Happy family

Find a legal form in minutes

Browse US Legal Forms’ largest database of 85k state and industry-specific legal forms.

Consideration

Consideration is a necessary element for a release to be valid.  A release is made for valuable consideration.  The consideration should be a thing of value.  There will be a presumption as to the existence of consideration when the release is made in a sealed document.

Consideration must be something to which a discharger became entitled only due to the release.  A thing of value to which a discharger was entitled even before a release may not be treated as consideration in such a release.  A valuable consideration for a release may consist of a benefit to the discharger or a detriment to the dischargee[i].  A consideration to which a discharger was entitled even without the release is not a valid consideration and therefore, cannot be given in support of the release.

There are different types of consideration.  Consideration vary among releases in different circumstances. The consideration can be made in the form of:

  • payment of funds;
  • employee benefits;
  • a surrender of a cross claim;
  • rights in property;
  • an enforceable promise; or
  • settlement of a disputed tort claim;

Thus, the most important factor of consideration is that it should be a thing of value.

The adequacy of a consideration is another important factor in constituting a valid release.  Generally it has been held by courts that consideration in support of a release has to be adequate.  But, a release may be upheld even if it is made on inadequate consideration or less than full consideration[ii].  It may not be required to have equality of value between the discharge and the consideration.  But, certain courts require a reasonable relationship between the liability released and the consideration for the release[iii].  The burden is on the discharged to show that undue compulsion was not made on the discharger in a release with inadequate consideration.  Inadequate consideration may result in the annulment of a release in certain jurisdictions.  However, any consideration, however slight in amount, is considered sufficient and adequate if accepted by the person giving the release[iv].

Payment of an admitted liability will not be considered consideration.  A mere promise also does not amount to consideration.  A release will not be valid where the consideration is something against public policy[v].  A release made in consideration of an agreement to ask for the dismissal of a pending prosecution is contrary to public policy and unenforceable[vi].

A lack of or invalid consideration will make a release void because a valid release has to be supported by consideration.  The declaration of a release as void may affect the causes of action which were barred by the release.  Delayed payment of a consideration does not amount to failure of consideration.  It is sufficient if it is paid within a reasonable time.

[i] Harp v. Hamilton, 177 S.W. 565, 1915 Tex. App. LEXIS 693.

[ii] Kansas C. S. R. Co. v. Armstrong, 115 Ark. 123 (Ark. 1914).

[iii] Gibson v. American Export Isbrandtsen Lines, Inc., 125 A.D.2d 65, 1987 N.Y. App. Div. LEXIS 40604.

[iv] Torres v. Monumental Life Ins. Co., 1998 U.S. Dist. LEXIS 12145 (E.D.N.Y. Aug. 5, 1998).

[v] Cain v. Darby Borough, 7 F.3d 377, 1993 U.S. App. LEXIS 26858.

[vi] Kroger Co. v. Demakes, 566 S.W.2d 653, 1978 Tex. App. LEXIS 3400.


Inside Consideration