§ 1611 Contract Consideration Determination

This law says that if a contract doesn't say how much something is worth or how to figure it out, or lets an interested person decide the price, then the price must be the amount that the thing is reasonably worth.

Key Takeaways

•If a contract leaves price unclear, the price must be the fair market value of what's being sold.
•The fair value is based on what a reasonable person would pay for the same thing.
•This rule prevents a party from picking an arbitrary or unfair price.

Example

A homeowner hires a contractor to fix a roof but the contract doesn't specify the payment amount, leaving it up to the contractor.

The homeowner must pay the contractor an amount that a fair person would consider the roof repair to be worth, based on the work needed and typical prices for similar repairs.

How to Calculate

Consideration = reasonable worth of the object of the contract

Identify what is being exchanged (e.g., roof repair).
Determine what a fair market price would be for that work.
Set the payment amount to that fair price.

Repairing a leaky roof

Result: If A is $5,000, then B = $5,000

Key Takeaways

•If a contract leaves price unclear, the price must be the fair market value of what's being sold.
•The fair value is based on what a reasonable person would pay for the same thing.
•This rule prevents a party from picking an arbitrary or unfair price.

Example

A homeowner hires a contractor to fix a roof but the contract doesn't specify the payment amount, leaving it up to the contractor.

The homeowner must pay the contractor an amount that a fair person would consider the roof repair to be worth, based on the work needed and typical prices for similar repairs.

How to Calculate

Consideration = reasonable worth of the object of the contract

Identify what is being exchanged (e.g., roof repair).
Determine what a fair market price would be for that work.
Set the payment amount to that fair price.

Repairing a leaky roof

Result: If A is $5,000, then B = $5,000

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 1611 Contract Consideration Determination

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References