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Contract Formation Principles: Consideration

Understanding the principles of consideration is crucial in contract law. Here's a breakdown of the two you mentioned:

1. Consideration must be sufficient but need not be adequate:

• Meaning: When forming a contract, both parties must offer something of value to each other. This "something" is called consideration.
• Sufficient: Consideration is sufficient if it has some legal value, regardless of its worth compared to the other party's promise.
  • Example: You promise to mow your neighbor's lawn, and they promise to bake you cookies. Both promises have legal value, even if the value of the cookies might not objectively equal the effort of mowing the lawn.
• Adequate: While consideration must be sufficient, it does not need to be adequate in terms of its perceived market value.
  • Example: You sell your car for significantly below market value. The sale is valid as long as you receive something of legal value (e.g., money) in return, even if it's less than the car's true worth.

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2. Consideration may be executed or executory but must not be past:

• Executed: Consideration is executed when one party has already performed their promised act.
  • Example: You pay for a meal at a restaurant; the restaurant provides the meal (both promises are executed).
• Executory: Consideration is executory when both parties promise to perform their obligations in the future.
  • Example: You sign a contract to pay for a car in installments; the seller agrees to deliver the car upon full payment (both promises are executory).
• Past: Consideration cannot be past, meaning an act done before the agreement cannot be used as consideration for a current promise.
  • Example: Your neighbor promises to pay you back for a loan you already gave them. This is not valid consideration because the act of lending the money occurred before the promise to pay.

Additional Points:

• Consideration can be anything of legal value, including money, goods, services, or a promise to do (or not do) something.
• The courts generally do not inquire into the adequacy of consideration, as long as it is sufficient and not illegal or against public policy.
• Understanding these principles is crucial for determining when a contract is valid and enforceable.

By understanding these concepts, you can better analyze contract formation and assess the validity of agreements. Remember, this is just an overview, and specific legal advice should always be sought from a qualified professional