Consideration Flashcards
What is consideration?
Something of value/ money
What is legal detriment?
To give up a legal right
-Detriment: the effect of forbearance
-Forbearance
What is enticement to act?
A benefit in exchange for action or non-action
What must consideration be?
Reciprocal: both parties must have a benefit/ detriment
The courts do not weigh consideration, however there are some exceptions. What are they?
- Nominal consideration
- Stated consideration
- Unconscionable contracts
- Moral consideration
- Past consideration
- Preexisting duty
What is a nominal consideration and what is it considered?
$1 and it is considered a gift
-Means of tax avoidance
-Also called peppercorn consideration
What is stated consideration
“Because I said it, that’s the consideration”
-Still a gift
What is an unconscionable contract?
An imbalance of power exists, especially in a time of need
-Would they have made this contract if they were not desperate
What is considered moral consideration?
A promise to pay because we are related (other moral relationship)
What is considered past consideration?
Because you own me for previous actions done without contract
What is preexisting duty?
Something already expected to be done cannot be considered consideration.
What kind of agreements lack consideration?
-Prexisting duty is not a legitimate debt
-Amount is not in dispute: both parties know and agree to the amount owed
-Less than a full payment: not consideration forgiveness of entire debt ($15K for a $6K car? does not meet adequacy of consideration)
Early payment can be consideration.
If a payment is not being made in full but an agreement is made to pay early their debt is now paid in full
-Early payment is additional consideration
What is liquidated consideration?
There is no dispute on the value; all parties agree on what was owed.
Ex. bank debts are liquidated
-You may negotiate to pay a portion of the consideration but the rest is still owed
What is unliquidated consideration?
- The value has not been assigned
-Hospital bills, loss wages, “pain and suffering” - Not all agree on the value
- Accord - when an agreement to settle is reached
- Satisfaction - when the performance is completed
What are the components of a good faith dispute?
- Must believe the consideration is real
- Bargain for exchange
-Adequacy of consideration is never an issue (except when it is) - Illusory promise
- Substitute for consideration
What is an illusory promise?
A contract without adequate promise
-Exceptions under the UCC:
1. When a company offers to purchase all units a manufacturer is able to produce (there is no set promise to purchase a specific amount)
2. When a group purchases what they need (there is no set promise to purchase a specific amount
What falls under substitutions for consideration?
- Promissory estoppel
-A person makes a statement that the other party “justifiably relies” on what was said as a contract (other party changes their position. The agreeing party could sue for the performance or amount owed)
-Statute of limitations (a reasonable time to take action - Bankruptcy
-Only “re-affirming” in court is enfocable
- Create an interest in personal property
- If consideration is owed, you can collect by:
-Requires a judge
-Sheriff (officer of the court) collects the property if the consideration is not met
Lien
