Consideration Flashcards
Consideration
Each party must promise to confer benefit or incur detriment (consideration)
Party A must confer a legal benefit OR a legal detriment
Party B must confer a legal benefit OR a legal detriment
Promises must be part of the bargain (mutual inducement)
Quid pro quo is inducement for benefit/detriment - “I’m only offering $5k for you to clean up your act
Hamer v. Sidway,
consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance,detriment, loss or responsibility given, suffered or undertaken by the other.
Giving up your legal right to do something is a detriment for the purposes of consideration
Dahl v. Hem Pharmaceuticals
If one party makes a promise in exchange for another party’s act or performance, and the other party completes that act or performance, there is a binding contract between the parties.
Gifts
Not consideration, there is no detriment
Conditional Gifts
“I will give you X so long as you use it in a prescribed way”
Conditioned Gift (consideration absent)
Key factors: was promisor (measure objectively) motivated to induce the condition to occur, or was it merely a pragmatic limitation? Could promisee have performed the condition without first utilizing the promisor’s performance?
Rest. (2d) § 71. Requirement of Exchange; Types of Exchange
To constitute consideration, a performance or a return promise must be bargained for
A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
The performance may consist of
an act other than a promise, or
a forbearance, or
the creation, modification, or destruction of a legal relation.
The performance or return promise may be given to the promisee or to some other person. It may be given by the promisee or some other person.
3 “Corollaries” of Consideration Doctrine
Past acts don’t count (sometimes)
- Exception: “Moral Consideration” (§ 86)
When there is a temporal disconnect, it is hard to establish the mutual inducement
- Pre-existing duties don‘t count (sometimes)
Exception: Not under the UCC (§ 2-209)
Modifications do not require separate consideration; does not apply only among merchants.
Value of consideration irrelevant (sometimes)
Exception: “Shams” do not count.
Exception to exception: “Ceremonial Consideration” –Option K
Mills v. Wyman - Past Act moral consideration
It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity.
The general position, that moral obligation is a sufficient consideration for an express promise, is to be limited in its application to cases where at some time or other a good or valuable consideration had existed.
Webb v. McGowin - Moral Consideration - Material Benefit
A moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has directly received a material benefit, although there was no original duty or liability resting on the promisor.
Restatement § 86. Moral Consideration
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 . . .
However, a promise is not binding under subsection 1
If the promise conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched or
To the extent that its value is disproportionate to the benefit [received by the promisor].
Alaska Packers’ Assn. v. Domenico - Pre existing duty
If parties enter a new agreement under which one party agrees to do no more than he was already obligated to do under an existing contract, the new agreement is unenforceable for lack of consideration
Brian Construction and Development Co. v. Brighenti
Where the subsequent agreement imposes upon the one seeking greater compensation an additional obligation or burden not previously assumed, the agreement has consideration (more work for more money) and is valid.
Dyer v. Nat’l By-Products
Restatement § 74(1)
Forbearance to assert or the surrender of a claim or defence which proves to be invalid is not consideration unless
The claim or defense is in fact doubtful because of uncertainty as to the facts or the law, OR
The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid
[As with Dyer, most courts have read a “good faith” requirement in (b); i.e., honest and reasonable] - is there a justifiable reason to believe
Consideration and One sidedness
courts won’t inquire into the one-sidedness of the exchange
BUT: Other doctrines concern themselves with fairness somewhat extensively
Sham distinctions in play
Ceremonial considerations (often valid)
Purported/ceremonial consideration allowed for option contracts
Consideration whose value is contingent and uncertain when made (usually valid)
Agreements to forbear from asserting legal claims that are deemed to be invalid
