Legal Detriment: Essential Doctrines and Applications
What Is Legal Detriment?
Legal detriment refers to the imposition of an obligation or detriment upon a person. Legal detriment is necessary for a valid contract. It is the relinquishing by a person of a legal right. This involves the contracting party suffering or causing a disadvantage or loss to themselves in order to fulfill their agreement to the contract.
When one party suffers or causes a disadvantage or loss to occur to the benefit of the other party in the contract , it will constitute legal detriment so long as this relinquishing of the legal right was the consideration that compelled them to enter into the contract in the first place.
Three key elements must be present for an act to be considered legal detriment with regard a contract:
The violation of the legal detriment will enable the wronged party to seek damages for the breach in the contract violation. Legal detriment serves as the consideration for both parties to fulfill their obligations under the contract terms.
Examples of Legal Detriment in Contracts
Legal detriment can be easily identified in direct contractual exchanges of benefit. The primary consideration in such agreements presents a simple scenario: Party A gives $100 to Party B, in exchange for Room X for two weeks (now Party A possesses a room where Party B did not before, and Party B has Party A’s $100, even though Party B didn’t before). In this context, legal detriment is the act of giving the room and receiving the money, respectively; Party B legally detrimented itself by giving the room, as it had value to them apart from the contract; Party A legally detrimented itself by receiving money, as they had foregone having $100 apart from the contract. Without expecting anything in return, neither component legally detriments themselves. Thus, the fundamental principle of consideration in contract law—mutual legal detriment—is always present.
More complicated examples of legal detriment in contracts can make issues of mutuality seem like mere formalities, which implicate analyses of intent and other questions about the inputs to the bargain. However, compensations are just the most visible, iconic examples of consideration, because they involve mutual transfers of something concrete.
Here are a few more examples:
A person works every day for overtime pay. They fulfill all of their contractual obligations. Though they do not work during the Sabbath, they agree to work for the company on Sunday morning, which is a violation of their long-standing sabbath rules, in exchange for an extra $50 per day. That is legal detriment.
A person builds a house free of charge, when they normally charge others to build houses. That is legal detriment.
A person does not sue their neighbor for trespassing and violating their property rights. That is legal detriment.
A person shares information about a pending acquisition for millions of dollars, with the expectation of $10,000 worth of good will from the receiving party. That is legal detriment.
A person pays $100,000 to have their sondom included in a contract, for services worth $20,000. That is legal detriment.
A person pays $100,000 to have their sondom included in a contract, for services worth $200,000. That does not constitute legal detriment.
Legal detriment is a not a term to be tossed around imprecisely. It occurs through the relinquishment of something of value to the parties to a contract.
Legal Detriment or Consideration
Legal detriment is connected to, and forms part of, the larger idea of consideration. When an offer is made and accepted, that idea might seem somewhat abstract, but it is actually a clear example of consideration. However, when an offer has been accepted, there is still a further element required, notably a legal detriment. Legal detriment describes the situation wherein a party willingly gives up a right or something of value in order to fulfil the acceptance of an offer or some obligation attached to it. Legal detriment is defined as a consistency in the requirements for both parties involved – essentially meaning that the detriment must involve the obligation to provide something. This separates legal detriment from other basic tenants of contract law, such as a legal benefit, which might represent the supply of something else, such as a service or an idea. While consideration can be described as an element of a bargain that forms the core of a contract between two parties, and which is sufficient enough to bind the parties to what they have agreed to, legal detriment describes the actual element of the obligation attached to the consideration. Legal detriment is when an individual agrees to do something for a benefit; the benefit is the consideration, and the legal detriment is the act that illustrates the consideration and binds both parties to the agreement and any conditions attached to it.
Legal Detriment: The Importance in Upholding Contracts
The presence of legal detriment is essential to the enforceability of a contract. Legal detriment is the loss that a promisor or promisee suffers or agrees to suffer in exchange for the promised performance of another party. Legal detriment is the sacrifice of a legal right as an inducement to a contract with another.
The requirement of legal detriment is supported by the principle of consideration. Consideration is both a cause, motive, price, or object which induces the contracting parties to enter into the contract and a legal detriment on the part of the promisor or promisee and a legal benefit to the other party. In other words, the binding force of a contract is consideration, which is often satisfied by legal detriment.
