Consideration Flashcards
Consideration
- Bargained-for exchange between the parties
- That which is bargained for must be considered of legal value or it must constitute a benefit to the promisor or a detriment to the promisee
Bargained-for Exchange
Promise must induce the detriment and the detriment induce the promise
Detriment must be the price of the exchange, and not merely fulfillment of certain conditions for making the gift
Whether the act or forbearance by the promisee would be of any benefit to the promisor
General Past or Moral Consideration
If something was already given or performed before the promise was made, it will not satisfy the “bargain” requirement
Exceptions to Consideration
Debt Barred by a Technical Defense - if a past obligation would be enforceable except for the fact that a technical defense to enforcement stands in the way (SOL), the courts will enforce a new promise if it is in writing or has been partially performed
Material benefit - some courts will enforce a promise if it is based on a material benefit that was previously conferred
Token Consideration
Something entirely devoid of value = usually not legally sufficient (gift rather than bargained-for consideration)
Sham Consideration
Consideration of $1 or other insignificant sum which frequently is not paid and was never intended to be paid
Possibility of Value
Possibility of value = adequacy of consideration will be found even though the value never comes into existence
Legal Detriment to Promisee
If promisee does something he is under no legal obligation to do or refrains from doing something he has a legal right to do (need not involve any actual loss to promisee or benefit to promisor)
Ex: pay $5,000 for nephew to stop drinking, smoking, etc.
Promisor must have sought to induce the detrimental act by his promise
Legal Benefit to Promisor
A forbearance or performance of an act by the promisee which the promisor was not legally entitled to expect or demand, but which confers a benefit of the promisor
Preexisting Legal Duty Not Consideration
Generally, the promise to perform, or the performance of, an existing legal duty is not consideration
Ex: Mike contracts to build a garage for Richard for $15k, then changes his mind and tells him Richard needs to pay $16k. Richard agrees but only pays him $15k. Mike cannot enforce because he was under a preexisting duty to build garage
New or Different Consideration Promised Exception
If the promisee has given something in addition to what she already owes in return for the promise she now seeks to enforce, or has in some way agreed to vary her preexisting duty (accelerating performance) = consideration
Voidable Obligation Exception
A promise to perform a voidable obligation (ratification) is enforceable despite the absence of new consideration
Preexisting Duty Owed to Third Party
Traditional: when a preexisting duty was owed to a third party, new promise did not constitute consideration
Majority: When a preexisting duty was owed to a third party, the new promise constitutes consideration
Honest Dispute as to Duty Exception
If the scope of the legal duty owed is the subject of honest dispute, then a modifying agreement relating to it will ordinarily be given effect (compromise by each party is a detriment)
Unforeseen Circumstances
Modern: A promise modifying a contract that has not been fully performed on either side is binding without consideration if the modification is fair and equitable in view of circumstances not anticipated when the contract was made (contractor unexpectedly hits bedrock)
Majority: mere unforeseen difficulty in performing is not a substitute for consideration, but if unforeseen difficulty rises to the level of impracticability such that the duty of performance would be discharged = exception
