lesson 9 Flashcards
consideration
the inducement, price, or promise that causes a person to enter into a contract
contracts are a two way street. if one person gets everything, and the other gets nothing:
there is no consideration
two basic elements of consideration
- value: must be a legal benefit to each side
- bargained for exchange: each party must have done something to benefit the other and that exchange must have been bargained/negotiated
exchange must induce ______, which must induce the _______.
detriment, promise
Joe tells Mike he will buy him pizza. Mike accepts, and is later rude to Joe. Joe changes his mind and Mike claims a contract. Ruling?
There is no contract because Mike gave no consideration
value
an act, a forbearance, or a promise to act/forbear
an act
when a party does something he was not legally required to do. must be voluntary.
forbearance
opposite of an act, decision to not do something
example of an act that does not count
student tells professor he will not cheat on a test if she gives him 100 dollars. he already has the duty not to cheat.
promises to act/promises of forbearance
constitute value when analyzing consideration
adequacy of consideration
the courts will NOT analyze this. people are allowed to make bad deals.
if purported consideration is outrageously high/unreasonable (elon musk example):
courts do not consider the adequacy of minimal consideration, and will not decline to enforce situations of outrageous or unreasonable consideration (musk must pay)
common situations that do not constitute consideration
illusory promises, preexisting duty, past consideration
illusory promises
appear to be a promise, but really isn’t, and does not constitute consideration
illusory promise example
Jason tells heather he will sell her his old textbook for $10. Heather says she will check if its the right book, then buy it. Next day, Heather gives him $10, but Jason says he already sold it. Heather sues him for cost, but she did not actually promise because it was CONDITIONAL
major exception to illusory promise
output contracts and requirement contracts
output contracts and requirement contracts
these contracts do not specifically set an amount of goods to be sold or purchased and it gives the purchaser and seller certain benefits (valid consideration under UCC)
example of output/requirement contracts
restaurant makes a deal to purchase “all the wine they need” from vineyard. Vineyard promises to supply it. Under UCC this is not an illusory promise, the promise is valid bc of a requirements contract. There is a way to determine how much they would need.
preexisting duty
when duty to act already exists, person cannot use their compliance with that duty to constitute consideration in another matter
preexisting duty example
alaska packers association v domenico (1902): workers agreed to perform a job for a certain period for a certain amount ($50 and 2 cents/fish). Workers wanted more money, packers agreed. Workers ended up being paid the old amount. Packers said we did make the promise, but did not have that intention. Courts did not enforce the additional money b/c they had no consideration due to preexisting duty.
exceptions to preexisting duty
additional work, modification, unforeseen circumstances,
additional work
additional work that is performed above and beyond the original contract does constitute consideration on the part of the workers to seek additional compensation
modification
under common law additional consideration is necessary for modification of a contract. sometimes, UCC creates an exception for modification
unforeseen circumstances example
James hires Kevin to plow a field. Kevin starts plowing and determines that the field is a former war zone and there are land mines buried. The fees to deactivate them are expensive and make the original contract a losing proposition. If Kevin agrees to finish the contract anyway, the costs of hiring the other company are valid consideration, even though Kevin has a preexisting duty to finish the job.
