Consideration

Question 1

What is consideration?

Answer 1

Consideration requires (1) a bargained for exchange between parties and (2) legal value - i.e. benefit/detriment

Re (1), a bargained for exchange means that the promise and detriment must induce each other.

Re (2), the value can be anything not entirely devoid of value. Sham consideration is not valid. Note that if something was valuable but value never came into existence that may be OK.

Note: both parties must be bound to do something

Question 2

When is an act or forbearance valid consideration?

Answer 2

Act/promise not to act is valid consideration if it benefits party asking for it. But benefit doesn’t need to be economic - can be mere gratification.

Question 3

When is promise for something already done valid consideration?

Answer 3

Generally never, but:
- when a past act benefited someone at their request or in response to an emergency, then a subsequent promise to pay for that act will be enforced

• when a past obligation is unenforceable due to a technical defense (e.g. statute of limitations), obligation will be enforceable if a new promise is made in writing or is partially performed

Question 4

When is promising to perform an existing legal duty valid consideration? What are 6 exceptions to main rule?

Answer 4

Generally it is not valid consideration, except for when:

• new or different consideration is promised
• promise to ratify a voidable obligation - e.g. go thru with voidable K
• preexisting duty is owed to a third party
• honest dispute wrt duty
• unforeseen circumstances sufficient to discharge a party from the duty (e.g. impracticability
• good faith agreement modifying UCC K needs no consideration

Note: payment of smaller sum of existing debt is generally NOT sufficient consideration under this rule, but could fall under one of these exceptions if, e.g., person promises to pay earlier than necessary or in different type of way.

Question 5

When may a K be modified without consideration?

Answer 5

Generally it may not except for when:
(1) the modification is due to circumstances that were unanticipated by the parties when the K was made
AND,
(2) it is fair and equitable

Also, UCC K’s do NOT need consideration to modify - just good faith promises.

Question 6

May an accord be valid without consideration?

Answer 6

Generally, no. An accord is an agreement to accept a different/less performance than initially bargained for. A valid accord requires consideration. The consideration may be of lesser value than the original consideration as long as it is different type or a claim to be paid to a third party. Or if there is a valid dispute to the underlying claim.

Question 7

When is a promise not to sue on a claim sufficient consideration?

Answer 7

When the claim is valid or claimant has good faith belief that it is valid.

Question 8

When is a right to choose several alternative means of performance considered valid mutuality/consideration?

Answer 8

Right to choose several modes of performance is only valid if:
(1) at least one alternative involves a legal detriment and power to choose rests with the promisee or third party
OR
(2) a valuable mode (i.e. one with actual detriment) is actually selected

Question 9

Is consideration required under a promissory estoppel cause of action?

Answer 9

No, if (a) the promisor should reasonable expect to induce action/forbearance and (b such action is in fact induced, then parties may bring claim for promissory estoppel (as opposed to suing on the K).

P can get expectation damages (e.g. full K) BUT courts can limit if they want (e.g., just reliance damages).

Note: So, if there is a valid K, then prefer to sue under that theory