Consideration

Question 1

Define Consideration

Consideration

Answer 1

Memorize
Consideration is a legally sufficient, bargained-for-exchange, which induces current performance, detriment to the promisee, and a binding obligation on both parties.

Short version: Consideration is a legally sufficient, bargained-for-exchange.

Question 2

What is Legal Sufficiency?

Consideration

Answer 2

Remember
Legal sufficiency is required to ensure that consideration is not given in the form of a token or sham amount in order to disguise a gift.

However, the possibility of value is sufficient even in never realized.

Question 3

What is a Bargained-for-Exchange?

Consideration

Answer 3

Remember

In a bargained-for-exchange, both parties give something to induce the exchange.

Question 4

Are Gratuitous Promises enforceable? Why?

Bargained-for-Exchange - Consideration

Answer 4

Memorize

Promises to make a future gift are gratuitous and are not enforceable as they lack the required consideration.

Question 5

Must consideration Induce Current Performance?

Consideration

Answer 5

Remember

Consideration must induce current performance.

Question 6

Is Past Consideration valid consideration?

Induces Current Performance - Consideration

Answer 6

Memorize
Past consideration is not valid consideration as it does not induce current performance.

Exception
If one party requests that the other party perform an act, and afterward promises something for doing the requested act, that promise if enforceable.

Question 7

Is Moral Consideration valid consideration?

Induces Current Performance - Consideration

Answer 7

Memorize
Moral consideration is not valid consideration as it does not induce current performance.

Exception
Debts barred by a technical defense such as statute of limitations, statute of frauds, incapacity, and bankruptcy will be enforceable if reaffirmance is in writing, but only for the amount reaffirmed.

Question 8

What is a Pre-Existing Duty? (Common Law Only)

Induces Current Performance - Consideration

Answer 8

Memorize
Under the common law, a promise to perform an existing legal duty is not sufficient consideration but rather a modification requiring additional consideration by both parties.

Remember
Applies to Common law contracts only.

Exception
When the pre-existing duty is owed to a third party then that consideration is sufficient.

Question 9

When does a Detriment to the Promisee occur?

Detriment to the Promisee Consideration

Answer 9

Memorize
A detriment occurs when one does something that they are not legally obligated to do (or) refrains from doing something one has a legal right to do.

Question 10

Is Forbearance to Sue a detriment?

Detriment to the Promisee Consideration

Answer 10

Memorize
Forbearance to sue is a detriment as long as the promisee has a good faith belief that there was a valid claim at the time of forbearance.

Question 11

Does there need to be a Binding Obligation on Both Parties?
Binding Obligation on Both Parties - Consideration

Answer 11

Memorize

Both parties need to be bound to the terms of the agreement.

Question 12

What is an Illusory Contract?

Binding Obligation on Both Parties - Consideration

Answer 12

Memorize

If only one party is bound to the contract, the contract is illusory and is not valid.

Question 13

Are Conditional Promises illusory?

Binding Obligation on Both Parties - Consideration

Answer 13

Memorize

Promises entirely within the control of the promisor are illusory.

Question 14

Are Satisfaction Conditions illusory?

Binding Obligation on Both Parties - Consideration

Answer 14

Memorize

Satisfaction conditions are not illusory because the promisor must act in good faith.

Question 15

Are Requirement and Output Contracts Illusory?

UCC 2-206 - Illusory Contracts - Binding Obligation on Both Parties Consideration

Answer 15

Memorize
Under the UCC, requirement and output contracts are not illusory because both parties must require or perform in good faith.

Question 16

What is Promissory Estoppel?

Consideration

Answer 16

Memorize
When a party detrimentally relies upon an offer, and that reliance is reasonable, foreseeable, and substantial, the other party may be estopped from not performing so as to prevent an unjust result.

Remember
1. Enforcement is limited to the amount that would prevent an unjust result, not the contract amount.

2. Chartable subscriptions and marriage settlements are enforceable without proof of forbearance.

Question 17

Are Cancellation Clauses illusory?

Binding Obligation on Both Parties - Consideration

Answer 17

Memorize
Cancellation clauses are illusory. However, if there is some restriction or limitation (however slight) on the cancellation clause, then it is NOT illusory.

Question 18

Must all consideration present be valid?

Consideration

Answer 18

Remember

There must be valid consideration, but not all consideration present must be valid.

Question 19

Within consideration, is the possibility of value sufficient even if never realized?

Answer 19

Yes, the possibility of value sufficient even if never realized.

Question 20

Within a bargained-for-exchange, are both parties required to give something to induce an exchange?

Answer 20

Yes, both parties are always required to give something to induce an exchange or he consideration is not valid.

Question 21

Within a bargained-for-exchange, what are the parties required to give to induce an exchange?

Answer 21

A promise or performance.

Question 22

Is there any circumstance where past consideration would be considered valid consideration?

Answer 22

Yes, if one party requests that the other party perform an act, and afterward promises something for doing the requested act, that promise if enforceable.

Question 23

Is there any circumstance where moral consideration would be considered valid consideration?

Answer 23

Yes, debts barred by a technical defense such as statute of limitations, statute of frauds, incapacity, and bankruptcy will be enforceable if reaffirmance is in writing, but only for the amount reaffirmed.

Question 24

Does Pre-Exising duty apply to Common law contracts only?

Answer 24

Yes, Pre-Existing Duty applies only to Common law contracts.

Question 25

Are there any exceptions to the Pre-Existing duty rule?

Answer 25

Yes, when the pre-existing duty is owed to a third party then that consideration is sufficient.

Question 26

Are there two ways to establish a detriment to the promisee? What are they?

Answer 26

When one does something that they are not legally obligated to do (or) refrains from doing something one has a legal right to do.

Question 27

Do both parties need to be bound by the terms of the offer?

Answer 27

Yes, both parties need to be bound by the terms of the offer.

Question 28

What happens when one party is not bound by the offer?

Answer 28

The offer is illusory.

Question 29

Are illusory contracts valid?

Answer 29

No, illusory contracts are not valid.

Question 30

Under Promissory Estoppel, is enforcement limited to the amount that would prevent an unjust result, not the contract amount?

Answer 30

Yes, under Promissory Estoppel enforcement is limited to the amount that would prevent an unjust result?

Question 31

Under Promissory Estoppel, are charitable subscriptions and marriage settlements enforceable without proof of forbearance?

Answer 31

Yes

Question 32

Can Promissory Estoppel be used to enforce gift promises?

Answer 32

Yes, if the reliance on the gift promise is SUBSTANTIAL.

Question 33

Does Promissory Estoppel create a valid contract?

Answer 33

No, only an enforceable agreement.