Overview
Good consideration is a legal construct in contract law where the motivation or basis for entering a contract does not involve a tangible or financial exchange. Instead, it revolves around non-monetary values such as love, affection, or moral obligations. Although financial consideration is most common in contracts, good consideration can also uphold a contract’s validity.
Examples
Familial Relationship
In family settings, contracts may involve good consideration. For instance, a parent may transfer property to a child out of love and affection, establishing a valid contractual commitment without financial exchange.
Moral Duty
A scenario involving moral duty may include a person caring for an elderly relative without financial compensation. The moral obligation to take care of the relative constitutes good consideration for any related contractual agreements.
Frequently Asked Questions
Is good consideration legally binding?
Yes, good consideration can be legally binding. Courts often recognize non-monetary values like love, affection, and moral obligations as valid reasons for entering into a contract.
How does good consideration differ from valuable consideration?
Good consideration differs in that it involves non-monetary values like emotional or ethical commitments, while valuable consideration involves a tangible or financial exchange.
Can business contracts use good consideration?
Typically, business contracts rely on valuable consideration (money, services, goods). Good consideration is more commonly seen in family and personal relationships.
Valuable Consideration: A consideration with a determinable financial value exchanged in a contract.
Moral Consideration: A term sometimes used interchangeably with good consideration, emphasizing ethical obligations as the basis for a contract.
Executory Contract: A contract in which some portion of the contractual agreement remains incomplete; can involve good or valuable consideration.
Online Resources
References
- Restatement (Second) of Contracts, American Law Institute.
- Chirelstein, Marvin A. Concepts and Case Analysis in the Law of Contracts.
Suggested Books for Further Studies
- Farnsworth, E. Allan. Farnsworth on Contracts.
- Ayres, Ian, and Gregory Klass. Studies in Contract Law.
- Calamari, John D., and Joseph M. Perillo. Contracts.
Real Estate Basics: Good Consideration Fundamentals Quiz
### Is good consideration sufficient to form a binding contract?
- [x] Yes, it can be.
- [ ] No, it cannot be binding.
- [ ] Only if money is also involved.
- [ ] It depends on the jurisdiction.
> **Explanation:** Good consideration like love, affection, or moral commitment is recognized legally, making it sufficient to form a binding contract in many instances.
### Can good consideration be used in commercial contracts?
- [ ] Yes, always.
- [x] No, it is typically for personal or family contracts.
- [ ] Only if the parties agree.
- [ ] Yes, but only in sole proprietorships.
> **Explanation:** Good consideration is generally not used in commercial contracts, which primarily involve valuable consideration with financial or material value.
### Which of the following would be an example of good consideration?
- [x] Transferring property to a child out of love.
- [ ] Buying a house for $200,000.
- [ ] Leasing a car.
- [ ] Signing an employment contract.
> **Explanation:** Transferring property to a child out of love and affection exemplifies good consideration.
### What is a primary difference between good and valuable consideration?
- [ ] Good consideration is faster to enforce legally.
- [ ] Valuable consideration is only used in business.
- [x] Good consideration involves non-monetary values.
- [ ] They are the same thing.
> **Explanation:** The primary difference lies in the nature of the exchange; good consideration involves non-monetary values, while valuable consideration involves tangible or financial exchanges.
### Which term is commonly used interchangeably with good consideration?
- [x] Moral consideration
- [ ] Financial consideration
- [ ] Legal consideration
- [ ] Contractual obligation
> **Explanation:** Moral consideration is commonly used interchangeably with good consideration as both relate to ethical or moral obligations.
### For a contract of good consideration to be valid, what must it exhibit?
- [ ] Both parties must be family members.
- [x] Clear intent and mutual agreement.
- [ ] Financial benefit for one party.
- [ ] Physical assets transfer.
> **Explanation:** The contract must exhibit clear intent and mutual agreement between the parties involved.
### Why might courts uphold contracts based on good consideration?
- [ ] They feel empathetic towards the parties.
- [ ] The IRS requires them to.
- [x] Non-monetary commitments can demonstrate serious intention.
- [ ] To discourage commercial transactions.
> **Explanation:** Courts may uphold these contracts because non-monetary commitments can be seen as showing a serious intention to honor the contract terms.
### Can good consideration be subject to enforceability scrutiny?
- [x] Yes, like any other contract.
- [ ] No, it’s always enforceable.
- [ ] Only in case of fraud.
- [ ] It cannot be legally contested.
> **Explanation:** Contracts based on good consideration may be scrutinized for enforceability, similar to contracts based on valuable consideration.
### Which family setting is most likely to use good consideration?
- [ ] Leasing of family farmland for commercial crops.
- [ ] Employment contracts among siblings.
- [x] Transferring real estate due to love and affection.
- [ ] Sale of property within the family.
> **Explanation:** Transferring real estate or assets due to love and affection within family settings is a common use case for good consideration.
### Which thrid-party agency is least concerned with good consideration principles?
- [ ] Local courts
- [ ] Family mediation services
- [x] Stock exchanges
- [ ] Real estate arbitration boards
> **Explanation:** Stock exchanges are least concerned with principles of good consideration, as they deal with financial transactions that must adhere to valuable consideration principles.
