Consideration

Question 1

What is consideration?

Answer 1

Something of value/ money

Question 2

What is legal detriment?

Answer 2

To give up a legal right
-Detriment: the effect of forbearance
-Forbearance

Question 3

What is enticement to act?

Answer 3

A benefit in exchange for action or non-action

Question 4

What must consideration be?

Answer 4

Reciprocal: both parties must have a benefit/ detriment

Question 5

The courts do not weigh consideration, however there are some exceptions. What are they?

Answer 5

1. Nominal consideration
2. Stated consideration
3. Unconscionable contracts
4. Moral consideration
5. Past consideration
6. Preexisting duty

Question 6

What is a nominal consideration and what is it considered?

Answer 6

$1 and it is considered a gift
-Means of tax avoidance
-Also called peppercorn consideration

Question 7

What is stated consideration

Answer 7

“Because I said it, that’s the consideration”
-Still a gift

Question 8

What is an unconscionable contract?

Answer 8

An imbalance of power exists, especially in a time of need
-Would they have made this contract if they were not desperate

Question 9

What is considered moral consideration?

Answer 9

A promise to pay because we are related (other moral relationship)

Question 10

What is considered past consideration?

Answer 10

Because you own me for previous actions done without contract

Question 11

What is preexisting duty?

Answer 11

Something already expected to be done cannot be considered consideration.

Question 12

What kind of agreements lack consideration?

Answer 12

-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)

Question 13

Early payment can be consideration.

Answer 13

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

Question 14

What is liquidated consideration?

Answer 14

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

Question 15

What is unliquidated consideration?

Answer 15

1. The value has not been assigned
   -Hospital bills, loss wages, “pain and suffering”
2. Not all agree on the value
3. Accord - when an agreement to settle is reached
4. Satisfaction - when the performance is completed

Question 16

What are the components of a good faith dispute?

Answer 16

1. Must believe the consideration is real
2. Bargain for exchange
   -Adequacy of consideration is never an issue (except when it is)
3. Illusory promise
4. Substitute for consideration

Question 17

What is an illusory promise?

Answer 17

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

Question 18

What falls under substitutions for consideration?

Answer 18

1. 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
2. Bankruptcy
   -Only “re-affirming” in court is enfocable

Question 19

1. Create an interest in personal property
2. 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

Answer 19

Lien