In-depth Notes on The Basic Consideration Requirement

Unit 7 - The Basic Consideration Requirement

R2K § 17: Requirement of a Bargain
  • General Rule (Subsection 1): Formation of a contract requires a bargain with:
    • Manifestation of mutual assent to the exchange.
    • Presence of consideration.
  • Exception (Subsection 2): A contract may be formed under special rules applicable to formal contracts, regardless of the bargain.
R2K § 71: Requirement of Exchange; Types of Exchange
  • Consideration Defined:
    • A performance or return promise must be bargained for.
    • Bargained For: If sought by the promisor in exchange for the promise and given by the promisee in exchange for that promise.
  • Types of Contracts:
    • Bilateral Contract: Promise in exchange for a promise.
    • Unilateral Contract: Promise in exchange for performance.
Gratuitous Promises
  • Definition: Promises that lack consideration are not binding.
  • Reason: Absence of a bargain invalidates the commitment.
Option Contracts
  • Definition: An option contract lacking consideration is not binding.
  • Reason: Without consideration, legal enforceability is absent.
Illusory Promises
  • Concept: An illusory promise lacks consideration; it offers no commitment.
  • Legal Implication: A valid contract cannot be based on illusory promises from either party.
R2K § 77: Illusory and Alternative Promises
  • Definition: A promise is not consideration if it allows the promisor to choose between alternative performances unless:
    • Each alternative would be considered if bargained separately.
    • At least one alternative would qualify as consideration and may potentially be exercised.
Preexisting Duty Rule
  • General Rule: Performing a legal duty is not valid consideration unless it differs in a substantial way from what was originally required.
Case Study: Jankowski v. Monclova-Maumee-Toledo Joint Economic Development Zone
  • Background: Township’s obligation to provide services in exchange for tax revenues.
  • Legal Finding: Preexisting duty negated consideration.
Case Study: Schnell v. Nell
  • Background: Zacharias Schnell's promise to pay based on a now void will.
  • Legal Findings:
    • Past considerations (i.e., wife's support) and love do not constitute valid consideration.
    • Nominal consideration of one cent was insufficient to enforce the obligation.
Benefit/Detriment Test
  • Definition: Consideration can consist of a benefit to the promisor or a detriment to the promisee.
  • Relevant Case: Hamer v. Sidway:
    • A promise to forbear from certain activities until age 21 was deemed consideration because it restricted legal freedom.
Led to the Conclusion in Cases**:
  • The promise must represent a true exchange reflecting a quid pro quo; mere affection or existing duties are insufficient for consideration.
Recent Case: Weavertown Transport Leasing, Inc. v. Moran
  • Argument: Moran argued there was no consideration for the ticket arrangement, deeming it a gratuitous promise with conditions rather than an enforceable contract.
  • Outcome: No consideration found; the arrangement was viewed as a conditional gift.
Example Problems
  1. Jules's Coat to the Homeless:
    • Question of obligation based on mutual assent.
  2. Antillico v. Isaac:
    • Analysis on whether Isaac's promise had sufficient consideration when renting land under previous familial ties.
  3. Fritz v. Vincent:
    • Consideration based on subjective satisfaction ratios in contract agreements for artistic work.