Consideration Flashcards
Define Consideration
Consideration
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.
What is Legal Sufficiency?
Consideration
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.
What is a Bargained-for-Exchange?
Consideration
Remember
In a bargained-for-exchange, both parties give something to induce the exchange.
Are Gratuitous Promises enforceable? Why?
Bargained-for-Exchange - Consideration
Memorize
Promises to make a future gift are gratuitous and are not enforceable as they lack the required consideration.
Must consideration Induce Current Performance?
Consideration
Remember
Consideration must induce current performance.
Is Past Consideration valid consideration?
Induces Current Performance - Consideration
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.
Is Moral Consideration valid consideration?
Induces Current Performance - Consideration
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.
What is a Pre-Existing Duty? (Common Law Only)
Induces Current Performance - Consideration
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.
When does a Detriment to the Promisee occur?
Detriment to the Promisee Consideration
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.
Is Forbearance to Sue a detriment?
Detriment to the Promisee Consideration
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.
Does there need to be a Binding Obligation on Both Parties?
Binding Obligation on Both Parties - Consideration
Memorize
Both parties need to be bound to the terms of the agreement.
What is an Illusory Contract?
Binding Obligation on Both Parties - Consideration
Memorize
If only one party is bound to the contract, the contract is illusory and is not valid.
Are Conditional Promises illusory?
Binding Obligation on Both Parties - Consideration
Memorize
Promises entirely within the control of the promisor are illusory.
Are Satisfaction Conditions illusory?
Binding Obligation on Both Parties - Consideration
Memorize
Satisfaction conditions are not illusory because the promisor must act in good faith.
Are Requirement and Output Contracts Illusory?
UCC 2-206 - Illusory Contracts - Binding Obligation on Both Parties Consideration
Memorize
Under the UCC, requirement and output contracts are not illusory because both parties must require or perform in good faith.
What is Promissory Estoppel?
Consideration
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.
- Chartable subscriptions and marriage settlements are enforceable without proof of forbearance.
Are Cancellation Clauses illusory?
Binding Obligation on Both Parties - Consideration
Memorize
Cancellation clauses are illusory. However, if there is some restriction or limitation (however slight) on the cancellation clause, then it is NOT illusory.
Must all consideration present be valid?
Consideration
Remember
There must be valid consideration, but not all consideration present must be valid.
Within consideration, is the possibility of value sufficient even if never realized?
Yes, the possibility of value sufficient even if never realized.
Within a bargained-for-exchange, are both parties required to give something to induce an exchange?
Yes, both parties are always required to give something to induce an exchange or he consideration is not valid.
Within a bargained-for-exchange, what are the parties required to give to induce an exchange?
A promise or performance.
Is there any circumstance where past consideration would be considered valid consideration?
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.
Is there any circumstance where moral consideration would be considered valid consideration?
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.
Does Pre-Exising duty apply to Common law contracts only?
Yes, Pre-Existing Duty applies only to Common law contracts.
Are there any exceptions to the Pre-Existing duty rule?
Yes, when the pre-existing duty is owed to a third party then that consideration is sufficient.
Are there two ways to establish a detriment to the promisee? What are they?
When one does something that they are not legally obligated to do (or) refrains from doing something one has a legal right to do.
Do both parties need to be bound by the terms of the offer?
Yes, both parties need to be bound by the terms of the offer.
What happens when one party is not bound by the offer?
The offer is illusory.
Are illusory contracts valid?
No, illusory contracts are not valid.
Under Promissory Estoppel, is enforcement limited to the amount that would prevent an unjust result, not the contract amount?
Yes, under Promissory Estoppel enforcement is limited to the amount that would prevent an unjust result?
Under Promissory Estoppel, are charitable subscriptions and marriage settlements enforceable without proof of forbearance?
Yes
Can Promissory Estoppel be used to enforce gift promises?
Yes, if the reliance on the gift promise is SUBSTANTIAL.
Does Promissory Estoppel create a valid contract?
No, only an enforceable agreement.
