Consideration

Question 1

Definition

Answer 1

Consideration is a bargained-for exchange of legal value.

Question 2

Past Consideration

Answer 2

A promise given in exchange for something already done does not satisfy the bargain requirement.

Exceptions: A subsequent promise to pay for an act will be enforceable:
- If that past act benefited the promisor and was performed by the promisee at the promisor’s request
- In response to an emergency, a subsequent promise to pay for that act will be enforceable.

Question 3

What is a “bargained for exchange?”

Answer 3

The promise induces the detriment and the detriment induces the promise

No bargain for gifts

See Past Consideration card

Question 4

What is “legal value?”

Answer 4

There must be a legal benefit and a legal detriment

Legal Detriment: if the promisee does something they are not legally obligated to do or refrains from doing something they have a legal right to do.

Legal Benefit: The forbearance or performance of an act that the promisor was not legally entitled to demand or expect.

Question 5

Promising to Perform Pre-existing Legal Duties as Consideration

Answer 5

This is generally insufficient consideration.

Exceptions:
- New or different consideration is promised

• The promise is to ratify a voidable obligation (for example, a promise to ratify a minor’s contract after reaching majority or a promise to go through with a contract despite the other party’s fraud)
• The preexisting duty is owed to a third person rather than to the promisor
• There is an honest dispute as to the duty
• There are unforeseen circumstances sufficient to discharge a party (such as impracticability)
• If the modification is fair and equitable in view of circumstances not anticipated when the contract was made.
• UCC: a good faith agreement modifying a contract subject to the UCC needs no consideration to be binding.

Question 6

Modifying Contracts

Answer 6

Generally, a contract can’t be modified unless the modification is supported by NEW consideration.

However, modification without consideration is allowed if: (1) the modification is due to circumstances that were unanticipated by the parties when the contract was made and (2) it is fair and equitable.

UCC: Consideration isn’t necessary to modify; all the parties need are good faith promises of new and different terms.

Question 7

What is an Illusory Promise?

Answer 7

If only one party is bound to perform, the promise is illusory and will not be enforced.

Question 8

Requirement of Mutuality

Answer 8

Consideration must exist on both sides of a contract.

Courts can supply implied promises (for example, a party must use their best efforts) to infer mutuality.

Question 9

Can a party choose one of several means to perform?

Answer 9

A promise to choose one of several alternative means of performance is illusory UNLESS every alternative involves legal detriment to the promisor.

The promise will not be found illusory if:
(1) at least one alternative involves legal detriment and the power to choose rests with the promisee or a third party, or
(2) a valuable alternative (that is, one involving legal detriment) is actually selected.

Question 10

Consideration and Promissory Estoppel

Answer 10

A promise is enforceable if necessary to prevent injustice if:
a. The promisor should reasonably expect to induce action or forbearance, and
b. Such action or forbearance is in fact induced.