Here, consideration is mutual, meaning both people contribute something valuable to the deal. Courts will look for proof that both sides agreed to these promises.
Here are some important points about consideration in bilateral contracts:
On the other hand, unilateral contracts involve one person making a promise to do something in exchange for a specific action from another. A good example is a reward. If Person A says, “I will pay $500 to anyone who returns my lost dog,” only Person A is making a promise. Person B enters the contract by finding and returning the dog. They don’t need to promise Person A anything first.
Here are some features of unilateral contracts:
For both types of contracts, consideration needs to meet some requirements:
Sufficiency and Value: Consideration must be enough to count, but it doesn’t have to be equal. For instance, if someone sells a property for $1, that’s enough consideration even if it’s not the true value.
Pre-existing duties: If someone already has a duty before the contract, they can't count fulfilling that duty as consideration. For example, a public servant can’t say they’ll do their job for money, because they’re already supposed to do it. But in unilateral contracts, if it’s a new task, that duty may not matter.
Past Consideration: Previous help doesn’t count as consideration. If Person A promises to pay Person B for a task they completed last week, that promise isn’t valid because it’s based on something done in the past.
Sometimes, exceptions can change how consideration works:
Estoppel: In some cases, a unilateral contract might still be enforced even without traditional consideration. This happens when someone relies on the promise and would be unfairly hurt if the promise weren’t kept.
Commercial Context: In business contracts, consideration can be seen more flexibly. Actions like trading stocks may create different kinds of agreements that don’t fit neatly into the usual definitions of value.
Different Jurisdictions: Laws can differ depending on where you are. Some courts have stricter rules about what consideration must look like, while others are more lenient. This means there’s a lot of complexity in contract law.
In summary, consideration is key to both unilateral and bilateral contracts. While bilateral contracts need promises from both sides, unilateral contracts rely on one promise in return for an action. Understanding these differences is crucial for anyone involved in contracts, as they help define the duties and rights of each person in the agreement. Knowing about consideration can also help students and professionals better navigate the world of contracts.
When we talk about contracts, it's important to understand a key term: consideration.
Consideration is something of value that two parties exchange when making a contract. It's what makes a contract legal and binding. This can mean a promise to do something, providing a service, or delivering goods. There are two main types of contracts—bilateral contracts and unilateral contracts—and the way consideration works in them is different.
In bilateral contracts, both sides promise to do something for each other.
For example, if Person A sells their car to Person B for $10,000, both of them have responsibilities. Person A must give the car, and Person B must pay the money. Here, consideration is mutual, meaning both people contribute something valuable to the deal. Courts will look for proof that both sides agreed to these promises.
Here are some important points about consideration in bilateral contracts:
On the other hand, unilateral contracts involve one person making a promise to do something in exchange for a specific action from another. A good example is a reward. If Person A says, “I will pay $500 to anyone who returns my lost dog,” only Person A is making a promise. Person B enters the contract by finding and returning the dog. They don’t need to promise Person A anything first.
Here are some features of unilateral contracts:
For both types of contracts, consideration needs to meet some requirements:
Sufficiency and Value: Consideration must be enough to count, but it doesn’t have to be equal. For instance, if someone sells a property for $1, that’s enough consideration even if it’s not the true value.
Pre-existing duties: If someone already has a duty before the contract, they can't count fulfilling that duty as consideration. For example, a public servant can’t say they’ll do their job for money, because they’re already supposed to do it. But in unilateral contracts, if it’s a new task, that duty may not matter.
Past Consideration: Previous help doesn’t count as consideration. If Person A promises to pay Person B for a task they completed last week, that promise isn’t valid because it’s based on something done in the past.
Sometimes, exceptions can change how consideration works:
Estoppel: In some cases, a unilateral contract might still be enforced even without traditional consideration. This happens when someone relies on the promise and would be unfairly hurt if the promise weren’t kept.
Commercial Context: In business contracts, consideration can be seen more flexibly. Actions like trading stocks may create different kinds of agreements that don’t fit neatly into the usual definitions of value.
Different Jurisdictions: Laws can differ depending on where you are. Some courts have stricter rules about what consideration must look like, while others are more lenient. This means there’s a lot of complexity in contract law.
In summary, consideration is key to both unilateral and bilateral contracts. While bilateral contracts need promises from both sides, unilateral contracts rely on one promise in return for an action. Understanding these differences is crucial for anyone involved in contracts, as they help define the duties and rights of each person in the agreement. Knowing about consideration can also help students and professionals better navigate the world of contracts.