Business Law Chpt. 8

Promisee

person to whom a promise is made

Forbearance

Refraining from doing what one has a right to do

Composition with creditors

agreement by all creditors to accept something less than the total amount of their claims as full satisfaction of a debtor's obliigations

requirement contract

Contractual situation in which a seller agrees to supply all the needs of a particular buyer

promisor

Person who makes a promise

promissory estoppel

enforcement of a promise to avoid injustice by denying to the promisor the defense of lack of consideration

nominal consideration

token consideration which bears no relation to the real value of the contract.

consideration

What a person demands and generally must receive in order to make her or his promise legally binding.

past consideration

act that has already been performed and thus cannot be consideration for a promise in the present

gift

voluntary transfer of ownership of property without consideration

legal value

change in the legal position of a party as a result of the contract

output contract

a contract in which the buyer agrees to buy all of the item manufactured by the producer

Accord and Satisfaction

A situation when there is a genuine dispute about the amounnt of a debt, so the debtor offers a certain amount in full settlement of the debt

release

A situation where a tort occurs and due to financial pressure the injure party agrees to discharge the other party from the liability of the tort (not take him/her to court) but receive money or other consideration instead

statute of limitations

a specific time limit for bringing a law an expiration time for bring a case to court).

liquidated debt

A situation in which both the debtor and the creditor agree that a debt exist and on the amount of the debt

donor

The person giving the gift

donee

The person receiving the gift

Explain the three situations in which consideration is not needed

• promise to donate to donate to a charity

• firm offer by a merchant

• promised barred by law

Glenn contracted to provide the labor for an addition to Reid's home for $10,000. When Glen was partially through, he realized that the job was more time-consuming than anticipated. Therefore her refused to continue until Reid promised to pay an additional $2,000. Reid did so. Is Glenn legally entitled to the extra $2,000?

Glenn is not entitled to the extra $2,000 as the labor was part of her previous contract for $10,000. Finishing the work is an existing private duty so she is legally required to finish the house for nothing other than the $10,000. For the $2,000 Glenn would have to give something extra as well

Lyn wanted to go to a Gospel concert and she knew it would be very expensive. Her dad told her that he would pay for the tickets, because she is going to an event that enhances her Christian faith. Lyn borrowed the money from a friend and bought the ticket for the concert, but her dad refused to repay the money for the ticket. Can Lyn compel her father to pay?

Yes, She could take him to court with the hopes of getting promissory estoppel as the father knew Lyn would rely on promise. Because of that reliance Lyn went into debt with her friend with the expectation that her dad would repay the money. Without the promise being held she would have been a victim of injustice, because she now has debt

Shawn owed Ryan $7,000, which is due today. There was no dispute to the amount. However, Shawn did not have the $7,000, so he asked Ryan if he would accept $6,000 in full settlement of the debt. If Ryan accepts the $6,000, will he be able to successfully sue and collect the $1,000 later.

Yes, because the money is due today, Shawn paying the money early would not count as consideration sot the initial terms of the contract should still count. And Shawn could probably successfully sue for the remaining $10,000 later.

Joe found a nearly new engine in his friend's garage. He was experienced enough to see that it was in good shape. When he asked his friend how much she wanted for it, she said "you can have it if you'll get it out of here by the weekend and clean up the oil and grease around where it was". Joe said, "Okay", even though he knew the engine was worth nearly $1,200. Is this a valid contract? If so, identify the consideration received by each party.

This is a valid contract as consideration does not need to be adequate to the actual value. The consideration for Joe would be the engine and the consideration for the friend would be getting the engine, oil and grease out of her garage

A high school rock band practiced for at least one hour most days of the week. Its studio was a small garage in the drummer's home. Ultimately, several neighbors offered to pay the rent at a local warehouse as a practice room for one year if the group agreed to stop practicing at the drummer's home. As the warehouse was much larger, the players agreed. Did the rock band receive consideration? Did the rock band receive a benefit, endure a detriment, both, or neither? Was the contract enforceable?

Yes, the rock band received consideration because they agreed to stop practicing at the drummer’s, house, which is a detriment, and in return, they got a larger practice space at the warehouse, which is a benefit. Since both sides gave something of value, the contract is valid and enforceable

Forbearance cannot be consideration

False

The person who makes a gift is called the donee

False

Consideration can be found in the exchange of benefits, or in the trading of a benefit for a detriment, but not in the exchange of two detriments

False

Termination clauses always make a contract invalid for lack of consideration

False

Output clauses make contracts invalid

False

If you already owe a duty, the duty cannot be used as consideration

True

Legal value means a change in one's legal position as a result of a contract.

True

Debts discharged in bankruptcy can still be reaffirmed by the debtor.

True

Under the UCC, a merchant's signed, written offer to buy or sell goods is binding for a limited time without consideration.

False

Promissory estoppel can be invoked even if enforcing the promise is not the only way to avoid injustice

False

At common law, changes in contract must be supported by consideration.

True

There is no time Limit under a typical statute of limitations for lawsuits based on the breaches of contract

False