Friday, July 29, 2011

Legal lingo: Consideration in the context of a contract


Generally, a contract must be supported by consideration to be enforceable. Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 659 (Tex. 2006).

What constitutes consideration?

Consideration consists of a benefit to the promisor or a detriment to the promisee. N. Natural Gas Co. v. Conoco, Inc., 986 S.W.2d 603, 607 (Tex. 1998). Consideration for a promise may be either a performance or a return promise bargained for in a present exchange. Johnson, 209 S.W.3d at 659 (citing Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991); Restatement (Second) of Contracts § 71(1) (1981)).

Lack of consideration may defeat contract claim

Lack of consideration for a contract is an affirmative defense to its enforcement; therefore, [ LITIGANT ] was required to raise a fact issue on lack of consideration. See Tex. R. Civ. P. 94; Kaye/Bassman Intern. Corp. v. Help Desk Now, Inc., 321 S.W.3d 806, 814 (Tex. App.—Dallas 2010, pet. denied).

Consideration for execution of promissory note

[A] written instrument reciting a consideration imports one, and with such a recitation we presume the consideration [to be] sufficient. Hoagland v. Finholt, 773 S.W.2d 740, 743 (Tex. App.—Dallas 1989, no writ). However, parol evidence is admissible to show want or failure of consideration and establish the actual consideration given for the instrument. DeLuca v. Munzel, 673 S.W.2d 373, 376 (Tex. App.—Houston [1st Dist.] 1984, writ ref‘d n.r.e.) (citing Fire Ins. Ass’n v. Wickham, 141 U.S. 564, 579–82 (1891); Gaines Motor Sales Co. v. Hastings Mfg. Co., 104 S.W.2d 548, 551 (Tex. Civ. App.—Fort Worth 1937, writ dism‘d)).

To constitute consideration, . . . [t]he performance or return promise . . . may be given by the promisee or by some other person. Restatement (Second) of Contracts § 71 (1981) (emphasis added). ―It matters not from whom the consideration moves or to whom it goes. If it is bargained for and given in exchange for the promise, the promise is not gratuitous. Id. cmt. c.

SOURCE: Houston Court of Appeals - 14-09-00312-CV - 7/26/11 - McLernon v. Dynegy Inc.

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