Failure Of Consideration Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Failure Of Consideration, written in plain English, along with examples of how it is used.

What is Failure Of Consideration?

n. The stoppage of goods or services delivery when promised in a contract. Failure of consideration is justified when goods that a party bargained for are no longer valuable or are damaged. The recipient can withhold payment, demand performance or take legal action.

History and Meaning of Failure Of Consideration

In contract law, a promise from one party to another is given in exchange for value or consideration. Failure of consideration is an unforeseen inability to carry out that exchange of value or performance once the contract has been executed. This failure may be due to circumstances beyond the promisor's control, such as damage or loss of goods, or unforeseen events that prevent the party who is supposed to provide the consideration from delivering. When the failure of consideration is severe, it may be enough to render the entire contract void.

Examples of Failure Of Consideration

  1. A homeowner contracts with a landscaper to lay a new lawn but, after paying in full, the landscaper fails to deliver the sod. In this case, the homeowner can withhold payment until the sod is delivered or take legal action to recover their money.
  2. A customer contracts with a car dealership and pays for a new car, but the dealership then discovers that the car was damaged in transit and cannot be delivered as promised. In this case, the customer can either wait until a new car is available or demand their money back.
  3. A company hires a consultant to provide a report on a new product. The consultant delivers a report, but the report is inaccurate and of poor quality. In this case, the company can demand that the consultant either fix the report or provide a refund for the poor work.

Legal Terms Similar to Failure Of Consideration

  1. Consideration: the exchange of value or performance promised between parties to a contract.
  2. Breach of contract: the failure of one party to perform their obligations as promised under a contract.
  3. Frustration of purpose: an event stops the parties from being able to carry out the purpose or goals of the contract, rendering it impossible or impractical to perform as agreed upon.