What is legal detriment?

In layman’s terms, “legal detriment” refers to something a person “gives up” when entering into a contract. 

A valid contract requires mutual consideration, which usually results in both parties gaining something they want or need in return for something they’re willing to exchange.

In this article, we take a deep dive into the concept of legal detriment and examine the following points in more detail:

• The definition of legal detriment

• How to determine legal detriment

• Examples of legal detriment

• Case studies relating to legal detriment

• The difference between legal detriment and legal benefit

What is legal detriment?

Legal detriment by definition means losing a legal right or advantage when entering a contract. 

How is legal detriment determined?

Determining legal detriment means assessing whether each party to the contract has given up something of value as part of the negotiations.

This is known as “consideration,” a crucial aspect of contract law.

Detriment in law is determined case-by-case by analyzing the facts and circumstances surrounding a contract.

When assessing legal detriment, the parties’ intentions, the nature of the exchange, and whether each party has genuinely given up something of value will all be considered.

Consideration must be part of the bargain or exchange; each party must give something up in return for what they receive.

Specifically, the consideration must have some measurable value to the party that’s parting with it for the contract to be valid. 

This means the consideration shouldn’t be illusory or nominal but must instead represent a genuine commitment, i.e., it needs to be recognized as having value by law.

As such, vague promises or commitments are unlikely to constitute legal detriment. 

Similarly, something a party is already obligated to do by law will not constitute valid consideration.

Illegal acts or promises to perform illegal acts don’t count either.

What’s an example of legal detriment?

So, what is a detriment? Legal detriment can take many forms.

Some of the most common examples are money, goods, and services, as outlined in the example below:

Frank owns a company that prints and sells t-shirts. He wants to advertise his services to a broader audience, so he contacts Shirley, who owns a marketing agency.

Shirley agrees to run a social media marketing campaign and design and print some leaflets for Frank. In return, Frank will pay Shirley $500.

In this example, the legal detriment for Frank is the $500 fee he will pay; for Shirley, it’s the time and effort she’ll spend designing the leaflets and running the social media campaign and the physical leaflets themselves.

Both parties give up something valuable to them in return for something the other party is willing to provide. 

What’s the benefit-detriment theory of Hamer vs Sidway? 

The benefit-detriment theory established in Hamer vs.

Sidway set a legal precedent that consideration doesn’t have to benefit the promisor solely; it can also be a detriment to the promisee. 

William E. Story I promised to pay his nephew, William E. Story II, $5,000 if he abstained from drinking alcohol, using tobacco, or indulging in a variety of other vices until he reached 21 years of age.

The younger Story agreed, fulfilling the promise.

However, upon asking for the money due to him, the elder Story encouraged him to wait until he was older before claiming it. Upon the uncle’s death some 13 years later, no money had exchanged hands.

By this point, Story II had transferred the $5,000 financial interest to his wife, who had, in turn, transferred it to Louisa Hamer on assignment.

The estate refused to grant Hamer the money, who then proceeded to sue the estate’s executor, Franklin Sidway.

The Court of Appeals ruled that Story II’s abstinence constituted valid consideration, so the promiser, Story I, was obligated to fulfill the promise.

An example of the benefit-detriment theory in the modern day: Jacob and Youngs v Kent case study

A more recent example of the benefit-detriment theory can be found in the case of Jacob & Youngs, Inc. v. Kent (1921). 

This case revolves around a property that was built for George Kent by a general contractor, Jacob & Youngs Inc. 

Kent requested in the initial contract that all piping used in the construction be made by the Reading Iron Company but later learned that some of the piping used was manufactured by a different outfit.

As a result, he refused to pay the full balance for construction.

The court ultimately found in favor of Kent, ruling that Jacob & Youngs Inc. didn’t fulfill the contract and were therefore not entitled to their benefit.

What’s the difference between a legal detriment and a legal benefit?

A legal detriment refers to something of legal value given up by a party to a contract; a legal benefit refers to something of legal value that a party acquires.

Both legal detriment and legal benefit are valid forms of consideration and are crucial for a contract to be enforceable.

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