Chapter 12: Consideration

Question 1

Define: Consideration

Answer 1

the value given in return for a promise (in a bilateral contract) or in return for a performance (in a unilateral contract)

Question 2

What are the two parts that consideration can be broken down in to?

Answer 2

1) Something of LEGALLY SUFFICIENT VALUE must be given in exchange for the promise, and usually there must be a BARGAINED FOR exchange.

Question 3

Something of “legally sufficient value” may consist of which 3 things?

Answer 3

1) a promise to do something that one has no prior legal duty to do, 2) the performance of an action that one is otherwise not obligated to undertake, or 3) the refraining from an action that one has a legal right to undertake.

Question 4

What does “Bargained-for Exchange” mean?

Answer 4

It means that the item of value must be given or promised by the promisor in return for the promisee’s promise, performance, or promise of performance. This is what makes a CONTRACT different from a GIFT

Question 5

True or False: Legally sufficient is not the same as adequate

Answer 5

TRUE

Question 6

True or False: Courts are concerned with whether or not parties made wise decisions in their contract.

Answer 6

FALSE

Question 7

What is “Freedom of Contract”

Answer 7

The doctrine where courts leave it up to the parties to decide what something is worth, and parties are usually free to bargain as they wish, this keeps frivolous suits out of the court system. The courts are NOT responsible for unwise decisions.

Question 8

What are some things that look like consideration, but are not?

Answer 8

Pre-existing duty, Past consideration, illusory promises, option to cancel clauses.

Question 9

What is “pre-existing” duty?

Answer 9

If the consideration is something that a party is already obligated to do. Since there is already a duty to do thing, then the consideration is not valid.

Question 10

What is the one exception to “Pre-existing” duty?

Answer 10

Unforeseen difficulties

Question 11

What is “Past Consideration”?

Answer 11

If the consideration stated is in the past. Example, “Because you did a good job last year, we are giving you a bonus of ten thousand dollars”. This would be considered a “gift” not a “contract”.

Question 12

What is “Illusory Promises”?

Answer 12

When the promisor sounds as if he/she is promising really great things, but you can’t really objectively define what the promise means.

Question 13

What is a “requirement contract”?

Answer 13

When one party buys from its supplier all that is requires

Question 14

What is an “output contract”?

Answer 14

The buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the seller’s output.

Question 15

When parties want to make a “contract to settle the claims” that each has against each other, what are the three ways that this can be accomplished?

Answer 15

1) An accord and satisfaction 2) A release 3) A covenant not to sue

Question 16

What is “an accord and satisfaction”?

Answer 16

When a debtor offers to pay less than the creditor claims he owed (can only happen if the amount is in dispute)

Question 17

What is a “liquidated debt”?

Answer 17

One whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.

Question 18

What is a “unliquidated debt”?

Answer 18

The amount of debt is NOT settled, fixed, agreed on, ascertained, or determined, and reasonable persons may differ over the amount owed.

Question 19

What is a “Release”?

Answer 19

A contract in which one party forfeits the right to pursue a legal claim against the other party.

Question 20

What is a “Covenant Not to Sue”?

Answer 20

When parties make a contract which then substitutes for some other types of claims they may have aganst each other

Question 21

What is “Promissory Estoppel”?

Answer 21

When a person who has reasonably and substantially relied on the promise of another, may be able to obtain some measure of recovery.