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TOPIC 4: INTRODUCTION TO CONTRACT LAW — ESSENTIAL ELEMENTS OF A CONTRACT — STEPS 3, 4 AND 5
Please remember to check your Bulletin Board. • Chapters 5 and 6 of Turner. • Chapters 5 and 6 of Gibson (optional).

Learning objectives
After you have completed the readings for this topic you should be able to: > define consideration and be able to identify when it is present; > explain and apply the legal principles relating to consideration; > explain the difference between past, executed and executory consideration; > explain and apply the doctrine of promissory estoppel; > identify contracts which must be in writing; > recognise the classes of persons who have limited contractual capacity and describe the effect that each has on simple contract; > outline the common law rules regarding contracts entered into by infants and which can be valid, voidable or void; > summarise statutory changes to the common law made in NSW and SA in relation to infants; and > outline the common law rules with regard to capacity to contract with respect to corporations and bankrupts, the mentally ill and those under the influence of alcohol.

Graduate School of Business

4:2

Step 3: Consideration
Consideration is something for something. Put another way, it is the price the promisee pays for the promise. For example, in the case of the purchase of a house, it is that house in exchange for the purchase price. Consideration makes the agreement in a commercial bargain. A person seeking to enforce a contract must have, in fact, provided consideration for the promise which they seek to enforce against the other party. Note, that an exchange of promises may be enough to constitute consideration, as may be a promise to do work or a promise to release a person from liability. Consideration involves the idea of exchange. In other words it is something given by a party

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