Contracts and Sales Multistate Bar Practice Exam

Which of the following statements is true regarding the legality of consideration?

1. All types of consideration are legally binding

2. Consideration must always be monetary in nature

3. Consideration can include a benefit to the promisor or detriment to the promisee

4. Only tangible benefits can be considered valid

The correct answer is: Consideration can include a benefit to the promisor or detriment to the promisee

The statement regarding the legality of consideration that is true is that consideration can include a benefit to the promisor or detriment to the promisee. This reflects the understanding that consideration does not have to be monetary; it can involve anything of value exchanged between parties, such as services, goods, or a promise to act or refrain from acting. The essence of consideration is that it provides a basis for a contract, demonstrating that something of value is being exchanged, which can create an obligation on one party and a corresponding right on the other. In contract law, consideration does not need to be tangible, nor does it have to be equal in value. What is important is that there is something offered in exchange for a promise, which binds the parties to the agreement. This flexibility in the types of consideration reflects the broad nature of contract formation in legal principles. The incorrect options suggest limitations that do not accurately characterize consideration in contracts. For instance, consideration is not required to be exclusively monetary; it can also be non-monetary benefits or detriments. Likewise, the idea that only tangible benefits are valid is misleading, as intangible benefits can also serve as consideration if they are deemed to hold value by the parties involved.