Lesson 5 - Types of Consideration

Important Terms for this Lesson:
Consideration - that which is given or received in a contract
• Gift - the transfer of ownership without receiving anything in return
• Donor - the person giving a gift
• Donee - the person receiving a gift
• Forbearance - a promise to not do something
• Promisor - the person who promises an action or forbearance
• Promisee - the person to whom a promise is made

What are three requirements of consideration?
A:
Three requirements of consideration are (1) each party must make a promise, perform an act, or forbear, (2) each party’s promise, act, or forbearance must be in exchange for a return promise, at, or forbearance by the other party, and (3) what each party exchanges must have legal value (be worth something in the eyes of the law). Q:
Who is the person who makes a gift? A:
The person who makes the gift is the donor. Q:
How can legal value be found in the exchange of benefit for a detriment? A:
With legal value, the detriment is the giving up of a legal right. A detriment arises when a person promises forbearance. Q:
What is adequacy of consideration? A:
Adequacy refers to the values that different people place on similar property, which can vary widely. What one person will pay for an item or service, another person may feel is unreasonable and never consider paying. SCARCITY AND VALUE
Scarcity of needed goods has always led to an increase in value. Scarcity will lead to the formation of black markets that traffic in the needed goods to be sold at the highest price in countries that have planed economies. Give two examples of situations where prices are much higher due to demand and the circumstances. For example, Super Bowl tickets sell for a much higher price than the dollar value printed on the ticket due to demand.