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“For value received” is a legal term used to indicate that something valuable was exchanged in a contractual transaction without specifically identifying it. The phrase is often used in promissory notes, bills of exchange and property 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 to the value of the consideration, so no contract dispute can be raised on the basis of the consideration's inadequacy.
Contract law in countries with legal systems derived from the 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 demonstrate that an offer was made, that the offer was accepted and that valuable consideration was tendered in exchange for a party's promise to perform. For example, a valid contract for window washing would have the worker offering services for a specific fee, the homeowner accepting the offer and the homeowner presenting or promising to present consideration, or payment, for the services. If the window washer failed to perform or the homeowner failed to pay, the court would decide the case based on the existence of a valid contract.
In some instances, a party would dispute the validity of a contract based on nonexistent or inadequate consideration. For example, if an elderly person promised to give his house to a relative, and then changed his mind, the relative might sue to have the house transferred based on breach of contract if a signed agreement to that effect existed. If the relative did not pay any money in exchange for the transfer of the property, the court could hold there was no consideration exchanged and no intent to enter into a contract for sale. The arrangement could be viewed as a potential gift that the elderly person decided against making at his discretion.
To prevent parties from claiming that no actual consideration was exchanged, or consideration was exchanged that wasn't proportional to the value of the item or service offered by the other party, the term “for value received” was adopted. Using "for value received" takes the determination of the adequacy of the consideration out of the hands of the court. When that phrase is used, it is an admission by the parties that the consideration was sufficient to make a binding contract.
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