Consideration Flashcards
What is the general rule regarding consideration?
A promise is unenforcable unless it is supported by consideration
What is the majority rule regarding consideration?
A promise is supported by consideration if based on a bargained for exchange such that there was something either goods or services that was promised and bargained for by the barties
What is the benefit/detriment minority rule?
Whether there is consideration is determined by whether there is a benefit to the promisor and/or a detriment to the promisee
What is the legal detriment test for consideration?
Whether the promisee is doing something that he had a legal right not to do, or forgoing some activity he had a legal right to engage in
Must consideration be proportionate to the benefit received?
No, if consideration is present but its too small compared to the value of the promise its exchanged for then there will still be a contract, as the sufficiency of consideration isn’t a factor courts consider
What is the impact of insufficient consideration?
Insufficient consideration is where there’s no consideration for a particular promise, which will result in no bargain
What are illusory promises?
A promise of performance that leaves performance to the discretion of the promising party does not constitute consideration
What is a gratuitous promise?
The promise to make a gift
May a gratuitous promise constitute consideration?
Gratuitous promises are generally are insufficient to constitute consideration and promises to make a gift are thus generally unenforceable due to insufficient consideration
When are gratuitous transfers binding?
Gratuitous transfers are legally binding when there is
1. present intent to give a gift
2. actual or symbolic delivery
Are recitals of consideration binding?
No, if no value is received then there is no consideration
Minority rule: recitals of consideration are enforceable based on a signed writing
What is general rule regarding past / moral consideration?
A promise in exchange for something already given or already performed is not supported by consideration
What are exceptions where moral or past consideration is enforcable?
- A written promise to pay a debt that has expired past the statute of limitations
- a written promise to pay a debt discharged in bankruptcy
- a benefit that passes under the material benefit test
What is the material benefits test?
Under the minority rule Material Benefit Test, a promise made based on past benefits is enforceable if:
1. Promisee conferred the benefit on the promisor (NOT a third party)
2. The benefit conferred is material
What is exception to material benefits test?
Benefit is not enforceable if benefits were previously contracted for by the promisor
