Business Law CH8-9

Consideration

Something of legal value given by one party to another in exchange for a promise or performance.

Gift

A voluntary transfer of property or property rights to another person without receiving any consideration in return.

Donor

The individual or entity who makes a voluntary transfer of property or assets without receiving consideration.

Donee

The individual or entity who receives a gift or voluntary transfer of property without giving consideration.

Forbearance

The intentional act of refraining from exercising a legal right, which can serve as valid consideration in a contract.

Promisor

The party within a contractual agreement who makes a legally binding promise to perform or abstain from an action.

Promisee

The party within a contractual agreement to whom a legally binding promise is made.

Legal value

The requirement that a contracting party must alter their legal position, either by assuming a new legal obligation or giving up an existing legal right.

Nominal consideration

A token or minimal amount of consideration given solely to satisfy the legal requirement of a contract, often lacking true economic equivalence.

Output contract

An agreement where a seller commits to sell their entire production of a specific good or service to a single buyer.

Requirements contract

An agreement where a buyer commits to purchase all of their required supply of a specific good or service from a single seller.

Liquidated debt

A debt where the existence and the exact legal dollar amount are undisputed and definitively settled between the parties.

Accord and satisfaction

A legal contract whereby a debtor offers, and a creditor accepts, a different performance to discharge an existing obligation, settling the debt once executed.

Release

A contractual agreement where one party forfeits their legal right to pursue a claim or lawsuit against another party.

Composition with creditors

An agreement between an insolvent debtor and multiple creditors where the creditors agree to accept a pro

Past consideration

An act or benefit performed or conferred in the past that cannot serve as legal consideration for a current or future promise.

Illusory Promises

A statement that appears to be a contractually binding promise but contains terms so indefinite or optional that the promisor is not actually obligated to do anything.

Termination Clauses

Contractual provisions that grant one or both parties the legal right to end the agreement under specified conditions or after a set notice period.

Settlement of Liquidated Debts

A legal resolution involving a debt of an undisputed amount; payment of a lesser sum generally does not discharge the remaining balance unless new consideration is provided.

Settlement of Unliquidated Debts

A legal resolution involving a debt where the amount or liability is genuinely disputed; acceptance of a lesser sum generally discharges the entire obligation.

Mutual Gifts

An exchange of voluntary transfers between parties without any legal obligation or bargained

Statute of limitations

A legislative statute that prescribes the maximum time period within which a party must initiate legal proceedings after an alleged injury or breach.

Promissory estoppel

A legal doctrine that permits the enforcement of a non

Debts Discharged in Bankruptcy

Financial obligations that a court permanently cancels, legally barring creditors from taking collection actions against the debtor.

Contractual capacity

The legal qualification and mental ability of an individual or entity to enter into a valid, enforceable contract.

Age of majority to contract

The legally defined age at which an individual acquires full adult status and the unrestricted legal capacity to bind themselves to contracts.

Minor

An individual who has not yet reached the statutory age of majority and therefore possesses limited contractual capacity.

Minority

The legal status of being under the statutory age of majority, which grants specific protections including the right to disaffirm most contracts.

Necessaries

Things required for a minor's or incapacitated person's baseline survival and well

Emancipation

The legal process by which a minor is formally released from the control, custody, and care of their parents or legal guardians, gaining adult status.

Mental incapacity

A cognitive or psychological impairment that prevents an individual from understanding the nature, purpose, and consequences of a transaction, rendering their contracts void or voidable.

Intoxication

A temporary state of cognitive impairment induced by alcohol or drugs that, if severe enough to prevent understanding of the transaction, makes a contract voidable.

Scope of authority

The legally defined boundaries of power granted to an agent or employee to act, negotiate, and enter into binding agreements on behalf of a principal or employer.

Informal emancipation

A situation where a minor effectively achieves financial and social independence from their parents through conduct rather than a formal court decree.

Disaffirmance

The exercise of a legal right by a protected party, such as a minor, to renounce or void a contract they previously entered into.

Ratification

The act of accepting and giving legal force to an obligation that was previously voidable, occurring after the legal disability or minority status is lifted.

three requirements of consideration

1. Each party must make a promise, perform an act, or forbear (refrain from doing something).

2. Each party’s promise, act, or forbearance must be in exchange for a return promise, act, or forbearance by the other party.

3. What each party exchanges must have legal value, that is, it must be worth something in the eyes of the law. For example, acts—including binding promises, forbearances, detrimental changes in position, and property—are all considered to have legal value.

The three traditional, standard legal necessaries

food, clothing, and shelter.

evidence of informal emancipation

1. The parent and minor agree that the parent will cease support.

2. The minor marries.

3. The minor moves out of the family home.

4. The minor becomes a member of the armed forces.

5. The minor gives birth.

6. The minor undertakes full-time employment.