Why Value and “Consideration” is Vital to a Valid Contract

Put simply, the legal definition of “consideration” is essentially value. When it comes to California contract law, valid contracts are expected to have a mutual consideration, or fair exchange of value. If the contract is missing this essential element, the contract may be deemed unenforceable by the court of law.

Why is Consideration so Important to the Courts?

Consideration, or lack thereof, is important in California contract law when the contract heavily favors one party of the contract at the expense of the other. For example, when a contract states that one side will sell a car (worth approximately $20,000) to another party for one dollar.

For these types of unfair contracts, it is presumed that these agreements involve some sort of coercion or fraud. After all, what reasonable person would willingly/knowingly agree to such an inequitable exchange?

Unfortunately, there are many cases of individuals being coerced or tricked into such an unfair contract. Thankfully, the courts have come to understand this harsh reality, and have tried to instigate remedies for victims. For many victims that can provide a compelling case, these contracts with no “consideration” can be voided.

Bilateral and Unilateral Contracts, What Type of Contract am I in?

Bilateral and Unilateral contracts are the two most common/general types of contracts people agree to. These two contracts have distinct differences that are important to understand; however, both of these types still involve an exchange of value (in one form or another).

Bilateral Contracts

Bilateral contracts are the more common of the two types. Bilateral contracts include agreements made when people purchase groceries, auto repairs, cell phone subscriptions, or contracts similar to those used for utilities.

These contracts are readily used and integrated in many peoples' daily lives. The essential element to bilateral contracts is that both parties in the contract makes a promise to the other. For example, a cell phone provider promises to maintain consistent and reliable cell service for the customer. On the other hand, the customer agrees to pay a monthly fee to the provider.

Unilateral Contracts

Unilateral contracts are less common and slightly different in that only one party of the contract makes a promise to the other. A common example is the reward contract. Reward contracts offer to pay a finder's fee to the person that fulfills the request; however, no person or entity is actually obligated to look, find, or even return the request.

Your Next Steps

Understanding the distinction between bilateral and unilateral contracts is important in determining whether one's case will be viewed favorably in the eyes of the court. If you think your contract dispute falls in one of these two categories, it is highly advised to seek legal counsel for a consultation.

This is a legal blog. It is not intended to be used as legal advice.

For further information please contact the law offices of attorney Ramona Kennedy.

Ramona Kennedy (Attorney) received her Jurisprudence Doctorate in America and is a licensed attorney in California (USA). Ramona Kennedy is a member of Orange County Trial Lawyers Association (OCTA).

Ramona Kennedy is fluent in English and Farsi (reading & writing) & speaks Azeri Turkish.

It is advisable to seek legal guidance from our office today as we strive to help guide you with your specific case. 

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