1. Texas Real Estate Contracts 4 th Edition © 2015 OnCourse Learning

2. Chapter 3: Consideration © 2015 OnCourse Learning

3. Consideration, in general Consideration is simply the inducement to a contract, often referred to as a bargained for exchange between the parties to an agreement. © 2015 OnCourse Learning

4. Both parties experience a benefit and a detriment © 2015 OnCourse Learning

5. Types of Consideration Promise Performance Money Physical Exchange © 2015 OnCourse Learning

6. Promise as Consideration in Bilateral Contracts Exchange of promises in a real estate sales contract © 2015 OnCourse Learning

7. Performance as Consideration in Unilateral Contracts Unlike the bilateral contract, the consideration in a unilateral contract is a promise given in exchange for performance. For example, a seller under a listing agreement promises to pay a specified commission in exchange for the broker’s performance in bringing forth a ready, willing, and able purchaser. © 2015 OnCourse Learning

8. Money as Consideration In a typical option under the standard residential real estate sales contract, a prospective purchaser may pay a fixed sum for the option to terminate the contract for the purchase and sale of real estate for any reason within a specified time. © 2015 OnCourse Learning

9. --Nominal Consideration Nominal consideration is consideration that bears no relation to the real value of the contract. © 2015 OnCourse Learning

10. --Valuable Consideration Valuable consideration is consideration that bears a substantial relation to the real value of the contract. © 2015 OnCourse Learning

11. Types of Nonconsideration Gratuitous consideration Past consideration © 2015 OnCourse Learning

12. Gratuitous Consideration Where either party to the transaction intends to make a gift, there is typically no detriment induced and therefore there is no consideration. © 2015 OnCourse Learning

13. Past Consideration Past consideration refers to an act completed before the contract is created. Past consideration on an old transaction is not consideration on a new transaction and, therefore, cannot create a valid contract. © 2015 OnCourse Learning

14. --Preexisting Legal Duty The general rule is that the promise or performance of a preexisting legal duty does not constitute sufficient consideration for the creation of a subsequent valid contract. Where additional consideration is combined with the promise or performance of a preexisting legal duty, this is sufficient to create a valid enforceable agreement. © 2015 OnCourse Learning

15. Voidable Contracts A voidable contract is a contract that can be avoided at the option of one party to the contract. However, where a voidable agreement is ratified, the new agreement is enforceable without additional consideration. © 2015 OnCourse Learning

16. Alternatives to Consideration Promissory Estoppel There must be a promise made to the injured party. That promise must be calculated to induce reliance by the injured party. There must be actual reliance on the promise by the injured party. Some injustice may result if the agreement is not enforced. © 2015 OnCourse Learning