CONSIDERATION- CHAPTER 9

Question 1

What is a gratuitous agreement?

Answer 1

-A “free” agreement
One the law refuses to enforce

Question 2

Consideration

Answer 2

-The exchange of benefits and detriments by parties to an agreement
-This binds parties together in a contractual relationship

Question 3

Benefit

Answer 3

-Something that a party was not previously entitled to receive

Question 4

Detriment

Answer 4

-Any loss suffered

Question 5

Three types of consideration

Answer 5

1. Giving up/ promising to give up something that you have the legal right to keep
2. Doing something/ promising to do something that you have the legal right not to do
3. Not doing something you have the legal right to do (forbearance)

Question 6

3 Key characteristics of consideration

Answer 6

1. Bargained-For-Exchange
2. Something of Value
3. Legality of Consideration

Question 7

Characteristics of consideration: Bargained-For-Exchange

Answer 7

-A promise in return for another promise
-A promise is made in return for an act
-A promise is made in return for a promise not to act

Question 8

Characteristics of consideration: Something of Value

Answer 8

-Law has no specific requirements on value
-A contract can be deemed unconscionable (unfair) if consideration is completely out of line

Question 9

Characteristics of consideration: Legality of Consideration

Answer 9

-The courts require that the consideration involved in an agreement be legal
-If the consideration is illegal the contract is invalid

Question 10

5 Types of Consideration

Answer 10

1. Money
2. Property
3. Services
4. Promise not to Sue
5. Charitable Pledges

Question 11

5 Types of Consideration: Money

Answer 11

-Parties are free to exchange any set amount of money they negotiate
-Unless price limits have been set by legislature/executive ruling

Question 12

5 Types of Consideration: Property/Services

Answer 12

-Some parties still prefer to engage is barter agreements that involve goods and services

Question 13

5 Types of Consideration: A Promise Not to Sue

Answer 13

-If one party has the right to sue another but gives up the right for something of value, this is valid
-When a person agrees not to sue they must sign a release form

Question 14

5 Types of Consideration: Charitable Pledges

Answer 14

-Charitable organizations/nonprofits depend upon contributions
-This has led te court to enforce charitable pledges as if they were contracts

Question 15

Accord

Answer 15

-The acceptance by the creditor of less than what has been billed to the debt

Question 16

Satisfaction

Answer 16

-The agreed-to settlement as contained in the accord

Question 17

Disputed Amounts

Answer 17

-A dispute can be settled by accord/ satisfaction if the creditor accepts a payment that is less than the amount due as full payment
-Dispute must be real, in good faith, and not trivial

Question 18

Undisputed amounts

Answer 18

-If the parties have mutually agreed to a set amount of money in the contract then the amount cannot be disputed

Question 19

Enforceable agreements without Consideration

Answer 19

-Exceptions are allowed by state statute when courts find it wrong to require consideration (in interest of fairness/justice)

-Promises under seal
-Promises after discharge in bankruptcy
-Debts barred by statutes of limitations
-Promises enforced by promissory estoppel

Question 20

Promise under seal

Answer 20

-A seal is a mark or impression placed on a written contract indicating that the instrument was executed and accepted in a formal manner
-Most states allow the addition of seal or Locus Sigilli

Question 21

Promises after Discharge

Answer 21

-A person who has had their debts discharged in bankruptcy can reaffirm the debt which means they’ve decided to pay it voluntarily

Question 22

Debts Barred by Statutes of Limitations

Answer 22

-A statute of limitations establishes the time frame within which a party is allowed to bring suit
-Different states set different time limits for collection of debt

Question 23

Promises Enforced by Promissory Estoppel

Answer 23

-Doctrine used to prevent injustice when a person changes their position significantly in reliance on another persons promise and the promise is not fulfilled

Question 24

Before the court will apply Promissory Estoppel, these 3 elements must be met:

Answer 24

1. The person who gave no consideration must promise to bring about action/ forbearance
2. The one who gave no consideration must have relied on the promise and changed their position significantly
3. Injustice can be avoided only by enforcing the agreement

Question 25

Option

Answer 25

-When an offeree gives consideration to an offeror in exchange for a promise to keep an offer open for a specified period of time

Question 26

Firm Offer

Answer 26

-When a merchant makes a written offer stating a period of time during which an offer will remain open, consideration is not needed

aka Irrevocable Offer

Question 27

Unenforceable agreements without consideration: Illusory Promise

Answer 27

-For a binding contract to be formed, both parties must be under an obligation
-Some contracts appear to be valid but on further scrutiny appear to be hollow

Question 28

Unenforceable agreements without consideration: Future Gifts

Answer 28

-If a person promises to bestow a gift a some future time, that promise is not enforceable if no consideration is given

Question 29

Unenforceable agreements without consideration: Past consideration

Answer 29

-The act of giving or exchanging benefits/detriments must occur when a contract is made
-Consideration that took place in the past or that is given for something that has already been done is not legal

Question 30

Unenforceable agreements without consideration: Preexisting duties

Answer 30

-If a person is already under a legal obligation to do something, a promise to do that same thing is not consideration

Question 31

Unenforceable agreements without consideration

Answer 31

1. Illusory promise
2. Future Gift
3. Past consideration
4. Preexisting duties
5. Social agreement