What does for good and valuable consideration mean?
How is this important when drafting contracts?
What legal aspects should you know?
Keep reading as we have gathered exactly the information that you need!
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Table of Contents
For Good And Valuable Consideration
In many contracts, the phrase “for good and valuable consideration” appears as the final statement of its recitals.
Here are a few examples:
NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the obligations herein, the Borrower pledges and grants to Lender as follows:
For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Buyer hereby agree as follows:
You may also see phrases referring to other good and valuable consideration, such as:
NOW, THEREFORE, upon the mutual agreements and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
What does the phrase mean?
What is the definition of “valuable consideration” in regards to contract validity?
For a contract to be valid, there must be a consideration.
The consideration represents one of the pillars in contract law required for a contract to be considered as formed and legally binding.
A contract is legally formed when there is:
- Offer
- Acceptance
- Consideration
- Legal capacity
- Legality
Keep reading as we’ll look into it further…
Good consideration
What is good consideration?
The first aspect of the phrase to consider is a “good” consideration.
To say that the consideration is “good” is to say that the legal instrument, contract, deed, agreement or transaction provides sufficient consideration to the parties.
In essence, the parties are acknowledging and recognizing that there is consideration and that the consideration is good.
For example, good consideration in real estate is when a buyer and seller agree to the terms and conditions for the purchase of a home.
This is a “good” consideration as it is something legally permissible and it is good between the parties.
Later, we’ll discuss what does it truly means to say in a contract that there is consideration when in fact there isn’t one…
Valuable consideration
What does for valuable consideration mean?
Why say “good” and “valuable” consideration?
In contracts, when you see a phrase drafted as “for valuable consideration”, the author of the contract or drafting party is referring to the actual exchange of “goods” or “value”.
Typically, valuable consideration will refer to the exchange of a sum of money for something else of value.
For example, in the sale of a real estate property, the valuable consideration is the actual sum of money paid by the buyer to the seller.
The valuable consideration necessary to make a contract valid must be a benefit or something of value effectively exchanged by the parties.
Legal interpretation
What is the legal value of stating in a contract that consideration was good or valuable?
The most important thing to note is that consideration is something that either is present or not.
A contract stating that there is good and valuable consideration does not legally create consideration or render it as valid.
If the parties enter into what appears to be a contract but there was no consideration, the contract cannot legally be formed or binding.
As a result, the parties’ statement is worthless to the extent there is no consideration as there is no binding contract.
As the good saying goes, “no consideration, no contract”!
What if there is some form of consideration to the parties, how will the courts interpret the phrase for good and valuable consideration phrase if the parties end up in a legal dispute on the consideration or value of the contract?
In that case, you have to be ready that litigation lawyers and trial lawyers attempt to use every word stated in a contract to defend their legal position.
In the best-case scenario, the litigants may not find any real value in pleading the phrase in court.
However, in other cases, it can create interpretation issues that may be favorable for one party and detrimental for another.
As it appears in the case Haden v. Sims, 150 So. 210, 168 Miss. 64 (Miss. 1933), the parties had stated in their deed that payment will be “one dollar and other considerations”.
The court ruled that it was not one dollar owed but $1,000.
In this case, the court admitted parol evidence to prove what “other considerations” meant.
Based on that evidence, the court came to the conclusion that what was owed was not one dollar but $1,000.
In essence, based on the standard rule of interpretation, the court must give meaning to all provisions of the contract.
The moral of the story is that if your contract is reciting the consideration in full, then you should not include any language such as “and other good and valuable consideration” to avoid interpretation challenges.
Takeaways
So what is the legal meaning of good and valuable consideration?
Let’s look at a summary of our findings.
For Good And Valuable Consideration:
Related legal terms
Consideration contract law
Consideration clause
Contract consideration
Mutual covenants
Define consideration
Unilateral contract
Illusory contract
Illusory promise
Promissory estoppel
Recitals
