(B)(2) Adequacy of Consideration - subjective value, preexisting duty rule, past consideration, executive contract, & modification Flashcards
adequacy of consideration in general
the basic concept of legal detriment is that there must be something of substance, either an act or a promise, which is given in exchange for the promise that is to be enforced
challenging contract on the grounds of inadequate consideration
in general, a party cannot challenge a contract on the grounds that the consideration is inadequate
is a different in economic value between the items exchanged grounds for finding that a contract did not exist due to inadequate consideration?
no
adequacy of consideration - subjective value
the benefit to the promisor does not need to have an economic value—regardless of the objective value of an item, if the promisor wants it, the giving of it will constitute adequate consideration
preexisting-duty rule - common law
at common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisor is already bound to perform (i.e., there is no legal detriment)
preexisting-duty rule - common law: giving something in addition to what is already owed
if the promisor gives something in addition to what is already owed (however small) or varies the preexisting duty in some way (however slight), most courts find that consideration exists
preexisting-duty rule example #1: a borrower knows that he owes a lender $1,000 today. the borrower promises to repay the loan if the lender promises to lend the borrower an additional $100—is there consideration?
no - the borrower has not provided consideration for the lender’s promise
preexisting-duty rule example #2: a borrower knows that he owes a lender $1,000. the borrower offers to pay the lender $900 today if the lender agrees to forego the additional $100. the lender accepts the offer—is there consideration?
yes - the borrower has provided the lender with consideration for the lender’s promise
preexisting-duty rule - exception for a third party
there is an exception to the preexisting-duty rule when a third party’s promise is exchanged for the promise to perform an act that the promisor is already contractually obligated to perform—under the exception, the party’s promise to the third pary is sufficient consideration
preexisting-duty rule exception for a third party example: C contracts with P for P to install plumbing in a house built by C for H. C subsequently becomes insolvent and walks away from the project. H contracts with P and P promises to pay P the same amount P would have received from C if P installs the plumbing—does P’s completion of the job constitute consideration?
P’s completion of the job constitutes consideration for the promise by H, even though P was already contractually obligated to C to do the work
past consideration
under the common law, something given in the past is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise
past consideration example: A is drowning, and B dives in and saves A. grateful to have been saved, A promises B $500—is this enforceable?
under the common-law approach, there is no consideration, and the promise is therefore unenforceable—it is based on a mere moral obligation arising out of past conduct
past consideration modern trend
there is a modern trend (adopted by the Second Restatement), however, toward enforcing some such promises under material benefit rule
executory contract
an executory contract is a contract whose terms are to be performed by both parties at a later date or in an ongoing manner
executory contract example
a rental agreement that calls for monthly payments over a period of time cannot be performed all at once; the renter is required to make monthly payments while the owner is required to allow possession each month; similarly, a construction contract that requires payments upon reaching specified milestones cannot be performed all at once and is therefore considered “executory”
