Ch.13 Consideration

Consideration

Value given in return for a promise (bilateral) or in return for a performance (unilateral)

Inducement

Price or motive causing a party to enter an agreement

Elements of Consideration

Two parts: Something of legally sufficient value must be given in exchange for a promise and must be bargained for exchange

Legally sufficient value

Consideration must be something of value in the eyes of the law

Forbearance

Act of refraining from exercising a legal right; an agreement where a lender temporarily ceases to require mortgage payment to delay foreclosure or accept smaller payments

Bilateral consideration

Promise for a promise; for example, a seller promises to ship goods to a buyer and the buyer promises to pay for them

Unilateral consideration

Promise for performance; for example, when you finish painting a garage, I will pay you

Hamer v. Sidway

Case where an uncle promised to pay his nephew if he refrained from drinking, smoking, swearing, cards, or pool until age 21

Promise to do something

Consideration may consist of a that one has no prior legal duty to do

Performance of action

Consideration may consist of the ___ one is otherwise not obligated to undertake

Refraining from action

Consideration may consist of one has a legal right to undertake

Contractual obligation

An obligation created when consideration is present, such as the act of painting creating an obligation to pay

Bargained for exchange

The requirement that consideration must be the result of a bargain between the parties

Amount of consideration

Courts generally do not interfere with contracts based on the _ paid; parties determine the bargain's worth

Sufficient Consideration

Enough that thing is promised done forborne or suffered by party to whom promise made as consideration for promise made to him.

Waiver as Consideration

Waiver of any legal right at request of another is sufficient consideration for a promise.

damage or suspension or forbearance

Any _ of a right will be sufficient to sustain a promise.

solely on comparative value

Generally court won't question adequacy of consideration based of things exchanged.

Determination of Consideration

____ existing doesn't depend on comparison of value of exchanged things.

direct economic or financial value

Thing doesn't need to be of to be legally sufficient consideration.

Freedom of Contract Doctrine

Courts leave to parties decide what is worth and parties free to bargain as wish.

large disparity in amount of value of consideration

_ may raise red flag - shockingly inadequate consideration can indicate fraud duress or undue influence.

Counterfeit iPhone Example

Ex) paid $1400 for new iphone discovered counterfeit, could claim no valid contract because not authentic device is inadequate consideration and fraud.

Judge's Finding on Lease

Judge found lease supported by adequate consideration, not courts job to question adequacy of consideration because consideration not dependent on comparative value of exchange.

Tenant Estoppel Certificate

Defendants fully aware of lease upon purchasing property and provided with tenant estoppel certificate attesting to fact agreement in full force and effect.

Preexisting Duty Rule

Usually a promise to do something one already has a legal duty to do doesn't constitute a legally sufficient consideration.

Contractor's Duty

If party already bound by contract perform duty cannot serve as consideration for second contract.

Contractor's Demand Example

Ex) contractor demands more money for building or will stop, owner agrees pay, agreement unenforceable because not supported by legally sufficient consideration, contractor had preexisting contractual duty to complete building.

extraordinary difficulties totally unforeseen

Court may allow exception for ___ at time contract formed.

fair and equitable

Court must find modification __ in circumstances and not anticipated when contract made.

Past Consideration

Promises made for actions or events already taken place unenforceable. Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain.

Illusory Promises

if terms express such uncertainty of performance that promiser not definitely promised to do anything - unenforceable - fails to bind promisor.

Option to Cancel Clause

When promiser has option to cancel before performance has begun, promise illusory.

Requirements and Output Contracts

Uncertain performance is characteristic of requirements and output contracts.

Accord and Satisfaction

Accord and Satisfaction: debtor offers to pay and creditor accepts a lesser amount than originally claimed was owed; An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other.

Liquidated Debt Definition

Liquidated debt: one whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.

Unliquidated Debt Definition

Unliquidated debts: amount of debt not settled, fixed, agreed on, ascertained, or determined and reasonable person may differ over amount owed.

