Consideration Flashcards
Elements of Consideration
Bargained for Exchange
This element requires that the promise induce the detriment and the detriment induce th epromise. There is no bargain involved when one party gives a gift to another.
Elements of Consideration
Elements of Consideration
A bargained for exchange, and
legal value
meaning that which is bargained for must be considered of legal value or, as it is traditionally stated, it must constitute a benefit to the promisor or a detriment to the promisee.
Elements of Consideration
Bargained For Exchange: Act or Forbearance
An act or forbearance by the promisee (or a promise to act of forbear) is sufficient consideration to form a contract if it benefits the promisor.
The benefit, however, need not be economic (for example, the gratification of influencing the mind of another is sufficient).
Elements of Consideration
Bargained For Exchange: Past or Moral Consideration
A promise given in echange for something already done does not satisfy the bargain requirment.
EXCEPTION: Where a past obligation is unenforceable becuase of a technical defense (i.e., SOL), that obligation will be enforceable if a new promise is made in wiritng or is partially performed.
Also, under the modern trend, if a past act benefited the promisor and was performed by the promisee at the promisor’s request or in response to an emergency, a subsequent promise to pay for that act will be enforceable.
Elements of Consideration
Legal Value Element: Adequacy of Consideration
Courts do not inquire into the adequacy or fairness of consideration.
However, if something is entirely devoid of value, it is insufficient.
Sham consideration is also insufficient.
But note that if there is a possibility of vlaue in teh thing bargained for, considerationwill be found even if the value never comes into existence.
Elements of Consideration
Legal Value Element: Legal Benefit and Detriment
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.
A legal benefit is the reverse. It is forbearance or performance of an act that the promisor was not legally entitled to demand or expect.
Elements of Consideration
Legal Value Element: Preexisting Legal Duty
Traditionally, performing or promising to perform an existing legal duty is insufficient consideration.
Exceptions (i.e., there is consideration if):
1. New or differetn consideration is promised;
2. the promise is to ratify a voidable obligation
3. the preexisting duty is owed to a third person rather than to the promisor
4. there is an honest dispute as to the duty; or
5. there are unforeseen circumstacnes sufficient to discharge a party (such as impracticabality), or under the modern view, if the modification is fair and equitable in view of circumstacnes nto anticipated when teh contract was made.
Elements of Consideration
legal Value Element: Modification of Contracts
Under general contract law, a contract can’t be modified unless the modification is supported by new consideration.
The modern view, permits modification without consideration if:
1. the modification is due to circumstances that were unanticipated by the parties when teh contract was made, and
2. it is fair and equitbale.
Under the UCC, consideration isn’t necessary to modify; all the parties need are good faith promises of new and different terms.
Elements of Consideration
Legal Value Element: Dishcarge of Debts
In general, an accord must be supported by consideration. Even if the consideration is of a lesser value than the originally bargained-for consideration in the prior contract, it is sufficeint if the new consideration is of a different type or if the claim is to be paid to a third party.
Elements of Consideration
Legal Value Element: Forbearance to Sue
A promise to refrain from suing on a claim constitutes consideration if the claim is vlaid or the glaimant in good faith beleived the claim was valid.
Mutual and Illusory Promises - Requirement of Mutuality
Consideration must exist on both sides of acontract (although the benefit of the consideration generally need nto flow to all parties).
If only one party is bound to perform, the promise is illusory and will not be enforced. Courts often supply implied promises (for example, a party must use their best efforts) to infer mutuality.
Examples of satisfying Mutuality
- Requirements and Outputs contracts
- conditional promises, unless the condition is entierly within the promisor’s control
- Contracts where a party has the right to cancel, if that right is somehow restricted
- Exclusivity agreements because the court will find an implied promise to use best efforts
- Voidable promises
- Unilateral and option contracts, and
- Gratuitous surtyship promises made before or at the same time that considertion flows to the principal debtor
Promissory Estoppel or Detrimental Reliance
Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing.
A promise is enforceable if necessary to prevent injustice if:
1. the promisor should reasonably expect to induce action or forbearance, and
2. such action or forbearance is in fact induced.
A valid contract is better than an agreement that can be enforced only by promissory estoppel because some states limit recovery under promissory estoppel to that which “justice requires.”
Thus, in a question asking whether a party can prevail basedon an agreement, always check first to see if there is a vlaid contract. Only if there isn’t should you consider promissory estoppel as a proper choice.
