Consideration [IN PROGRESS] Flashcards
Consideration is
a contract requirement in which there must be a bargained for exchange
A promise is supported by consideration if:
- It induces a legal detriment to the promisee, and the promisee’s detriment induces the promise.
- The reciprocal nature of detriment for promise gives rise to a bargained for exchange
A conditional gift ______ supported by consideration
is not
Kirksey v. Kirksey
Promises to make gifts are generally not enforceable because they lack consideration, even if they have conditions attached to
them.
there was no consideration where someone was permitted to live on land if they moved. Although they suffered a detriment by leaving their home to move, the promise was not induced by the detriment. Therefore, it was merely a condition to a gift, not consideration
Hamer v. Sidway
If the promise to make a gift is induced by the detriment, then there will be a
contract.
forbearing from smoking and drinking is valid consideration
DAHL V. HEM
PHARMACEUTICALS
If one party makes a promise in exchange for another party’s act or performance, and the other party completes that act or performance, there is a binding contract between the parties.
Consideration does not exist where it is only
nominal or is merely a sham.
Newman v. Hunter (worthless stock)
2. Restatement of Contracts §71
Consideration for detriment previously suffered does not arise to consideration because
the promise did not induce that
detriment. BUT, a court may still enforce past consideration.
What past consideration may still be enforceable without consideration
Agreements to pay discharged debt or moral obligations
For there to be consideration, the promisee must suffer
a legal detriment, a requirement to act or refrain from acting, that is induced by the promise.
If a party does or promises something that they are legally already obligated to do
they have not incurred a legal detriment that will amount to consideration
(ex: minor agreeing not to drink alcohol is not a valid contract because they already have a pre-existing duty to refrain from drinking alcohol.)
When might the court find that there was no bargained for exchange?
Where there is an extreme disparity in value
Restatement of Contracts §89
Modification will be allowed if is fair and
equitable; or By statute; or To the extent that justice requires in view of a material change in position in reliance on the promise.
Does it matter if the consideration is inadequate in light of the agreement?
No, it only matters that the parties have incurred a bargained for exchange. (Consideration will be satisfied if so)
A party may allow a reformation of the contract where the circumstances have changed
to create an inequitable outcome. (Brian Construction v. Brighenti)
Alaska Packers v. Domenico
no consideration where the sailors required a higher wage to continue an expedition
When, if ever, can settling a lawsuit serve as consideration?
Settling a lawsuit can serve as consideration, so long as the party believes, in good faith, they have a legal claim
The detriment is refraining from exercising a legal right to claim a judicial remedy.
Dyer v. National By-Products
does not matter if the the claim has merit, but only if the claim is believed to have merit in good faith
Restatement of Contracts §74
Claim settlement is encouraged
[As with Dyer, most courts have read a “good faith”
requirement into (b); i.e., honest and reasonable]
Past consideration can be enforced if
necessary to prevent injustice
Webb v. McGowin
Past consideration permitted because
someone saved someone’s life, a material benefit, of which is a
service that could be implied they would have contracted for.
The subsequent agreement to pay money was a ratification of
the contract)