Consideration Flashcards
Basic Requirements for Consideration
- Each party must promise to confer a benefit or incurs a detriment (consideration)
- Promises must be part of a bargain (mutual Inducement)
equivalency of exchange not measured
R § 71: Requirement of Exchange (Consideration Requirements)
(1) A promise is supported by a consideration if it is bargained for
(2) A promise is bargained for if it is sought by the promisor in exchange for the promise and given by the promisee in exchange for the promise - conjunctive motives
(3) performance may consist of
(a) an act other than a promise
(b) a forbearance
(c) the creation, modification, or destruction of legal relation
(4) The performance or return promise may be given to the promisor or to some other person. May be given by the promisee or some other person.
What is a Gratuitous Gift?
Giving someone something for nothing - lacks the bargain/mutual inducement
Conditioned Gift
If the condition is a strong inducement factor, it is consideration.
ex. “I will give you X if you give up something you currently have the right to (or give me something I currently don’t have the right to).”
If the condition is just a pragmatic limitation, it is a gift.
ex. “I will give you X so long as you use it in a prescribed way”
3 Corollaries of Consideration Doctrine
Past Acts Don’t Count
Pre-existing Duties Don’t Count
Value of Consideration is Irrelevant
Explain “past acts don’t count” and exceptions
General rule: past acts can not be a part of a current bargain because it lacks the inducement element.
Exception- Moral Consideration: There has to have been a material benefit to the promisor conferred directly by the promisee. Also R§86
R §86 - Moral Consideration
(1) A promise made in recognition of a benefit previously received by the promisor from the promise is BINDING to the extent necessary to prevent injustice unless
(2) Unless
(a) the promise was conferred as a gift and the promisor is not unjustly enriched
(b) to the extent that its value is disproportionate to the benefit received by promisor
Explain Pre-existing duties don’t count and exceptions
When a party agrees to perform an obligation that they already owe, but asks for more money without taking on additional duties, the second agreement is not enforceable.
Exceptions - (§89) If the modification is fair and equitable based on (1) change in circumstance, (2) statute, or (3) a reliance on the promise
Exceptions (§2-209 UCC) Does not require separate consideration for a second agreement.
Explain Value of Consideration is Irrelevant and Exception
General Rule (§79) If consideration is met, courts don’t look at the equivalency of the exchange.
Exception (364): Unless it’s grossly inadequate or grossly unfair.
§89 Modification of Contracts
A promise modifying a duty under a contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
(b) to the extent provided by statute; or
(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.
§ 79. Adequacy of Consideration
If consideration is met, courts don’t require
(a) gain, advantage, or benefit to the promisor or loss, detriment, or disadvantage to the promisee
(b) equivalency of value exchange
( c) mutuality of obligation
§74(1) Settlement of Claims
Topic: Value of Consideration
Is agreeing to settle for a claim enough to be consideration?
Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless
(a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or
(b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.
What is an exception to the consideration doctrine?
Promissory Estoppel
Explain the “dual life” of promissory estoppel
Life 1: a type of (or substitute for) consideration that “perfects” contractual rights
Life 2: a separate cause of action based on reliance theory
Restatement § 90(1). Promise Reasonably Inducing Action or Forbearance
(1) A promise which the offeror
- should reasonably expect to induce action or forbearance on the part of the promisee or a third person and
- which does induce such action or forbearance
- is binding if injustice can be avoided only by enforcement of the promise.
The remedy granted for breach may be limited as justice requires.
