Contracts - CONSIDERATION

Question 1

CONSIDERATION

Answer 1

Consideration exists when there is a bargained-for exchange in which each party receives something that is either a benefit to it or a detriment to the other party.

A person can bargain for a PROMISE, PERFORMANCE, or even FORBEARANCE

Legal detriment = promisee does something he is under no legal obligation to do or refrains from doing something that he has a legal right to do

note the detriment or forbearance must be a benefit to the promisor, can’t just be a condition to get a gift - e.g., if you come over to my house ill give you my car - no consideration here, just a condition to receive a gift

Question 2

Rule for “Past Consideration”

Answer 2

Generally (MBE) “Past Consideration” is NO CONSIDERATION AT ALL

NY DISTINCTION*** “Past Consideration” IS consideration if the consideration is expressly stated in a writing signed by the Promisor, and the consideration can be proven to be given

Question 3

Adequacy of Consideration

Answer 3

Generally, adequacy of consideration is IRRELEVANT

e. g. sell a John Denver CD for $200, there is consideration
note: token consideration (ie something entirely devoid of value) will usually not be legally sufficient bc intent is to give a gift

Question 4

Illusory Promise

Answer 4

An illusory promise is when one side of the contract actually has not become bound by an obligation and the agreement therefore lacks mutuality

-e.g. We agree that I can buy as many widgets as I want for $100 each. Promise is not enforceable bc I may not buy any at all and have therefore undertaken no real obligation

Illusory promises are UNENFORCEABLE

Question 5

Contract Modification

Answer 5

Under COMMON LAW – NEW CONSIDERATION is required to modify a contract. Performing a Pre-existing duty is not enough (PRE-EXISTING DUTY RULE)

Under UCC - CONSIDERATION IS NOT REQUIRED to modify a contract, but you MUST SHOW GOOD FAITH

*in NY don’t need consideration to modify a contract if the modification is in a SIGNED WRITING (p.16)

Question 6

Pre-Existing Duty Rule

Answer 6

In order to modify a contract under the common law, you need new consideration. It is not enough to perform a pre-existing duty

Question 7

Is Partial Payment of a Debt valid consideration?

Answer 7

It depends, if the debt is DUE and UNDISPUTED, then there is no consideration
-e.g. you owe VISA $2,500 - it is due and undisputed. if you orally agree with VISA to pay $2,000 now, for visa to forgive debt, they can later come after you for the $500 bc there was NO CONSIDERATION for this promise

NY DISTINCTION*** - in NY don’t need consideration if the promise to forgive the debt is IN WRITING

Also, under MBE and NY, if debt is IN DISPUTE, or you agreed to $2,000 EARLY, there WOULD BE CONSIDERATION in both of these cases

Question 8

Time-Barred Debt

Answer 8

A written promise to pay a debt, collection of which is barred by the statute of limitations, is enforceable EVEN WITHOUT CONSIDERATION

e.g. VISA is time-barred by S/L from collecting $2500 but you agree in writing to pay them $1500, this is enforceable in NY and on MBE

Question 9

PROMISSORY ESTOPPEL as a substitute for Consideration

Answer 9

FORESEEABLE RELIANCE may make a promise enforceable EVEN WITHOUT CONSIDERATION

A promise is enforceable if necessary to prevent injustice if:
(I) promisor should reasonably expect to induce action or forbearance
(ii) of a definite and substantial character
(iii) and such action or forbearance is in fact induced

e.g. tenant’s lease expires next mo. and L promises to renew. In reliance, T paints the apartment. L refuses to renew. There was no consideration for promise to renew by L, but T foreseeably relied by painting and can therefore enforce L’s promise to renew