Release Contract

Release: contract where one party forfeits right to pursue legal claim against other; bars any further recovery beyond terms stated.

Promissory Estoppel Definition

aka detrimental reliance - person who has reasonably and substantially relied on promise of another may be able to obtain some measure of recovery.

Charitable Subscriptions

Promises to make charitable contributions traditionally unenforceable lacking legally sufficient consideration.

promise in return for a promise.

Consideration in bilateral contracts normally consists of a

performance (an action).

Consideration in unilateral contracts involves a promise in return for a __.

basis for the bargain

Consideration must provide the struck between the contracting parties.

Promisor

The party who offers the promise in a contract.

Promisee

The party who receives the promise in a contract.

gifts

bargained-for exchange distinguishes contracts from _.

adequacy of consideration

Courts will inquire into the _ when fraud, undue influence, duress, or lack of a bargained-for exchange may be involved.

Rescission

A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made.

Option-to-Cancel Clauses

When the promisor has the option to cancel the contract before performance has begun, the promise is illusory.

Requirements Contract

In a _, a buyer and a seller agree that the buyer will purchase from the seller all of the goods of a designated type that the buyer needs or requires.

Output Contract

In an , the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the seller's output.

settle legal claims.

Businesspersons and others often enter into contracts to .

Accord

The agreement in accord and satisfaction where one party undertakes to give or perform, and the other to accept, in satisfaction of a claim, something other than that on which the parties originally agreed.

Satisfaction

The performance (usually payment) that takes place after the accord is executed.

Liquidated Debt

A debt that is due and certain in amount.

Unliquidated Debt

A debt that is uncertain in amount.

Release

A contract in which one party forfeits the right to pursue a legal claim against the other party.

binding

A release will generally be __ if it meets the following requirements: the agreement is made in good faith, the release contract is in a signed writing, and the contract is accompanied by consideration.

Covenant Not to Sue

An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim; doesn't always bar further recovery.

bar further recovery

Unlike a release, a covenant not to sue does not always .

discharged

After the payment has been accepted or other performance has been made, the 'accord and satisfaction' is complete, and the obligation is __.

not satisfaction

In the majority of states, a creditor's acceptance of a sum less than the entire amount of a liquidated debt is because the debtor has given no consideration to satisfy the obligation of paying the balance to the creditor.

Satisfaction in Unliquidated Debts

Acceptance of a lesser sum operates as satisfaction, or discharge, of the debt because there is valid consideration.

Detrimental Reliance

Reliance on a promise that results in a disadvantage or loss to the promisee.

Statute of Limitations

A law that sets the maximum time after an event within which legal proceedings may be initiated.

Enforceable Promise

A promise that can be legally upheld in a court of law.

Clear and Definite Promise

A promise that is specific and unambiguous.

Reasonable Reliance

The expectation that the promisee will act based on the promise made.

Substantial Detriment

A significant disadvantage or loss incurred by the promisee due to reliance on the promise.

Injustice

enforcement of a promise is necessary to prevent unfair outcomes or _.

Implied Promise

A promise that is inferred from actions or circumstances rather than explicitly stated.

Partial Payment

A payment that is less than the total amount owed, which can imply a promise to pay the remaining debt.

Charitable Subscription

A promise to make a donation to a charitable institution, traditionally unenforceable without consideration.

Doctrine of Promissory Estoppel

A legal principle that allows for the enforcement of a promise to avoid injustice, even without consideration; applies when a promisor makes a clear and definite promise on which the promisee justifiably relies.

Barred Debt

A debt that cannot be recovered due to the expiration of the statute of limitations.

Creditor's Recovery

The ability of a creditor to collect a debt, which may be extended by a debtor's promise to pay.

Business Transactions

Commercial dealings between parties that may invoke promissory estoppel.

Employment Relationships

Work-related agreements that may be subject to the doctrine of promissory estoppel.

Family Disputes

Conflicts among family members that may be resolved using the doctrine of promissory estoppel.

Estopped

Barred, impeded, or precluded from asserting a claim or defense.