Consideration clause

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Consideration clause - a part of the agreement devoted to mutual obligations of the parties. It is on this basis that any subsequent claims, if any, are asserted. It is an essential element and an integral part of binding agreements. It is characterized by the fact that it determines the rules, form and procedure for the fulfillment by the parties of the terms and conditions accepted by them.

Nature of the obligation

The obligation is the cause of the receivable and the debt. One party promises to the other party that it will comply with its request within a specified period of time or upon request. In turn the other party undertakes that in the situation of a correct fulfillment of the benefit, it will accept such benefits. However, for it to be effective, both parties must make a valid and identical declaration of intent.

Consideration

However, the laws of the States concerned may restrict the catalogues of objects which may be subject to the obligation. These include things such as trafficking in human beings, exploitative labor, narcotic drugs and weapons of illegal origin. The conclusion of such contracts is not only void by operation of law, but may also be subject to public prosecution, which may lead to the conviction of the parties to the contract. It is a type of benefit in which each party is both a creditor and a debtor. The type of such an obligation obliges both the obligation and the entitlement. The basic principle of mutual benefit provision is their simultaneous provision. This means that the commitment will only be implemented if both parties comply with the agreed provisions. Mutual benefits are the basis for economic trade and represent an elementary principle for something. It is assumed that the benefits described are equivalent to each other as both parties have agreed to provide them.

Subject of the consideration clause

The subject of the obligation may be: tangible objects, intangible objects, real estate or services. Each of them has its own unique features. However, it is common for them to be available for use in the course of trade[1]. The Considaration Clause is an essentialia negotii of contracts, which means that any binding contract will remain null and void without being clearly defined. Therefore, it is important to indicate when defining them:

  • Subject matter of the commitment
  • Subject of the obligation
  • Method of fulfillment of the obligation
  • Time limit for fulfillment of the obligation; and
  • Place of performance of the obligation.

After completing the above-mentioned sections, all the minimum requirements for a consideration clause will be met.

Unfair arrangments

The content of the consideration clause shall be in accordance with the principles of morality and social conduct[2]. The conclusion of any unauthorized clauses may result in the contract being automatically voided in whole or in part. In business-to-business trade, the catalogue of prohibited terms is by far small and boils down to terms that were misleading, apparent or threatened[3]. Special protection is provided for consumers. As they are generally in a weaker legal position, most legislations grant them special protection. Hence, all provisions aiming, among others at: exclude or limit liability towards a consumer for personal injury; entitle the consumer's contractual partner to unilaterally modify the contract without a valid reason as indicated in that contract; only confer on the consumer's contractual partner an entitlement to ascertain the conformity of the performance with the contract. Such arrangements are referred to as tort clauses, which may give rise to a right of withdrawal and a possible claim for damages.

Examples of Consideration clause

  • In a contract for the sale of goods, the consideration clause may provide that the buyer agrees to pay the agreed-upon price for the goods and the seller agrees to deliver the goods in the agreed-upon condition.
  • In a contract for the leasing of property, the consideration clause may provide that the lessee agrees to pay the agreed-upon rent and the lessor agrees to provide the agreed-upon space in the agreed-upon condition.
  • In a contract for the sale of a business, the consideration clause may provide that the buyer agrees to pay the agreed-upon price and the seller agrees to transfer all assets, liabilities, and employees associated with the business in the agreed-upon condition.
  • In an employment contract, the consideration clause may provide that the employee agrees to perform the agreed-upon job tasks in the agreed-upon manner and the employer agrees to pay the agreed-upon salary and benefits.

Advantages of Consideration clause

A Consideration clause is a very important element of any agreement and its advantages should not be underestimated. Among the most important advantages of such a clause are:

  • Defining the conditions of the agreement in a clear, comprehensive and legally binding way. The clause ensures that all parties to the agreement are aware of the terms and conditions of their obligations, and that they agree to abide by them.
  • Ensuring that the agreement is enforceable. The clause outlines what is expected of the parties and provides a mechanism to ensure that they fulfill their obligations.
  • Establishing trust between the parties. The clause ensures that all parties are aware of the obligations they are undertaking, thus promoting a sense of trust and reliability.
  • Providing a basis for legal action in the event of a breach of agreement. The clause outlines the consequences of any breach and provides a legal basis for any subsequent claims.

Limitations of Consideration clause

Consideration clauses have certain limitations. These include:

  • The clause should not be used to bypass the basic principles of contract law or to impose illegal or immoral obligations.
  • The consideration clause should be written in a way that clearly defines the obligations of the two parties.
  • The clause must be reasonable and not excessively one-sided in favour of one party over another.
  • The consideration should be fair and equitable for both parties.
  • Consideration clauses should not be used to limit the parties’ rights to claim damages if something goes wrong.
  • The clause should be written with clear language so that all parties understand their obligations under the agreement.
  • Consideration clauses should not be used to circumvent the law, as any clause that does so may be void or unenforceable.

Other approaches related to Consideration clause

Consideration clause is an important element of any agreement, which outlines the obligations of the parties. It is characterized by the fact that it determines the rules, form and procedure for the fulfillment of the terms and conditions accepted by them. Other approaches related to consideration clause include the following:

  • Establishing a legal basis for the agreement: Consideration clause outlines the mutual obligations of the parties and serves as a legal basis for the agreement.
  • Defining the scope of obligations: Consideration clause outlines the scope of obligations of the parties and provides a clear understanding of the rights and responsibilities of each party.
  • Limiting the liability of the parties: Consideration clause also serves to limit the liability of the parties in case of any breach of the agreement.

In conclusion, consideration clause is an essential element and an integral part of any binding agreement. It outlines the mutual obligations of the parties, defines the scope of obligations and limits the liability of the parties in case of any breach of the agreement.

Footnotes

  1. ↑ T. Huber-Putschert 2018, p. 6-8
  2. ↑ E. Mackaay 2011, p. 8-12
  3. ↑ P. S. Abril, F. O. Blazquez, J. M. Evora 2018, p.17


Consideration clause — recommended articles
Contractual relationship — Affirmative Covenant — Assignment of claims — Binding contract — Statute barred debt — Executed agreement — Executory consideration — Exemption clause — Mutual assent

References

Author: Maria Bartkowska

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