Chapter 5 - Consideration

Question 1

Consideration

Answer 1

Each party to a contract must get something to which that party was not legally entitled before entering the contract, and each party must give up something to which that party was legally entitled before the contract

Question 2

Bargained-for

Answer 2

Each party is induced to enter contract by consideration offered by other party

Question 3

Illusory

Answer 3

An illusion; stated consideration does not really obligate the party

Question 4

Subjective Standard

Answer 4

Imposed or influenced by individual position or bias

Question 5

Objective Standard

Answer 5

Not influenced by personal opinion or bias

Question 6

Sham consideration

Answer 6

Stated consideration did not really occur

Question 7

Nominal

Answer 7

Minimal

Question 8

Recital

Answer 8

A formal statement

Question 9

Condition Precedent

Answer 9

Event that must occur before the contemplated transaction is completed

Question 10

Condition Subsequent

Answer 10

Event that may “undo” an executed contract

Question 11

Output Contract

Answer 11

Contract under which buyer agrees to purchase all that seller produces; court may impose requirement of reasonable performance

Question 12

Needs Contract

Answer 12

Contract under which buyer agrees to purchase all of buyer’s needs from seller (see exclusive dealing); court may impose requirement of reasonable performance

Question 13

Exclusive Dealing

Answer 13

Contract under which parties agree to deal only with each other with respect to particular needs

Question 14

Contracts Under Seal

Answer 14

Formal contracts

Question 15

Cost-plus Contract

Answer 15

A way of sharing risk

Question 16

Allowances

Answer 16

Contract total price includes “estimates” for components; if actual price of components differs from allowances, total contract price changes

Question 17

Incentive Consideration

Answer 17

Consideration changes to motivate faster or better performance

Question 18

Accord and Satisfaction

Answer 18

Agreement to accept and give payment or performance, different from that originally required by contract

Question 19

Rescind

Answer 19

To terminate a contract before all of its terms are completely performed

Question 20

Recision

Answer 20

Mutual agreement to cancel

Question 21

Waiver

Answer 21

Intentional relinquishment of right, claim, or privilege

Question 22

Liquidated Debt

Answer 22

Debt that is not in dispute

Question 23

Unliquidated Debt

Answer 23

Debt, the amount of which is in dispute, settlement of unliquidated debt can constitute consideration