Consideration Flashcards
generally, what is consideration?
something that makes an agreement legally enforceable
what are the two elements of consideration?
1) a bargained for exchange between parties, and
2) legal value
what gives something “legal value”? (consideration)
must constitute either a benefit to the promisor or a detriment to the promisee
**EXAMPLES = promise for promise, promise for performance, promise for forbearance
what is a “bargained for exchange”? (consideration)
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)
when is a promise to forbear sufficient consideration to form a K?
only when it BENEFITS the promisor (but need not be an economic benefit)
is past/moral consideration sufficient to create a legally enforceable agreement?
NO (promise in exchange for something already done does NOT satisfy the bargain requirement)
what are the two exceptions to past consideration? (when is it sufficient?)
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
generally, do courts inquire into the adequacy or fairness of consideration?
NO
when WILL courts invalidate consideration?
only when it is ENTIRELY DEVOID of value
will consideration be sufficient even if its value never comes into existence?
YES (so long as it has the POSSIBILITY of value)
what is a legal detriment?
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
what is a legal benefit?
a forbearance or performance of an act that the promisor was NOT legally entitled to demand or expect
is performing or promising to perform an EXISTING legal duty sufficient consideration?
NO (preexisting legal duty rule)
what are the exceptions to the preexisting legal duty rule? (5)
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)
does a modification to a UCC K need new consideration to be binding?
NO (so long as agreement to modify is made in good faith)
**NOTE = in UCC, consideration is a mere technicality
at common law, can a contract be modified without new consideration?
NO
at common law, when are modifications without consideration nonetheless permissible? (2 requirements)
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
must an accord (to discharge debt) be supported by consideration?
YES
is new consideration of lesser value than the original sufficient to support an accord?
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
under what circumstances will a debtor’s offer to make partial payment on an existing debt suffice to support an accord & satisfaction?
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
what is the mutuality requirement of consideration?
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)
what is promissory estoppel’s effect on consideration?
consideration is NOT necessary if the facts indicate the promisor should be estopped from NOT performing
when is promissory estoppel sufficient to require enforcement? (2 requirements)
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
if promissory estoppel elements are met, what kind of damages may be awarded?
either expectation damages OR reliance damages (ie – whatever the promisee spent in reliance on promise)
**NOTE = depends on jurisdiction!
