Consideration

What is Consideration?

what each party gives up in making an agreement

Bargained-for Exchange

Something of value must be given or promised in return for the performance of promise of another

Benefit-Detriment Approach

A benefit received by the promisor or detriment incurred by the promisee

Promises to make a gift are unenforceable because they __________________

lack consideration

Charitable subscriptions are binding to the extent…

…the donor reasonably should have known the charity was relying on the promise

Love and affection are…

…not consideration for a contract

Adequacy of Consideration

Courts do not ordinarily consider given as it is up to parties to decide if each is getting a fair return; the fact that the consideration is disappointing does not affect the binding character of the contract

Forbearance as Consideration

Refraining from an act can be consideration

Illusory Promises

If a promise is no obligation or apparent obligation, the contract fails

Cancellation Provisions…

do not make the promise illusory (Illusory Promises)

Conditional Promises…

…depend on the occurrence of a specified condition to be valid (Illusory Promises)

Special Situations

Preexisting Legal Obligation, Past Consideration, Moral Obligation

Preexisting Legal Obligation

Avoidance Promising, Completion of Contract, Compromise and Release of Claims, Part Payment Checks, Composition of Creditors

Avoidance Promising

Refraining to do what has already been agreed on

Completion of Contract

promises in the first contract are not binding (Good Faith Adjustment, Contract for Sales of Goods)

Good Faith Adjustment

enforceable with the original contract in extraordinary circumstances

Contract for Sales of Goods

modifications in good faith are binding

Compromise and Release of Claims

a promise to pay part is not consideration for a promise to discharge the balance

Part-Payment Checks

when a good faith dispute about the amount exists and a debtor tenders a check saying “paid in full,” cashing the check discharges the debt

Composition of Creditors

group of creditors agree to accept partial payment in full settlement of debt

Past consideration is…

no consideration

Promises based upon ____________ are not enforceable

moral obligation

Exceptions to the Laws of Consideration

Charitable Subscriptions, Uniform Commercial Code, Promissory Estoppel

Charitable Subscriptions

reliance on a pledge in undertaking a project is a substitute for consideration

Uniform Commercial Code

abolishes the requirement of consideration in some cases

Promissory Estoppel

if the promisee relied on the promise to their detriment, promisor is prevented from claiming promise is unenforceable

The doctrine of promissory estoppel is also known as the doctrine of beneficial reliance.

False

Damages recoverable in a case of promissory estoppel are determined by the profits that the promisee expected.

False

A landowner's promise to pay a contractor a bonus to complete construction of a building according to the terms of a pre-existing contract between the landowner and the contractor is:

ordinarily not binding on the promisor

Consideration always must be an act or the promise to perform an act

False

Forbearance to assert a claim is binding consideration:

when the claim, regardless of whether it has legal merit, has been asserted in good faith

Which of the following is not consideration for a present promise?

the promise to pay one's child support obligation, consistent with a pre-existing court order

Which of the following can be consideration for a promise?

refraining from smoking cigarettes

True consideration occurs only when the value of one promise is equal to the value of the promise given by the other party.

False

A promise to make a gift is enforceable as a contract.

False

Forbearance Definition

the temporary postponement or reduction of loan payments (mortgage, student loan) granted by a lender to avoid default, or the act of refraining from enforcing a legal right. It is a temporary relief measure, not loan forgiveness, as missed payments must be repaid later.

Primary Estoppel Definition

an equitable legal doctrine that prevents a party from going back on a promise if another party reasonably and detrimentally relied on it, even without a formal contract. It requires a clear promise, reliance on that promise, and significant detriment (financial harm or action taken) to avoid injustice.

Uniform Commercial Code Definition

a comprehensive set of standardized laws governing commercial transactions, such as sales, leases, and secured loans, adopted across all U.S. states to ensure consistency. It provides legal rules for business dealings, including contracts, banking, and creditor rights, primarily found in Article 9 for security interests.

What is a Good-Faith Adjustment?

A request made to a creditor to remove valid negative marks—such as late payments—from a credit report, usually due to a one-time mistake or unforeseen hardship. While creditors are not required to comply, they may do so for loyal customers.

What is a cancellation provision?

A contract or insurance clause allowing one or both parties to terminate an agreement before its scheduled expiration, often requiring written notice (commonly 30 days). It defines procedures, notice periods, and financial consequences (fees/refunds) to manage risks. These are crucial for exiting agreements without breach penalties.