California Injury Attorney Blog

Consideration is the legal concept of value in connection with contracts. It is anything of value in the common sense, promised to another when making a contract. It can take the form of money, physical objects, services, promised actions,abstinence from a future action and much more. Under the notion of "pre-existing duties," if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense.

In common law it is a prerequisite that both parties offer some consideration before a contract can be thought of as binding.

However, even if a court decides there is no contract, there might be a possible recovery under Quantum meruit (sometimes referred to as a Quasi-contract) or promissory estoppel

Basic examples of consideration
If A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000, and B's consideration is the car.

Additionally, if A signs a contract with B such that A will paint B's house for $500, A's consideration is the service of painting B's house, and B's consideration is $500 paid to A.

Further, if A signs a contract with B such that A will not repaint his own house in any other color than white, and B will pay A $500 per year to keep this deal up, there is also consideration. Although A did not promise to affirmatively do anything, A did promise not to do something that he was allowed to do, and A therefore did pass consideration. A's consideration to B is the forbearance in painting his own house in a color other than white, and B's consideration to A is $500 per year.

This form of consideration is often seen in settlements. B committed a tort against A, causing $5,000 in compensatory damages and $3,000 in punitive damages. Since there is no guarantee that A would win against B if it went to court, A will agree to drop the case if B pays the $5,000 compensatory damages. This is sufficient consideration, since B's consideration is a guaranteed recovery, and A's consideration is that B only has to pay $5,000, instead of $8,000.

Conversely, if A signs a contract to buy a car from B for $0, B's consideration is still the car, but A is giving no consideration, and so there is no valid contract. However, if B still gives the title to the car to A, then B cannot take the car back, since, while it may not be a valid contract, it is a valid gift.