The rule that legal detriment, or the giving up of a benefit, is required for an enforceable contract has been articulated as a principle of law for centuries. The English case of Currie v. Misa involved an action for the recovery of goods under a conditional contract governed by English law. The English Court of Exchequer held that the entire consideration must be taken into account in determining whether the contract is supported by consideration, stating: The debtor did the plaintiffs a legal benefit, by taking on themselves the debt due from Wright to the Frigid States, and the whole of that benefit must be taken into account in estimating the consideration to be given by the creditor for the release of the security to which he was entitled against Wright . . . .
In other words, the debtor, who owes a liquidated sum of money, replaces that obligation with the promise of another party to pay it. The promise of the third party, the frigid states, is the consideration that satisfies the requirement of a quid pro quo for the release: the promise of the third party must be measured against the debtor’s extinguished obligation.
The rule that legal detriment must exist is generally accepted in the United States. For example, in Marsh v. Jones, the Supreme Court of Idaho stated that ‘an elementary principle of our law is that there can be no binding contract unless there is a lawful consideration for it, which consideration must consist either in a benefit to the party promising (the promisor) or a detriment to the party to whom it (the promisee) is made.’ Additionally, in Hurst v. Jones, the Supreme Court of Idaho explained that consideration ‘must be either a lawful (1) [a]ct or a forbearance to do an act; (2) the promise to do an act; or (3) the promise not to do an act which the promissor is not otherwise legally bound to perform. The forbearance must serve as a legal detriment to the promisor, and the act must be a legal benefit to the promisee. The parties to the agreement must either do or forbear from doing something that each party has a legal right to do.’
The Continental Bank N. A. v. Alva Supermarket, Inc. decision illustrates the importance of the principle that ‘there can be no binding contract unless there be a lawful consideration for it.’
Misconceptions & Issues Surrounding Legal Detriment
One common misconception regarding legal detriment is that it must result in some significant loss or deprivation. In reality, legal detriment is even more broad than that it may simply be a barrier to pursuing the contractual right rather than a loss or detention itself. The notion that legal detriment is an additional form of consideration is also a misinterpretation. Legal detriment may be used as consideration and has been used in exchange for other things of value; however, it is distinct from consideration. Legal detriment is defined as a disadvantage in the position of an agreeing party. As mentioned, this can include a simple barrier to pursuing a right under a contract or an actual harm/deprivation. No matter the detriment, the binding agreement does not legally exist if resulting legal detriment has not occurred.
Legal Detriment Across Various Jurisdictions
In exploring the concept of legal detriment, it is important to analyze how it is viewed and treated in different legal systems. The circumstances surrounding the formation of contracts and the precise legal requirements for a contract to exist can vary greatly among jurisdictions. The Requisite of Consideration provides a brief, comparative survey and analysis of the legal doctrine of detriment in how it operates within different legal systems.
Civil Law. In a discussion of the reformation of contracts and the remedy of rescission, Matthew Harris Jones observes: A presumption exists in civil law jurisdictions that contractual obligations are expected to be the law in the absence of contradiction by the parties. Civil law jurisdictions do not make specific provision for certain types of contract, such as unilateral promise or unilateral conditions. Such contracts are dealt with according to their function. The law will reform the contract if substantial damages have been suffered by the party not originally intended to suffer from a unilateral condition. The concept of freeing a party’s property from an encumbrance which has lost its purpose and which is held by a party has developed into a right of redemption (retractation) which is used as a remedy for unjust enrichment and for the defence of unjustified enrichment.
Common Law. Under common law , any deviation from the requirements of the formation of a contract, by which one party has lost something of value and the other has obtained the benefit without payment or other consideration, provides a defence. A party who has entered into a contract must also abide by its conditions or suffer the consequences of non-performance.
The Uniform Commercial Code. The application of the theory of legal detriment under UCC §1-201 does not differ from the general principles of restitution or money had and received. The enforceability of the bargain However, the concept of legal detriment under UCC §2-207(2) varies from the general principles in that, in order to be enforceable against the offeree, a promise within the UCC requires a "fair notification" of an additional term and manifesting assent to the terms in the agreement. Hence, common law concepts of a meeting of the minds, of offer and acceptance, and of consideration may be met by other means, apart from mutual action on the exchange being the prerequisite of a prior execution of the bargain. The practical effect a practical effect is that the broader notions of legal detriment not only under UCC §1-201 but also under other areas of common law lead to more efficient bargain enforcement goals under the UCC.