Legal Definitions - legal value

Legal value refers to the essential element in a contract that makes it legally enforceable. For an agreement to be considered a valid contract, both parties must exchange something that the law recognizes as having value. This "legal value" doesn't necessarily mean monetary worth; it signifies a "bargained-for exchange" where each party either receives a benefit or incurs a detriment (gives up a legal right or does something they weren't legally obligated to do) as part of the agreement. Without legal value, an agreement is often considered a mere promise or gift, which may not be enforceable in court.

• Example 1: A Promise to Perform a Service

  A homeowner hires a landscaping company to redesign their backyard for $10,000. The homeowner promises to pay the $10,000, and the landscaping company promises to complete the redesign according to the agreed specifications.

  How it illustrates legal value: The landscaping company's promise to perform the redesign service is the legal value provided to the homeowner. In return, the homeowner's promise to pay $10,000 is the legal value provided to the landscaping company. Both parties are giving up something (money or a service) that they were not legally obligated to provide before entering the contract, creating a binding agreement.

• Example 2: A Promise to Refrain from an Action (Forbearance)

  A small business owner owes a significant debt to a supplier. The supplier agrees not to file a lawsuit to collect the debt for six months, provided the business owner agrees to make increased monthly payments during that period.

  How it illustrates legal value: The supplier's promise to refrain from suing (known as forbearance) is the legal value provided to the business owner, as the supplier is giving up their immediate legal right to pursue collection through the courts. In exchange, the business owner's promise to make higher monthly payments is the legal value provided to the supplier. This mutual exchange of promises creates a new, enforceable agreement.

• Example 3: Performing an Action Not Legally Required

  A university student is offered $200 by their neighbor if the student cleans out the neighbor's cluttered garage by the end of the week. The student spends the weekend cleaning the garage.

  How it illustrates legal value: The student's act of cleaning the garage is the legal value provided to the neighbor. The student was not legally obligated to clean the garage, so performing this task constitutes a "detriment" or an act of legal value. In return, the neighbor's promise to pay $200 is the legal value provided to the student. Once the student completes the task, the neighbor's promise to pay becomes legally binding.