Consideration

Question 1

what is consideration

Answer 1

the primary basis for the enforcement of promise in our legal system

promises are generally enforceable only when the parties have exchanged something of value known as consideration

Question 2

in order to have consideration

Answer 2

1. bargained for exchange

2. legal sufficiency

Question 3

bargained for exchange

Answer 3

something is negotiated and not considered a gratuitous promise

Question 4

legal sufficiency

Answer 4

to be legally sufficient, the consideration for the promise must be either a legal benefit to the promisor or a legal detriment to the promisee

the promisor must receive something of legal value or the promisee must give up something of legal value in return for the promise

Question 5

legal benefit

Answer 5

means the obtaining by the promisor of that which he had no prior legal right to obtain

Question 6

legal detriment

Answer 6

does not mean harm; but rather something which the promisee was previously under no legal obligation to do or refrain from doing

Question 7

adequacy

Answer 7

legal sufficiency has nothing to do with adequacy of consideration

requirement of legally sufficient consideration is not at all concerned with whether the bargain was fair or either good or bad for either party

the requirement is

1. that the parties have freely agreed to an exchange
2. that the subject matter exchanged or promised in exchange, either imposed a legal benefit on the promisor or conferred a legal detriment on the promisee

Question 8

unilateral contracts

Answer 8

in a unilateral contract, one party (the promisor) exchanges a promised for an action (or restraint from action) from another party (the promisee). The promisee does not make a promise in return, but simply fulfills the action or the retrain to complete the contract

Question 9

bilateral contract

Answer 9

in a biliateral contract there is an exchange of promises, so each party is both a promisor and a promisee

Question 10

illusory promises

Answer 10

a statement that appears to be a promise but that, upon close examination of the words, promises nothing real or legally binding; it may contain words such as desire, want or wish to buy making performance entirely optional

where one party is not bound, neither party is bound

Question 11

output and requirements contracts

Answer 11

the agreement of a seller to sell her entire production to a particular purchaser is an output contract

an agreement to purchase all the materials of a particular kind that the purchaser needs from a seller is called a requirement contract

these are not illusory because they are for a provable quantity not a desired amount

Question 12

pre-existing obligations

Answer 12

the law does not regard the performance of (or the promise to perform) a preexisting obligation, whether private or public, as either a legal detriment or a legal benefit

no consideration at all

Question 13

modification of a preexisting contract

Answer 13

the preexisting duty rule under common law requires that a contract modification or amendment be supported by additional and new consideration

UCC provides that contract modifications are binding despite no new consideration provided they intend to do so and act in good faith,

if a valid controversy develops regarding a party’s obligations, a subsequent modification that clarifies the dispute and that is unsupported by consideration will be valid

Question 14

section 89 of the restatement of contracts 2nd provides that

Answer 14

no consideration is needed to modify an existing contract provided that the modification results from

1. unforseen circumstances
2. the amount of the modification is fair and equitable

Question 15

settlement of an unliquidated debt

Answer 15

a disputed (unliquidated) debt is an obligation whose existence or amount is contested. the giving up or compromise of a disputed claim constitutes legally sufficient consideration if the dispute is honest and not frivolous

tender and acceptance of a lesser amount than that demanded in the case of a liquidated, or undisputed debt does not operate as an accord and satisfaction and does not discharge debt, unless there is some new consideration present

Question 16

past consideration

Answer 16

past consideration is an act done before the contract is made. the element of exchange is missing promise is given for an act already done. past consideration is no consideration.

Question 17

exceptions to the consideration requirement

Answer 17

certain promises are enforceable even though they are not supported by consideration.

1. promise to pay debts barred by the statute of limitations
2. promise to pay debts discharged in bankruptcy
3. promissory estoppel
4. promises made under seal
5. contract modifications made under seal
6. firm offer by a merchant
7. renunciation

Question 18

promise to pay debts barred by the statute of limitations

Answer 18

the statute of limitations provides a time limit on bringing a legal action, but the debtor can become liable again for an expired debt by freely admitting that the debt is owed, by making partial payment, or by making a new promise to pay without pleading the statute

Question 19

promise to pay debt discharged in bankruptcy

Answer 19

the bankruptcy act limos the enforceability of such promises, but in some cases, they may be enforceable, as with reaffirmation agreement signed by the debtor

Question 20

promissory estoppel

Answer 20

sometimes non contractual promises are enforced under the doctrine of promissory estoppel where one party has relied, to her detriment, on the promise made by another party

Question 21

promises made under the seal

Answer 21

under the common law, a promise under seal was binding without consideration. in some states a promise under seal is still binding. most states, however, have created laws which remove the distinction between contracts under seal and written, unsealed contracts

Question 22

contract modifications under UCC

Answer 22

a contract for the sale of goods can be modified without any consideration provided the parties act in good faith

Question 23

firm offer by a merchant

Answer 23

is not revocable for lack of consideration during the time stated in the offer, or for a reasonable time (in no event to exceed 3 months)

Question 24

renunciation

Answer 24

any claim or right arising from a breach can be discharged with a written, signed renunciation