Chapter 8: Conisderation And Privity

Question 1

Gratuitous promise

Answer 1

Party A gives Party B a good without receiving anything of legal value in exchange

• Party B entitled good if they receive it but cannot force Party A to give it
• party A can change their mind because there is no contract

Question 2

Consideration

Answer 2

A party gives (or promises to give) a benefit to someone else’s or suffers (/promises to suffer) a detriment

Question 3

Sufficient consideration

Answer 3

Almost anything of value

Exception: love and affection

Question 4

Adequate consideration

Answer 4

Same value as consideration for which it is exchanged

Consideration does NOT have to be adequate, but just be sufficient

Question 5

Forebearance to sue

Answer 5

Promise not to pursue legal action in court, settle via contract

Question 6

Mutuality of consideration

Answer 6

Each party must provide consideration in exchange for the other party’s consideration

Question 7

Past consideration

Answer 7

Consideration for something a party did prior to contemplation of a contract

Question 8

Pre-existing obligation

Answer 8

An obligation that existed but not performed before a contract was contemplated

3 types, pre-existing-:

• public duty
• contractual obligation owed to 3rd party
• contractual obligation owed to same party

Question 9

Pre-existing public duty

Answer 9

Cannot rely on obligation as consideration for a new contract

Ex.) firefighter cannot sell services to you when your house is on fire

Question 10

Pre-existing contractual obligation owed to a 3rd party

Answer 10

One action to be used as consideration for two contracts

Question 11

Pre-existing contractual obligation owed to the same party

Answer 11

Ex.) party a sells steel to party b. Party A’s supplier raises prices partway through delivery process. Party A persuades Party B to increase price they’re paying for the remaining shipment. Once rest of shipment delivered Party B refuses to pay increased price

-party A gave nothing new for the increased price, therefore did not form a new contract so Party B did not have to pay increase prices

Question 12

Novation

Answer 12

Discharge initial contract band enter new agreement

Question 13

Fresh consideration

Answer 13

Party provides new consideration

Question 14

Seals

Answer 14

Mark put on document to indicate a party’s intention to be bound by the terms therein, with or without consideration

Question 15

Loose rule of seals

Answer 15

Seal can take many forms from stamps to wax seal

Question 16

Strict rule of seals

Answer 16

Seal must be applied when both parties sign the document

Question 17

Promissory estoppel

Answer 17

Prevents a party fro retracting a promise that another party relies on

Question 18

4 requirements for promissory estoppel

Answer 18

1. Representation
   - representor must clearly indicate that it will not enforce its legal rights against representee
2. Reliance
   - representee must rely on promise to an extent that it would be unfair for representor to retract promise
3. ## Inequitable behaviour
4. Existing legal relationship

Question 19

Privity of contract

Answer 19

People who will enforce the contract (the parties) that can sue or be sued on grounds of the contract

Question 20

Third party beneficiary

Answer 20

Person expected to benefit a contract but not be party to the contract

Question 21

Assignment

Answer 21

Process in which a contractual party transfers its rights to a third party

Question 22

Assignor

Answer 22

Contractual party that assigns rights

Question 23

Assignee

Answer 23

Party to which rights are assigned

Question 24

Debtor

Answer 24

Original party that rights can be enforced against

Question 25

Subject to equities

Answer 25

Debtor can use same defence against assignee that it would use against assignor

Question 26

Statutory assignments

Answer 26

Assignments subject to a statute

Question 27

Requirements of a statutory assignment

Answer 27

1. Written
2. Notice: give written notice to debtor
3. Absolute: absolute at the time of creation

Question 28

Vicarious performance

Answer 28

Contractual party arranged to have someone else perform obligations
-contractual party still liable

Question 29

Trusts

Answer 29

Person hold property on behalf of another

Question 30

Trustee

Answer 30

Person whom holds property

Question 31

Beneficiary

Answer 31

Person for whom the property is held

Question 32

Statute exceptions to privity

Answer 32

1. Life insurance
   Usually made with a third party in mind
2. Automobile insurance
   If you buy auto insurance for you and another party insurance company cannot refuse

Question 33

Employment and privity

Answer 33

Employees can rely on exclusion clauses meant to protect company

Question 34

Himalaya clause

Answer 34

Protect third party beneficiary from liability