Legal Definitions - good and valuable consideration

In contract law, good and valuable consideration refers to the essential element where each party to an agreement provides something of legal value to the other. For a contract to be legally enforceable, there must be an exchange of promises, actions, or a forbearance (refraining from an action) that the law recognizes as sufficient. This "consideration" ensures that the parties are genuinely committed to the agreement, as they are each giving up something or undertaking an obligation. It doesn't necessarily mean the value exchanged must be equal in monetary terms, but it must be something recognized by law as having legal worth.

• Example 1: Home Renovation Contract

  A homeowner hires a contractor to remodel their kitchen. The homeowner promises to pay the contractor $50,000 upon completion, and in return, the contractor promises to perform the kitchen renovation according to the agreed specifications and timeline.

  How it illustrates the term: Here, the homeowner's promise to pay $50,000 is their consideration, and the contractor's promise to perform the renovation services is their consideration. Both parties are exchanging legally recognized value (money for services, services for money), making this a contract supported by good and valuable consideration.

• Example 2: Settlement of a Business Dispute

  Two business partners have a disagreement over the distribution of profits. To avoid a costly lawsuit, they enter into a settlement agreement where Partner A agrees to pay Partner B $10,000, and in exchange, Partner B agrees to drop all current and future claims related to the profit dispute and not pursue legal action.

  How it illustrates the term: Partner A's payment of $10,000 is their consideration. Partner B's consideration is their promise to refrain from suing (a forbearance) and to release all claims. This exchange of money for the relinquishment of a legal right constitutes good and valuable consideration, making the settlement agreement legally binding.

• Example 3: Commercial Lease Agreement

  A small business owner signs a lease agreement to rent office space for their new startup. The business owner promises to pay a monthly rent of $2,500 and adhere to all terms outlined in the lease. In return, the landlord promises to provide the business owner with exclusive use of the office space for a specified period.

  How it illustrates the term: The business owner's promise to pay rent and abide by the lease terms serves as their consideration. The landlord's promise to grant the right to occupy and use the property is their consideration. This mutual exchange of promises involving monetary payment and the right to property use represents good and valuable consideration, forming a valid lease contract.