Consideration

Question 1

generally, what is consideration?

Answer 1

something that makes an agreement legally enforceable

Question 2

what are the two elements of consideration?

Answer 2

1) a bargained for exchange between parties, and
2) legal value

Question 3

what gives something “legal value”? (consideration)

Answer 3

must constitute either a benefit to the promisor or a detriment to the promisee
**EXAMPLES = promise for promise, promise for performance, promise for forbearance

Question 4

what is a “bargained for exchange”? (consideration)

Answer 4

situations where the promise induces the detriment and the detriment induces the promise (ie – no bargain involved where one party gives a gift to another)

Question 5

when is a promise to forbear sufficient consideration to form a K?

Answer 5

only when it BENEFITS the promisor (but need not be an economic benefit)

Question 6

is past/moral consideration sufficient to create a legally enforceable agreement?

Answer 6

NO (promise in exchange for something already done does NOT satisfy the bargain requirement)

Question 7

what are the two exceptions to past consideration? (when is it sufficient?)

Answer 7

1) when past obligation is unenforceable bc of TECHNICAL defense (ie – SoL) it will nonetheless be ENFORCEABLE IF a new promise is made in writing OR is partially performed
2) if past act benefited the promisor and was performed at their request OR in response to an emergency, a SUBSEQUENT promise to pay for that act will be enforceable

Question 8

generally, do courts inquire into the adequacy or fairness of consideration?

Answer 8

NO

Question 9

when WILL courts invalidate consideration?

Answer 9

only when it is ENTIRELY DEVOID of value

Question 10

will consideration be sufficient even if its value never comes into existence?

Answer 10

YES (so long as it has the POSSIBILITY of value)

Question 11

what is a legal detriment?

Answer 11

results if the promisee does something they are NOT legally obligated to do or refrains from doing something they have a legal RIGHT to do

Question 12

what is a legal benefit?

Answer 12

a forbearance or performance of an act that the promisor was NOT legally entitled to demand or expect

Question 13

is performing or promising to perform an EXISTING legal duty sufficient consideration?

Answer 13

NO (preexisting legal duty rule)

Question 14

what are the exceptions to the preexisting legal duty rule? (5)

Answer 14

1) new or different consideration is promised
2) the promise is to ratify a voidable obligation (ie – promise to ratify minor’s K after reaching majority)
3) duty is owed to a third person (not promisor)
4) there is an HONEST dispute as to the duty
5) there are unforeseen circumstances sufficient to DISCHARGE a party (traditional view) OR if the MODIFICATION is fair/equitable in light of unanticipated change in circumstances (modern, majority view)

Question 15

does a modification to a UCC K need new consideration to be binding?

Answer 15

NO (so long as agreement to modify is made in good faith)
**NOTE = in UCC, consideration is a mere technicality

Question 16

at common law, can a contract be modified without new consideration?

Answer 16

NO

Question 17

at common law, when are modifications without consideration nonetheless permissible? (2 requirements)

Answer 17

when…
1) modification is due to circumstances that were unanticipated by the parties when the K was made, AND
2) the modification is fair and equitable in light of those circumstances

Question 18

must an accord (to discharge debt) be supported by consideration?

Answer 18

YES

Question 19

is new consideration of lesser value than the original sufficient to support an accord?

Answer 19

YES so long as either…
1) new consideration is of a different type, or
2) the claim is to be paid to a third party

Question 20

under what circumstances will a debtor’s offer to make partial payment on an existing debt suffice to support an accord & satisfaction?

Answer 20

if there’s either…
1) some bona fide dispute as to the underlying claim, OR
2) there is some alteration (even if slight) in the debtor’s consideration

Question 21

what is the mutuality requirement of consideration?

Answer 21

requirement that consideration must exist on both sides of the K (if only one party bound to perform, the promise is illusory/won’t be performed)

Question 22

what is promissory estoppel’s effect on consideration?

Answer 22

consideration is NOT necessary if the facts indicate the promisor should be estopped from NOT performing

Question 23

when is promissory estoppel sufficient to require enforcement? (2 requirements)

Answer 23

necessary to enforce to prevent injustice if…
1) foreseeability = promisor should reasonably expect to induce action/forbearance, AND
2) performance = such action/forbearance was ACTUALLY induced

Question 24

if promissory estoppel elements are met, what kind of damages may be awarded?

Answer 24

either expectation damages OR reliance damages (ie – whatever the promisee spent in reliance on promise)
**NOTE = depends on jurisdiction!