Consideration: A Required Element For An Enforceable Contract

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A contract is an agreement resulting in obligation enforceable at law; it is “a voluntary obligation proceeding from a common intention arising from an offer and acceptance." Johnson and Johnson v. Charmley Drug Co., 11 N.J. 526, 539 (1953). To be an enforceable contract there must be a definite offer, acceptance of that offer and consideration. Friedman v. Tappan Dev. Corp., 22 N.J. 523, 531 (1956). Thus, without consideration there can be no contract. Contl. Bank of Pa. v. Barclay Riding Acad., Inc., 93 N.J. 153, 170 (1983), cert. denied, Barclay Equestrian Ctr., Inc. v. Contl. Bank of Pa., 464 U.S. 994 (1983).

What is Consideration?

A simple way of defining consideration is to say that both sides must “get something out of the exchange.” Contl. Bank of Pa., 93 N.J. at 170; Friedman, 22 N.J. at 533; 1 Corbin, Contract §110 (1963 ed.). Valuable consideration may take the form of either a detriment incurred by the promisee or benefit received by the promisor. Contl. Bank of Pa., 93 N.J. at 170; Novak v. Cities Serv. Oil Co., 149 N.J. Super. 542, 549 (Law Div. 1977), aff’d, 159 N.J. Super. 400 (App. Div.), certif. denied, 78 N.J. 396 (1978); 1 Corbin, Contract §§121-122 (1963 ed.).

If consideration is met, there is no additional requirement of gain or benefit of the promisor, loss or detriment to the promisee, equivalence in values exchanged, or mutually of obligation. Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. at 289 (adopting Restatement (Second) of Contracts §79 (1979)). In other words, Courts will not measure the adequacy of consideration. Rather, the only analysis is to determine whether or not consideration is present in the contract. See Seaview Orthopedics v. Natl. Healthcare Resources, Inc., 366 N.J. Super. 501, 509 (App. Div. 2004). Thus, if both parties even received something nominal a Court will find the existence of consideration as a matter of law.

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Ariadne Green - February 13, 2007 1:05 PM

A question: If a contract is entered between a New Jersey based company and a consumer in another state for "self"-publishing services (paid for book production), under New Jersey law can the consumer file a small claims suit in her own state or does she have to file in New Jersey and appear there?

Scott Unger - February 16, 2007 9:22 AM

If the company conducts business in the state where the consumer resides they can filed suit against the NJ company either in the consumer's state or NJ.

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