What is Valuable Consideration?

At law, the concept of "valuable consideration" is fundamental. It is especially relevant in contract law and is one of the essential elements required to form a legally binding contract. Without valuable consideration, a contract can be unenforceable.

Definition of Consideration

Consideration refers to something that is exchanged between parties involved in an agreement or contract. It can be in the form of money, goods, services, or a promise to perform (or even refrain from performing) a particular action. It is often referred to as the payment for the service or thing being transferred.

Nominal vs Valuable Consideration

Nominal consideration is a small or insignificant amount of money or value given in exchange for something. A common example of this is when someone agrees to buy something of value for payment of $1. The $1 payment is merely a token payment and does not reflect the actual or market value of the item or service being purchased.

Valuable consideration however is not insignificant and is something of actual value rather than a token payment. It does not need to be equivalent to the actual market value of the item or service being exchanged.

Elements of Valuable Consideration

1. Benefit and Detriment: For consideration to be deemed valuable, there must be a benefit to the party receiving it and a detriment to the party providing it. This means that each party must give up something of real value or undertake a responsibility.
2. Sufficiency and Adequacy: Consideration must be sufficient but not necessarily adequate. This means that the consideration must be something of value, but it does not have to be equal in value to what is being received in return. Courts generally do not assess the adequacy of consideration unless there is evidence of fraud or undue influence.
3. Legality: The consideration must be lawful. Any consideration involving illegal activities or actions that are against public policy will not be recognised by the Courts.

Examples of Valuable Consideration

• Monetary Payment: The most common form of consideration is money. For instance, paying $1,000 for a used car is a clear example of valuable consideration.
• Goods and Services: Exchanging goods or services can also constitute valuable consideration. For example, offering to install someone’s new dishwasher in exchange for the old dishwasher.
• Promises: A promise to do something in the future can also be valuable consideration. For example, a promise to deliver something at a later date in exchange for payment up front.

Importance of Valuable Consideration

Valuable consideration is crucial because it distinguishes a contract from a mere gift. In the absence of consideration, a promise is generally not enforceable at law as a contract. This principle ensures that there is some form of mutual exchange of value, which is an essential element of contract law.

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Any information on this website is general in nature and should not be taken as personal legal advice. We recommend that you speak to a lawyer about your personal circumstances.

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