“For value received” is a legal term used to indicate that something of value was exchanged in a contractual transaction without specifically identifying it. It satisfies a historical legal requirement that parties to a contract must exchange valuable consideration for the contract to be valid.
“For value received” is a legal term used to indicate that something of value was exchanged in a contractual transaction without specifically identifying it. The phrase is often used on promissory notes, bills of exchange, and title deeds. It satisfies a historical legal requirement that parties to a contract must exchange valuable consideration for the contract to be valid. The phrase “for value received” means that the parties stipulate the value of the consideration, so a contractual dispute cannot be raised on the basis of insufficient consideration.
Contract law in countries with legal systems derived from English common law established historical requirements for valid contracts. This makes practical sense, since verbal and written contracts drive commerce. The law is designed to allow parties to identify the conditions under which a valid contract is formed and to sue for breach of contract or specific performance if the terms of a contract are not met.
Historically, a valid contract had to show that an offer was made, that the offer was accepted, and that valuable consideration was offered in exchange for a party’s promise to perform. For example, a valid contract for window washing would have the worker offer services for a specified fee, the owner accept the offer, and the owner submit or promise to submit consideration or payment for the services. If the window cleaner doesn’t work or the landlord doesn’t pay, the court will decide the case based on the existence of a valid contract.
In some cases, a party would dispute the validity of a contract based on a lack of or inadequate consideration. For example, if an older person promised to give her house to a relative, and later changes her mind, the relative could sue to have the house transferred for breach of contract if there is a signed agreement to that effect. If the relative did not pay any money in exchange for the transfer of the property, the court could hold that no consideration was exchanged and no attempt was made to enter into a contract of sale. The arrangement could be seen as a potential gift that the older person chose not to give at her discretion.
To prevent parties from claiming that no actual consideration was exchanged, or that consideration was exchanged that was not proportional to the value of the item or service offered by the other party, the term “for value received” was adopted. The use of “for value received” takes the determination of the appropriateness of consideration outside the scope of the court. When that phrase is used, the parties admit that the consideration was sufficient to make a binding contract.
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