Consideration
somethin' for somethin'
I am planning to focus primarily on contract law definitions in the fall, as I will be teaching 1L Contract Law again this coming semester, and I think focusing on that will be helpful for first year incoming law students. This summer, I’d like to work mostly on personal and small business finance and investing definitions. But, the word consideration has been on my mind lately because of all of the feelings that come up when I read the newspaper, so I’m discussing it this week.
We all know the common meanings of consideration: to concern oneself with another’s feelings or needs or to take into account different aspects of a problem before creating a solution. Consideration is a noun, and I’m sure many of us have used the phrase “I’ll take your request into consideration” when receiving information from someone seeking something from us, like a sleepover party with their friends or ingredients to make a hot fudge sundae, and we are juggling multiple competing interests and demands at the moment of their ask.
But, consideration is also a legal term required to make a contract legally enforceable. More below.
Consideration:
legal definition - something of value exchanged between two people or entities in order to form a binding contract
Note: Popular examples of consideration required to make a contract legally enforceable are money, property, or even a promise to take some type of action, like promising to water a person’s plants while they’re visiting India in exchange for them bringing you back some of your Masi’s homemade achaar.
Story:
Auntie told her neice when she graduated from high school and went off to college in San Francisco with her first credit card and a new bank account, If you spend less than $50 each month of college on clothes and make up, I’ll transfer $50,000 for your graduate school education into an interest bearing account for you.” Auntie wrote the deal on a piece of paper and handed it to her niece. Good luck, beta, she said.
The niece, who absolutely loved to shop and had the legal right to take on debt, decided to change her habits. She knew she wanted to go to law school and that law school is expensive! The $50,000 would cover at least one year of tuition at her target schools.
Instead of shopping at fast-fashion stores, she went thrifting with her friends once a month. And for make up, she decided to shop at the neighborhood pharmacy instead of the high-end make up store. She carefully tracked her shopping habits each month to make sure she didn’t go over the $50 mark, sometimes returning a new lipstick if she realized she’d gone over budget or convincing her friends to go out for coffee instead of shopping.
Shortly after the niece’s college graduation ceremony, with a law school acceptance letter also in hand, the niece was ready to meet with Auntie to discuss the logistics of the promised $50,000. But Auntie sadly passed away, just after graduation, and her estate lawyer refused to honor the agreement, claiming there was no real contract because the niece didn’t give anything in return.
The niece put on her best black suit, and went to meet the lawyer at their law firm. She took out the paper Auntie had given her. This is a binding legal contract, she said, showing the estate lawyer what Auntie had written. A promise not to do something I am legally entitled to do is a form of consideration just as much as a promise to do something.1 She showed the lawyer her monthly credit card statements and a signed affidavit that she upheld her end of the bargain. I definitely gave up my right to max out credit cards on make up and clothes in return for the promised $50,000 for my future education. Auntie would have wanted me to have that money. She convinced the estate attorney that she was right, and they didn’t need to duke it out in court. She starts law school this fall.
This story is based on the famous contract law case, Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256 (1891) (Established that a nephew’s forbearance from engaging in legal activities such as drinking and smoking was a form of consideration, making his uncle’s promise to pay him $5,000 for giving up these legal rights until the age of 21 a legally binding contract).