4. Consideration Flashcards

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1
Q

What is required for consideration?

A

1) Bargained-for exchange between parties

2) Legal value

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2
Q

What is required for bargained-for exchange?

A

Promise to act/forbear

  • Benefit to Promisor
  • Detriment to Promisee
  • Economic/Non-economic
  • NOT gift

Moral consideration (overcome technical defence preventing enforceability of previous promise, e.g. SoL) => New promise

  • Writing
  • Part performance

Past consideration => New promise (some states)

1) Promisor benefitted from Promisee’s act
2) Promisee acted at Promisor’s request/In response to emergency
3) Promisee did not intend to confer gift

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3
Q

What is required for consideration to have legal value?

A

Promise not to sue on claim

  • Valid claim
  • NOT valid claim (reasonable person would believe claim well-founded + Promisor (not to sue on claim) made claim in good faith)

Adequate

  • NOT sham
  • NOT entirely devoid of value

Legal benefit

1) Promisee’s forbearance/performance of act
2) Promisor not legally entitled to expect/demand
3) Confers benefit on Promisor

Legal detriment

  • Promisee’s obligation not legally required
  • Promisee’s refrain from legally required act
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4
Q

What is the rule for pre-existing legal duties?

A

Promise to perform/performance of pre-existing legal duty is NOT consideration

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5
Q

What are the exceptions to pre-existing legal duties (as new consideration)?

A

Goods (Art 2)

  • Honest in fact + observance of reasonable commercial standards in fair dealing (good faith) => Valid (NOT as new consideration)
  • NOT extort modification from other party (bad faith)

Real estate/Services/Changing debt payment

  • New/Different consideration already promised
  • Ratify voidable obligation
  • Duty owed to TP
  • Honest dispute re scope of duty
  • Unanticipated circumstances at time of contract (fair + equitable, rises to impracticability)
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6
Q

What is required for consideration to be mutual (not illusory)?

A

Express
- Offeror + Offeree give consideration

Implied (by courts)

  • Requirements/Output contract
  • Conditional promise (NOT entirely within Promisor’s control)
  • Exclusivity agreements
  • Voidable promises
  • Option contracts
  • Unilateral contracts
  • Gratutitous suretyship promises (Surety promised before/at time Creditor performs)
  • NOT right to cancel

Alternative choices

  • Power to choose is with Promisee/TP + at least one of choices has legal detriment to Promisor
  • ALL choices have legal detriment to Promisor
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7
Q

What is required for enforcing contracts by promissory estoppel without consideration (as substitute for consideration)?

A

1) NOT valid contract
- Gratuitous promise

2) Promisor would reasonably expect Promisee’s detrimental reliance
3) Promisee’s actual detrimental reliance

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8
Q

What remedies are available for promissory estoppel?

A
Second Restatement (some states)
- Award 'as justice requires' (reliance damages)

Some states
- Expectation damages (promised under contract)

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9
Q

What is the difference between bilateral and unilateral contracts?

A

Bilateral contract

  • Seeks promise to perform in return => Offeree’s promise to perform becomes acceptance => Contract formed
  • NOT revocable (once accepted)

Unilateral contract

  • Seeks performance in return (consideration)
  • Revocable (NO acceptance involved)
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