Chapter 13

What is consideration in contract law?

is the value given in return for a promise or a performance in a contract. For a contract to be legally binding, consideration must meet two criteria:

1. Legally sufficient value: It must consist of something of value in the eyes of the law.

2. Bargained-for exchange: The item of value must be given or promised in exchange for the other party’s promise or performance.

What are the three ways consideration can be legally sufficient?

• Promise to do something not legally obligated to do.

• Performance of an action that one is not otherwise obligated to undertake.

• Forbearance: Refraining from doing something one has the legal right to do.

What is the concept of bargained-for exchange in contract law?

Consideration must provide the basis for the bargain between the parties. That is, the item of value must be given by the promisor (offeror) in return for the promisee’s promise or performance.

What does the adequacy of consideration refer to?

involves the fairness or the amount of value given in exchange. Generally, courts do not question the adequacy of consideration unless there is an issue of fraud, undue influence, or duress.

When might courts question the adequacy of consideration?

1. Fraud: Misrepresentation or deceit.

2. Undue influence: When one party takes advantage of the other’s weakness.

3. Duress: Coercion or threats that force someone to agree.

What is an example of an agreement that lacks consideration?

• Preexisting Duty: A promise to do something one is already legally obligated to do is not valid consideration. E.g., police officers or government officials cannot be offered additional payment for duties they are already required to perform.

What is rescission in contract law?

is the unmaking or cancellation of a contract, which returns the parties to their original positions before the contract was made. Sometimes, parties may mutually agree to rescind a contract and make a new one at the same time.

What are the different ways to settle claims in business?

• Accord and Satisfaction: When a debtor offers a lesser amount than claimed, and the creditor accepts, the agreement is the accord, and payment is the satisfaction.

• Release: One party gives up their right to pursue a legal claim against the other.

• Covenant Not to Sue: A party agrees not to take legal action.

What is promissory estoppel?

applies when a promisor makes a clear and definite promise, and the promisee justifiably relies on it. This doctrine makes the promise binding if enforcing it would serve justice, even without consideration.

What types of promises are enforceable under the promissory estoppel doctrine?

Promises are enforceable under promissory estoppel in the following situations:

1. Promises of gifts: Typically, promises for gifts are not enforceable unless there is detrimental reliance.

2. Donations to charities: If the charity relies on the donation, it may be enforced.

3. Business transactions: When one party relies on the promise of the other to their detriment.

4. Employment relationships: Promises that affect employees and lead to reliance.

What are the exceptions to the consideration requirements?

• Promises to pay debts that are barred by the statute of limitations.

• Promises to make charitable contributions are enforceable when reliance on the promise has occurred.

• Detrimental reliance under promissory estoppel.

What is the mutual assent in contract law?

often called the "meeting of the minds," refers to the mutual agreement between parties to the contract. It is usually evidenced by an unequivocal affirmation of the terms of the contract.

What is an implied contract?

is one that is not written or explicitly stated, but is formed by the actions or conduct of the parties involved. This type of contract arises from the circumstances rather than a formal agreement.

What is the benefit and detriment exchanged in consideration?

In every contract, there must be a benefit to the promisor (the one making the promise) and a detriment to the promisee (the one receiving the promise). This exchange creates the consideration required for a valid contract.