Consideration Flashcards
Consideration
contracts must be a two way street. if one side gets all the benefits and the other side gets nothing, then an agreement lacks consideration and is not an enforceable contract
3 rules of consideration
- both parties must get something of measurable value from the contract
- a promise to give something of value counts as consideration
- the two parties must have bargained for whatever was exchanged and struck a deal
What is value?
can be an act or forebearance
Act
any action that a party was not legally required to take in the first place
Forbearance
refraining from doing something that one has a legal right to do
Landmark case: Hamer v. Sidway
- William Story (Uncle) promised (nephew) William Story $5,000 if he refrained from liquor, tobacco, swearing, and playing cards for money until his 21st birthday
- nephew agreed and kept his word, giving up his legal right
- Uncle promised the money but said wait a few years until he was mature enough for the cash
- Uncle passed away
- Unlce’s estate refused to honor the promise
- estate argued nephew had given no consideration for the uncle’s promise there was no enforceable contract
- estate appeals
- did the nephew give consideration for the promise?
- it is enough that something is promised, done, forborne, or suffered by a party to whom the promise is made
- did performance prove benefit? to the promisor, the court will inquire into it
Adequacy of Consideration
- courts seldom inquire into the adequacy of consideration
- its not for the court to decide whether the parties had made an intelligent bargain
Illusory promises
- an illusory promise in NOT consideration
- not committing to do anything, neither party can enforce the deal
- ex: Jim says “he will buy it if he likes it” not really a promise
Liquidated debt
a debt in which there is not dispute about the amount owed
In cases of liquidated debt if the creditor agrees to take less than the full amount as full amount is their agreement binding
no
In cases of liquidated debt is the creditor bound by their word if the debtor has given no consideration to support the creditors promise to accept a reduced payment
no
Exception to liquidated debt:
Different performance
if the debtor offers a different performance to settle the liquidated debt, and the creditor agrees to take it as full settlement the agreement is binding
ex: instead of paying full amount offer five acres in Alaska
Unliquidated debt
a debt that is disputed because the parties disagree over its existence or amount
two reason to dispute under unliquidated debt
- the parties dispute whether any money is owed
2. the parties agree that some money is owed but dispute how much
Under unliquidated debt if the parties enter into a binding agreement to settle for less than what the creditor demands it will be enforced if
- the debt is unliquidated
- the parties agree that the creditor will accept as full payment a sum less than they have claimed
- the debtor pays the amount agreed upon
