Consideration

Question 1

What are the requirements for a consideration in a contract?

Answer 1

Each party of the contract has a benefit and detriment. The promises (detriment) are induced by the benefits and the benefits are induced by the promises (detriment). Bargained-for exchange. Consideration must actually change hands.

Question 2

Define “accord and satisfaction”.

Answer 2

Agreement between two parties to settle an unliquidated debt (obligation is acknowledged, but the amount is unclear)(accord); satisfaction is payment of that amount; payment discharges all obligations; is not effective for discharging a liquidated debt, such as an installment loan.

Question 3

What promises are enforceable without consideration?

Answer 3

• Good-faith modification under the UCC
• Charitable subscriptions (promissory estoppels on pledge to make a gift)
• Promises barred by the statue of limitations

Question 4

What are the elements of a consideration?

Answer 4

Consideration has two elements:

• There must be a bargained-for exchange between the parties. (If a party intends to make a gift, he or she is not bargaining.)
• What is bargained for must have legal value

Question 5

Define “preexisting duty”.

Answer 5

A promise to do what one is already legally obligated to do without consideration.

Question 6

How does an individual incur legal detriment?

Answer 6

An individual can incur legal detriment by (1) doing or promising to do something that he or she had no prior legal duty to do or (2) refraining from or promising to refrain from doing something that he or she had no prior legal duty to refrain from doing (i.e., is, by forbearance).

Question 7

List the types of contracts with uncertainty of total performance.

Answer 7

• Requirements contracts

- Output contracts

Question 8

List the exceptions to a preexisting duty.

Answer 8

• Rescission and new contract
• Unforeseen hardship
• Sale of goods; modification of contract