Contracts: Consideration Flashcards
Reggie, a painting subcontractor, submitted a bid to Ralph, the general contractor, for work on a condominium building. Ralph used Reggie’s bid to prepare his own bid on a project. Does Ralph’s reliance on Reggie’s bid redner Reggie’s offer irrevocable?
Yes. Reggie’s bid was an offer on a bilateral contract. Common law would allow the offer to be withdrawn prior to acceptance. However, in this situation the majority of courts hold that a general contractor’s justifiable injurious reliance on the bid renders the offer irrevocable. T he Restatement has also adopted this view. Bid shopping and bid chiseling by the general contractor will terminate the subcontractor’s irrevocable offer. And if the subcontractor’s bid is so grossly low that it is apparent it is a mistake, the general contractor cannot justifiably rely on it. Restatement (Second) of Contracts 87 (1981).
Hilda hires Ferdinand to do her yard work for one year at $60 perweek starting April 1. On March 1, the parties agree to modify the agreement so that Ferdinand is paid $70 per week. Is Hilda’s promise to pay the additional $10 per week enforceable?
No. The majority of cases hold that Ferdinand is just performing an existing duty and therefore has not incurred detriment for the promise to pay the additional $10. Such an attempted modification requires consideration. Note, however, that even the slightest change in duties is sufficient to statisfy the requirement of consideration. See Restatement (Second) of Contracts 73 (1981) (Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration, but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.”)
Must the detriment to the promisee be the sole inducement for a promise?
No. The detriment to be suffered by the promisee need not be the exclusive or even predominant inducement for a promise. However, it must be enough of an inducement to havei n fact been bargained for, which is a question of fact. Willison on Contracts 7:17 (4th ed. 2007) The Restatment states: “Even in the typical commercial bargain, the promisor may have more than one motive, and the person furnishing the consideration need not inquire into the promisor’s motives. Unless both parties know that the purported consideration is a mere pretense, it is immaterial that the promisor’s desire for consideration is incidental to other objectives and even that hte other party knows that htis is so.” 81 cmt. b(1981)
Is an aleatory promise illusory?
No. An aleatory promise is conditional on the happening of a fortuitous event, or one the parties suppose is fortuitous. If the condition is an event outside the total control of the promisor, the promise is aleatory and constitutes consideration. A common example is an insurer’s promise to pay in the event of a casualty, which suplies consideration for the insured’s premium payment, even if no casualty occurs.
Can consideration fail becaues of economic inadequacy?
No. Courts are not concerned with the adequacy of the consideration, although inadequacy of the detriment is a factor to be considered in determining whether a promise was really exchanged for a small detriment. In other words, the relative values of the consideration will not normally affect the validity of a contract. Note: Economic inadequacy may constituted circumstantial evidence of fraud, duress, undue influence, mistake, or that the detriment was not really bargined for.
Is there a difference between a constructive promise and an implied promise?
Yes. A construcive promise, also known as an implied-in-law promise, arises by construction of law when justice requires. An implied-in-fact promise arises when the parties’ conduct indicates that a promise has been made. The two types of promises are not treated differently.
George lends $100 to Jerry, who says, “I’ll pay you back when I feel like it.” Is Jerry’s promise enforceable?
No. Jerry’s promise is illusory. An “illusory promise” is “an expression cloaked in promissory terms, but which on closer examination, reveals that the promisor is not committed to any act or forbearance.”
Marty’s beloved, purebred, prize-winning Golden Retriever, Lucy, slips out of her collar at the 1-80 rest-stop near Peoria and takes off across a field. After hunting for her for six hours, Marty is forced to continue on without her to his Iowa home. Cindy, who lives about five miles from the rest stop, finds Lucy three days later and takers her in. While she made numerous efforts to find Lucy’s owner and Marty diligently tried to find his lost dog, it was not until four months later that they connected, and Lucy returned home. When he retrieved Lucy from Cindy, an overjoyed and immensely grateful Marty promised to reimburse her for all her expenses for caring for Lucy over the four months. When Cindy sent him a list of those costs and indicated that a check for that amount would be fine, Marty refused to pay. Can Cindy successfully sue to enforce Marty’s promise?
Yes. A promise to pay for a benefit already received is enforceable to the extent necessary to prevent injustice. Cindy did not care for Lucy as a gift. marty’s promise to pay the costs of Lucy’s care was not disproportionate to the benefit he received. Moreover, Marty would be unjustly enriched if he did not pay as promised. In essence, “a moral obligation is sufficient consideration to support a susequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor.” Webb v. McGowan
Can part payment satisfy a debt?
No. “Part payment by a debtor of an amount here and now undisputedly due is not consideration to support a promise by the creditor to discharge the entire amount due.” This principe is an application of the pre-existing duty rule. The “part payment” rule is both widely applied and widely unpopular. Courts therefore carefully scrutinize the transaction looking for osme kind of detriment that will avoid the rule’s application. Thus, consideration has been found where, for example, part payment preceded the due date, where part payment was made at a place other than that stated in the contract, or where the part payment is made by a third party.
Angie has agreed to contract for ale to purchase her first home, contingent on her obtaining at 30-year fixed rate mortgage loan for $200,000 at no more than 4.85% interest. Is Angie’s conditional promise to buy the property illusory?
No. Angie’s promise to buy would be illusory if she was obligated to try to obtain the loan. Case authority holds that buyer’s in Angie’s situation impliedly promise to put forth reasonable efforts to bring about the condition, i.e., obtain the specified loan. Such a conditional promise is not illusory.
Brandon says to Jessica: “I promise to fix your Saab if you promise to pay the liquidated debt you owe me and promise to refinish my ding room table.” Jessica agrees. Is there consideration?
Yes. Although the promise to pay the debt does not provide consideration, Jessica’s conjuctive promise to refinish the dining room table does. If one of several conjunctive promises is detrimental, it will support a counter-promise. Jessica is incurring detriment by promising to refinish the table and therefore supplying consideration for Brandon’s counter-promise. Note: In order to enforce Brandon’s promise, Jessica must both pay the debt and refinish the table. While not consideration, payment of the debt is a condition that must be performed if Jessica is to recover on Brandon’s promise.
