Ch.8 The Requirement of Consideration

Question 1

Consideration

Answer 1

something that has value in the eyes of the law, and which the promisor receives in return for a promise

• What a party gets in return for their promise: I will do this, if you do that
• Must exist for contract to be legally binding

Question 2

Forms of consideration

Answer 2

Money
Services
Promise not to do something
Relinquishment of a right
Delivery of property
Promise for a promise

Question 3

Gratuitous promise

Answer 3

promise not accompanied by consideration

• Unless promisor gets something in return for their promise, the promise is merely gratuitous
• Gratuitous promise is not enforceable under law

Question 4

Exceptions to rule of gratuitous promise:

Answer 4

Gratuitous offer of a service - if accepted, must be performed with care and skill

• Negotiable instruments
• Charitable donations

Question 5

Negotiable instruments

Answer 5

person may be liable on a promissory note, to subsequent endorser even without consideration

Question 6

Charitable donations

Answer 6

most charitable donations are gratuitous promises

• If charity can show a specific project undertaken on strength of a donor’s pledge may be enforceable

Question 7

Courts not concerned with whether promiser received proper compensation for promise

Answer 7

-Price or value is up to the parties not the courts

• Courts may intervene if promisor can satisfy that promise was made under unusual circumstances
• Always best to:
  – Express intentions in writing
  – Exchange some minor physical token or amount of money

Question 8

Seal

Answer 8

formal mode of expressing the intention to be bound by a written promise or agreement

– Involves affixing a wax paper wafer beside signature or making engraved impression on document

– Contract under seal requires no consideration because agreement derives validity from its form

Question 9

Consideration must be given before contract entered into and not after

Answer 9

Cannot be something the person received before promise is made

Cannot be something a person is already entitled to receive at law or under a present contract

Past consideration is no consideration

New contract requires new consideration

Question 10

Consideration must be legal

Answer 10

• Promises cannot be illegal or a violation of public policy
• Cannot violate Statutes
• Contracts with clauses that buyer must resell at fixed or minimum price are unlawful under Competition Act

Question 11

Tender differs from the ordinary offer:

Answer 11

• Involves advertisement or particular needs i.e. an invitation to submit offers (calling for tenders)
• No binding effect - firm asking for tender can reject or accept any of the offers
• Offer can be revoked at any time before acceptance
• Uses seal to render offer irrevocable; payment as money (deposit) as consideration

Question 12

Quantum Meruit

Answer 12

“As much as he has earned”

A quasi-contractual remedy that permits a person to recover a reasonable price for services and/or materials requested, where no price is established when the request is made
- Court decides on price based on price of similar goods or services in the area

Question 13

Relationship

Answer 13

When debtor and creditor agree amount payable on due date should be less than originally stated

• Creditors agreeing to accept less than what is owed is a gratuitous promise
• New promise requires new consideration
• Courts have attempted to lessen impact of rule:
  – Sign under seal
  – Acceptance of something other than money
  – Pay before the due date
  – Third marty makes the payment

Question 14

Estoppel

Answer 14

• rule whereby a person may not evade a promise or deny the truth of a statement of fact made by him or her when another person has relied and acted upon the promise or statement

Prevents retraction of a promise if:
- Promise relates to an existing legal relationship
- Expression of a fact as being true
- Reliance on statement by other party
- Reliance is a detriment to the other party