Consideration, SoF, & P.E.

Question 1

Requirements for Exchange

71

Answer 1

(1) must be bargained for
(2) performance/promise is bargained for if SOUGHT by Promisor IN EXCHANGE for his PROMISE and GIVEN by Promisee IN EXCHANGE for his PROMISE
(3) performance is an act other than promise, forbearance, or creation, modification or destruction
(4) promise/performance can be to Promisor or a third person by Promisee or a third person

Question 2

Sufficiency vs. Adequacy

Answer 2

courts look at the sufficiency of mutual exchange not the adequacy of consideration given in exchange

Batsakis v. Demotsis - imbalance does not invalidate
Schnell v. Nell - love and affection do not have legal value.

Question 3

Sham Consideration

Answer 3

gift dressed as a bargain

Schnell v. Nell - cannot give one dollar as consideration for something that has a specific known value

Question 4

For FORBEARANCE to be consideration

Answer 4

must be something one has a legal right to do

reasonable belief of having a legal right is sufficient even if belief is wrong. (Fiege v. Boehm)

promise must come first –induce forbearance

Question 5

ILLUSORY PROMISE as a defense

3
case

Answer 5

promise appears one-sided
to detriment of one party
benefitting party argues no exchange or acceptance

Wood v. Lady Duff-Gordon: implied promise fair consideration when one party receives great benefit would not have received but for efforts of other party

Question 6

POLICY around Illusory Promises rulings

Answer 6

Court wants to find enforceable contracts to prevent people from dealing in bad faith.
Those making bad deals treated negatively by court, especially when greater power.

Counter: makes court the author of the contract and may presume intent where never expected

Question 7

Past Consideration is not valid because

Answer 7

consideration should be induced by promise. Moral Obligation generally not consideration, UNLESS receives a material benefit that –preserves– , –cares for– , or –improves– the life or property of another.

Hayes v. Plantation Steel - stated intent to retire before offered pension.
Mills v. Wyman - promise to pay dead son’s medical expenses not enforceable because promise did not induce care
Webb v. McGowan - DF promise to pay for care for rest of life because PL saved his life was enforceable on DF’s estate on death.

Question 8

Policies on Pre-Existing Legal Duty

Answer 8

no additional obligation enforceable unless:

(1) Good Faith Modification based on need for additional work or additional unforeseen expenses beyond scope of original duty
(2) Anti-Extortion, cannot significantly complete a project then stop working to hold out for more money (Lingenfelder)
(3) Duty for Due Diligence because buyer’s responsibility to check things out before purchasing or contracting –caveat emptor

Question 9

Promissory Estoppel consists of

Answer 9

(1) promise
(2) causes reasonable expectation that promise will be completed
(3) induces reliance to detriment
(4) must enforce to prevent injustice

Question 10

Cases for PROMISSORY ESTOPPEL

Answer 10

Universal Computer - apparent authority to promise

Baird v. Gimbel - contractor offered price for materials. Offers that work like advertisements cannot create sufficient reliance because advertiser has no way to know who accepting or if would win bid

Branco v. Delta- direct acceptance by phone of offer and told relying on price to place bid set contract and reliance issue, enforceable against supplier

Hoffman v. Red Owl Stores - extreme example of injustice through greater bargaining power

Question 11

Six Statute of Fraud Defenses

Answer 11

Suretyship
One Year Rule
Sale of Goods over $500
Conveyance of Land
Executor's Promises
In Consideration of Marriage

Question 12

Using SURETYSHIP as a defense to contract formation

Answer 12

Surety claims no contract because not in signed writing and against surety’s interest

EXCEPTION:
Leading Object Exception - if Surety promise to guarantee Debtor under default AND is receiving a material benefit that is – pecuniary, immediate, and personal – then oral contract is created on Surety’s interest

Question 13

Using ONE YEAR RULE as a defense to contract formation

Answer 13

argue that agreement cannot be completed in one year because DATES of agreement make completion impossible in one year

ProBull v. AutoZone - multi-season contracts with exit clause do not fall under Rule

Question 14

Using SALE OF GOODS OVER $500 as defense to contract formation

Answer 14

must be in writing

EXCEPTIONS FOR RELIANCE INTERESTS

(1) Special Manufacture
(2) Partial Peformance
(3) 10 Day Rule - for “as needed” agreements, must communicate inability to complete order within 10 days or reliance created.

Question 15

Key items needed for PAROL EVIDENCE

4

Answer 15

(1) created prior to or contemporaneous with written
(2) defines or clarifies terms of written
(3) collateral agreement dependent on written
(4) not in contradiction with written
(5) includes supplemental oral or written evidence

Question 16

Issues with bringing in PAROL EVIDENCE

3

Answer 16

(1) look like ILLUSORY PROMISE
(2) TIMING
(3) Establishing INTENT of parties

Question 17

How to determine INTENT for Parol Evidence

3

Answer 17

Does it:

(1) clarify ambiguous terms
(2) provide additional agreed upon terms that are
(a) not traditionally reduced to writing
(b) collateral and could stand alone if not for dependence on written
(3) was written supposed to be COMPLETE AND FINAL statement of intent
(a) Merger Clause leads to “complete and final” argument

Question 18

Defending AGAINST argument of PAROLE EVIDENCE not intended to be part of final agreement

3

Answer 18

(1) wasn’t necessary because:
(a) past relationship
(b) terms not normally reduced to writing
(c) industry standards?
(2) Merger Clause is “boiler plate” language and not negotiated for
(3) extra information important to define ambiguous terms

Question 19

Courts look for key things for deciding whether to admit PAROL EVIDENCE

3

Answer 19

(1) compatible or contradictory to written
(2) whether parties had experience with like dealings and “should have known” to put in writing
(3) not like appearance of deal in bad faith