Consideration and Promissory Estoppel

Question 1

Gratuitous promise

Answer 1

Occurs when a promisee has neither promised nor given anything in return to promisor, leaving consideration requirement unsatisfied.

Generally unenforceable under doctrine of consideration.

Question 2

Insufficient consideration

Answer 2

Promisor defendant against an attempt to enforce a gratuitous promise can argue insufficient consideration in several ways:

(1) promise is not supported by consideration;
(2) there is a want of consideration or consideration is lacking; OR
(3) legally insufficient consideration.

Not to be confused with a FAILURE of consideration which is a claim that the party has not performed in accordance with his promise.

Question 3

Preexisting duty rule

Answer 3

Promisor cannot provide consideration where that consideration is a duty the promisor is already obligated to perform. Preexisting duties are not consideration.

Question 4

Bargained-for consideration

Answer 4

MAJORITY - Evaluate consideration based on the bargained-for exchange inquiry.

MINORITY/HYBRID – Legal detriment test: Question is whether the promisee is doing something he had a legal right not to do or is forgoing some activity in which he had a legal right to engage.

Question 5

Inadequate consideration

Answer 5

Modern rule – courts do not police the equivalence of bargained-for exchanges. Supposed inadequacy of consideration is no defense to a breach of contract claim. Not the same as insufficient consideration (which really means there was no consideration).

Question 6

Illusory promise

Answer 6

A promise to perform that leaves performance to the discretion of the promising party. Does not constitute consideration.

Question 7

Executed gifts

Answer 7

Gratuitous transfers are legally binding upon satisfaction of the requirements of a gift. In most states, delivery of the would-be gift + present intention to bestow the gift constitutes a legally binding gratuitous transfer.

Question 8

Recitals of consideration (p. 72 bar notes)

Answer 8

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Question 9

Forbearance of claim/defense

Answer 9

Valid consideration exists when a party agrees to forbear a claim/defense in exchange for promise/performance by the other party.

Even if the claim or defense proves to be invalid.

Forbearance to assert/surrender of a claim or defense which proves to be invalid is NOT consideration unless:

(1) the claim/defense is in fact doubtful because of uncertainty as to facts or law; OR
(2) the forbearing party believes that the claim/defense may be fairly determined to be valid.

Question 10

Past/moral consideration

Answer 10

Generally, a promise given in exchange for something already given/performed will not satisfy the bargain requirement.

EXCEPTIONS:

(1) written promise to pay debt barred by statute of limitations is binding; and
(2) written promise to pay all/part of an indebtedness that has been discharged in bankruptcy is binding.

Question 11

Promissory estoppel

Answer 11

Allows for enforcement of certain promises even where there is no consideration in return.

4 requirements must be met for promissory estoppel to be available:

(1) a promise
(2) foreseeable reliance
(3) actual reliance
(4) injustice without enforcement.

Actual reliance must be induced by the promise. Action/reliance can’t be taken on account of other factors.