Lack of Consideration As a Defense

Consideration is an essential element for the formation of a contract.  Consideration is something of value given by one party to a contract to the other.  Consideration is what induces parties to enter into an agreement to exchange mutual performances.

In an assignment of choses in action, the debtor is the obligor.  The obligor in an assignment, when sued by assignee cannot raise a defense of lack of consideration.  However, an assignee can recover damages against an obligor even though the contract between the assignor and assignee is one without consideration.[i]

Moreover, consideration is not necessary in an action between an assignee and an obligor.[ii] An assignment which is written and voluntarily made is generally considered irrevocable.[iii] An irrevocable assignment when signed and delivered, cannot be set aside on the ground that there was lack of consideration.

Thus it can be concluded that:

  • Lack of consideration is insufficient to vitiate an assignment between parties.
  • An original debtor cannot raise the defense of lack of consideration.

[i] Ertel v. McCloskey, 74 A.2d 652 (Pa. Super. Ct. 1950)

[ii] Cosmopolitan Trust Co. v. Leonard Watch Co., 249 Mass. 14 (Mass. 1924)

[iii] In re Brown’s Estate, 122 Mont. 451 (Mont. 1949)

Inside Lack of Consideration As a Defense