Consideration

Question 1

Consideration

Answer 1

Whatever is given in exchange for something else (a promise to do something, or doing something or refraining from doing something)

Question 2

Bilateral contract

Answer 2

Promise given in exchange for another promise

ex. your lease with your landlord

Question 3

Unilateral contract

Answer 3

Promise given in exchange for an action or refraining from acting

ex. I will pay you $100 if you find my dog
- can only be accepted by an act

Question 4

Requirements to have valid consideration

Answer 4

1. Bargained for
2. Legal sufficiency
3. Mutuality

Question 5

Bargained for

Answer 5

Consideration is the price bargained and paid for a promise - that is, something intended by the parties to be given in exchange for the promise

Question 6

Legal suffiency (must have “legal value”

Answer 6

a. legal detriment to promissee - detriment means any act which ocassioned the oferree the slightest trouble or inconvenience and which the offeree was not otherwise obliged to perform or refrain from performing
b. legal benefit to promisor - “Benefit means anything of slight or trifling value to the offeror”
c. generally, both are present if one is present
d. generally, doing or not doing what you had no obligation to do or refrain from doing, except for your agreement to do or not do something
e. not required that consideration be measured in economic or financial terms - but often will b

Question 7

Mutuality

Answer 7

Consideration must support both parties’ obligations in order for the obligations to be contractual

Question 8

Restament (second) of Contracts

Answer 8

1. To constitute consideration, a performance or a return promise must be bargained for
2. a performance or return promise is bargained for if it is sought by the promissor in exchange for his promise and is given by the promise in exchange for that promise
3. the performance may consist of
   - an act other than a promise
   - a forbearance
   - the creation, modification, or destruction of a legal relation
4. the performance or return promise may be given to the promisor or to some other person. it may be given by the promisee or by some other person

Question 9

______________ is irrelevant as to existence or sufficiency of consideration

Answer 9

Adequacy, or fairness

Question 10

Illusory promises

Answer 10

Imposes no contractual obligation on promisor and, therefore, there would be no binding contract

Question 11

an illusory promise does not _____________

Answer 11

constitute consideration

Question 12

Contracts with “option-to-cancel” provisions

Answer 12

The requirement that notice be given to exercise the cancellation privilege is legal consideration and the contract is not illusory

Question 13

Contracts with “best-efforts” provisions

Answer 13

The obligation of a party to use “best efforts” in performing an obligation is legal consideration and whether best efforts were exerted will be tested against a reasonable and the contract is no illusory

ex. i hereby appoint you to be my exclusive agent to market my products in Dane County, Wisconsin and you shall use your best efforts in doing so

Question 14

Pre-existing contractual obligation is :

Answer 14

not consideratoin supporting enforcement of new promise

Question 15

Common law

Answer 15

Consideration required to support the modification agreement

Question 16

UCC 2-209

Answer 16

no consideration required to support the modification agreement (but modification must be requested in good faith and not by coercion)

Question 17

Restatment (second) of contracts 89

Answer 17

Modification of an executory contract is binding without consideration if it is fair and equitable in light of facts that could not be reasonably anticipated by the parties (sometimes referred to as the unforeseen difficulties rule)

Question 18

Creditor

Answer 18

A person who is owed money by a person who is referred to as a debtor

Question 19

Issue with settlement of debts

Answer 19

Can the creditor sue for the unpaid balance after a partial payment has been made and a settlement reached?

That is, has an accord and satisfaction been entered into?

Question 20

Liquidated and undisputed debt

Answer 20

If additional or different consideration is given, debt is discharged (economic equivalency of different considerations is irrelevant)

Question 21

As to unliquidated (not an agreed-to amount) or disputed debt (dispute as to the existence of agreement), acceptance of a lessor sum discharges the debt if these elements are present:

Answer 21

a. genuine dispute (not frivolous)
b. partial payment offered as payment in full by the debtor (must be conspicuous) and in good faith
c. payment accepted by the creditor (the check is cahsed or the payment is not returned within a reasonable period of time)

Question 22

Payment-by-check exceptions under UCC Article 3

Answer 22

a. large organizations can advise a debtor that any offer to settle for less than the debt must be made to a particular official
b. if, within 90 days of cashing a full payment check, the creditor offers repayment of the same amount to the debtor, there is no accord and satisfaction

Question 23

Promissory Estoppel (enforceable agrement without consideration)

Answer 23

An equitable remedy - to avoid an unjust situation - where the aggrieved party cannot sue for breach of contract because no contract exists - but where the aggrieved party has suffered losses similar to hose he or she would have suffered if a contract existed and the other party failed to perform

• no contract was actually formed - but the promisor has promised to do something which would benefit the promisee
• this remedy is based on promisee’s detrimental reliance on the promise made by the promisor

Question 24

Elements of promissory estoppel

Answer 24

1. a promise made (but the promise does not have to be as certain and definite as a promise that results in a contract)
2. reasonable reliance by promisee (reliance in the exercise of ordinary care)
3. substantial economic detriement to the promisee results - the promissee’s reliance results in financial losses to the promisee
4. an injustice would occur without relief - subjective

Question 25

Restatement (second) of Contracts 90

Answer 25

A promise which the promisor should reasonably expect to induce action or forbearance of a definte and substantial character on the part of the promisee and which does not induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise