4. Consideration Flashcards
What is required for consideration?
1) Bargained-for exchange between parties
2) Legal value
What is required for bargained-for exchange?
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
What is required for consideration to have legal value?
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
What is the rule for pre-existing legal duties?
Promise to perform/performance of pre-existing legal duty is NOT consideration
What are the exceptions to pre-existing legal duties (as new consideration)?
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)
What is required for consideration to be mutual (not illusory)?
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
What is required for enforcing contracts by promissory estoppel without consideration (as substitute for consideration)?
1) NOT valid contract
- Gratuitous promise
2) Promisor would reasonably expect Promisee’s detrimental reliance
3) Promisee’s actual detrimental reliance
What remedies are available for promissory estoppel?
Second Restatement (some states) - Award 'as justice requires' (reliance damages)
Some states
- Expectation damages (promised under contract)
What is the difference between bilateral and unilateral contracts?
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)