Contract Law Consideration - Roth Law Group News - Cook County Small Business Attorney

Contract Law - Consideration

Implicit in a valid offer and acceptance is the requirement of mutual consideration, meaning the parties must each exchange something of value. While this concept does not require the parties to exchange equal value, it does require that the value exchanged by each party induced the other to enter the agreement. Thus, if a parent sold a parcel of real estate worth $1,000,000.00 to his or her child for $1.00, a court would consider the consideration illusory and would not recognize a validly formed contract since the parent's relationship with the child induced the parent to enter the real estate contract. Finally, the consideration given cannot be value given or promised in the past. To be valid, the consideration must be a new promise or benefit exchanged.

While the validity of consideration may be subject to attack on the basis that it is illusory or was really past consideration, a party to a contract may not escape the consequences of bad negotiation. Thus, if a seller of factory equipment worth $50,000.00 contracts to sell the equipment for $10,000.00, he or she may not rescind the contract upon learning of the car's actual value.

Previous Page

Next Page

Business Formation Articles:

Organizational Structure

Taxation and Finance

Federal and State Licenses

Business Liability Insurance

Commercial Litigation

Contract Negotiation and Drafting

Contract Law Articles

Contract Law Introduction

Contract Offer and Acceptance

Contract Consideration

Contract Performance or Delivery

Contract Issues Affecting Validity

Contract Law Conclusion