Consideration

Question 1

When does consideration exist?

Answer 1

When something of value is exchanged in a bargain

Question 2

What types of consideration create an unenforceable contract?

Answer 2

• Past consideration
• gifts
• illusory promises i.e. “I’ll paint your house as long as it doesn’t rain”
• a promise is not illusory if the alternative promises, on their own, would be consideration

Question 3

Preexisting duty rule

Answer 3

an act or forbearance is not consideration if it is already a legal obligation or not a legal entitlement i.e. not drinking until age 21, or paying your parking tickets

Question 4

Under the Preexisting duty rule when would a contract modification be enforceable?

Answer 4

1. If it results from unforeseen circumstances that didn’t exist when the contract was formed
2. If the parties’ duties are altered sufficiently to constitute consideration i.e. if Jack agrees to paint Jill’s house for $500, then also agrees to paint Jill’s house for an additional $500
3. A modification for a sale of goods requires no consideration to be binding