Years ago, somebody taught me this formula. If you want to sell candies, you first compute your expenses such as transportation, purchase price of the candy, rent for the place where you are selling the candies. The second step is to divide the total cost with the number of units or candies you are going to sell. After doing this, add a margin of profit. This is the price of your candy. In law, this may be considered your offer. If somebody else offered to buy or, in other words, accepted your offer to sell, then you have to contract. The price that has been set and has been accepted by the buyer is the consideration.
Consideration is the act incurred to make the promise enforceable. In other words, without consideration, neither party to a contract has a right to demand. To be valid, two elements must exist—legal value, which contemplates either legal detriment or legal benefit, and bargain for exchange. As regards legal value, this is necessary because, without this, there is nothing to consider. Perhaps one reason consideration is called such is because it is the main thing or aspect of a contract that parties consider for entering into it.
However, who decides the correct consideration and how is it determined. In the earlier example, the process is simple. The seller just added everything he spent and added a target profit. However, in this scenario, the merchandise is simple, the market is simple, the holding period is very short and the price is easy to determine. However, this is not always the case. Often, there are many other factors to be considered. There are many other costs and benefits to be computed. Unfortunately, many of these costs and considerations cannot be computed easily using numbers. To name a few, there is sentimental value, services, easements and gratuity. Computation of costs and value of what is to be the object of a contract is not always as easy as one plus one equals two.
Moreover, it is to be noted that, oftentimes, consideration is determined based on what is just in certain circumstances. Therefore, real properties are often priced at their fair market value. In economics, commodities are deemed to be priced based on the intersection between the supply and demand curves, such intersection being the efficient price at that time. However, these are not always possible. In many cases, buyers and sellers do not agree. What may just and fair may not be just and fair to another. Sometimes, the parties’ opinions of what are just and fair are too different that they cannot meet like two circles in a Venn diagram that never intersect.
The proper solution maybe is to not create a contract. Obviously, the possible end for this instance is for the possible parties to disagree and not enter into a contract at all. Either they can keep their properties and services to themselves or find another person whose opinion of just and fair consideration is similar to themselves. Unfortunately, in the real world, what seems to be obvious may often be incorrect and difficult. Many people find themselves in a situation where entering into a contract is urgent and necessary. Examples are unemployed people who have zero balance in their wallets, pockets and bank accounts. Another is people who are in very deep debt that their only options are to sell whatever remaining properties they have or hold on to a debt which earns too much interest in one month.
In these cases, a contract has to be entered. One of the parties has to agree to what he believes to be an unjust and unfair consideration. This is a sad fact of life. As much as the law would like to protect people in these situations, it can only do so much. It cannot always look for the welfare of all people to the detriment of commercial transactions and legal order. A proof of this is the principle in law that, with respect to legal value, the adequacy or satisfactoriness of consideration is irrelevant. As long as parties freely entered into the contract, the contract is valid. By freely, it does not mean not compelled by need. It only means with full knowledge and understanding of the consideration and other contractual stipulations. Of course, fraud, force and intimidation and similar deceits and undue influences may invalidate a contract.
In my opinion, this situation may be viewed in two ways. The first is that, in this case, the law made a choice as regards which party has a right to a decision. Between the two parties, the one who has more to lose has more need of the contract, thus he is the one who has to make a sacrifice in terms of consideration. The other view is that the need itself is part of consideration. Earlier, this essay discussed considerations and costs that are difficult to translate to pecuniary terms such as sentimental value. Need may be considered as one of these.
Looking at this discussion, the negative side of life seems to given much focus. It seems to validate the outcry of many that the poor are made poorer, the needy made needier. It may seem to cast law as either an oppressor or as something powerless to deal with these needs. However, despite these issues as regards consideration, it should be noted that not all unsatisfactory considerations are upheld. As mentioned above, contracts may be invalidated based on fraud, force and other similar grounds. There are contracts of adhesion and other similar principles in law. These and other similar legal mechanisms allow a degree of protection in favor of those whose positions make them unable to demand too much from a contract.
