Consideration Flashcards
Consideration
Whatever is given in exchange for something else (a promise to do something, or doing something or refraining from doing something)
Bilateral contract
Promise given in exchange for another promise
ex. your lease with your landlord
Unilateral contract
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
Requirements to have valid consideration
- Bargained for
- Legal sufficiency
- Mutuality
Bargained for
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
Legal suffiency (must have “legal value”
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
Mutuality
Consideration must support both parties’ obligations in order for the obligations to be contractual
Restament (second) of Contracts
- 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 promissor in exchange for his promise and is given by the promise in exchange for that promise
- the performance may consist of
- an act other than a promise
- a forbearance
- the creation, modification, or destruction of a legal relation - 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
______________ is irrelevant as to existence or sufficiency of consideration
Adequacy, or fairness
Illusory promises
Imposes no contractual obligation on promisor and, therefore, there would be no binding contract
an illusory promise does not _____________
constitute consideration
Contracts with “option-to-cancel” provisions
The requirement that notice be given to exercise the cancellation privilege is legal consideration and the contract is not illusory
Contracts with “best-efforts” provisions
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
Pre-existing contractual obligation is :
not consideratoin supporting enforcement of new promise
Common law
Consideration required to support the modification agreement
UCC 2-209
no consideration required to support the modification agreement (but modification must be requested in good faith and not by coercion)
Restatment (second) of contracts 89
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)
Creditor
A person who is owed money by a person who is referred to as a debtor
Issue with settlement of debts
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?
Liquidated and undisputed debt
If additional or different consideration is given, debt is discharged (economic equivalency of different considerations is irrelevant)
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:
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)
Payment-by-check exceptions under UCC Article 3
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
Promissory Estoppel (enforceable agrement without consideration)
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
Elements of promissory estoppel
- a promise made (but the promise does not have to be as certain and definite as a promise that results in a contract)
- reasonable reliance by promisee (reliance in the exercise of ordinary care)
- substantial economic detriement to the promisee results - the promissee’s reliance results in financial losses to the promisee
- an injustice would occur without relief - subjective
Restatement (second) of Contracts 90
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