Round 2 Lecture 1 Flashcards
consideration
whatever is given in exchange for something else (a promise to do something or refrain from doing something)
bilateral contract
promise given in exchange for another promise (ex: your lease with your landlord)
unilateral contract
promise given in exchange for an action or refraining from acting
requirements to have a valid consideration
- the consideration must be bargained for by the parties (intent)
- the consideration must have legal sufficiency (legal value)
the legal consideration must have legal sufficiency
Legally Sufficient Value may be established by: [4316.08]
(1) promising to do something that the promisor has no prior legal duty to do (e.g., promising to pay money for the promisor’s goods);
(2) performing an action that the promisor is not otherwise obligated to undertake; or
(3) refraining from exercising a legal right which the promisor is otherwise entitled to exercise.
legal detriment to promisee
detriment means any act which occasioned the offer the slightest trouble or inconvenience and which the offer was not otherwise obliged to perform or refrain from performing
legal benefit to promisor
benefits means anything of slight or trifling value to the offeror
adequacy of the consideration or fairness of the bargain are…
irrelevant as to existence or sufficiency of consideration
illusory promises
- imposes no contractual obligation on promisor and therefore there would be no binding contracts
- no real promise
- no detriment to promisor or duty imposed
- examples: “option to cancel” or “best efforts” provisions
contracts with “option to cancel” provisions
the requirement that notice be given to exercise the cancellation privilege is legal consideration and the contract is not illusory
contracts with “best efforts” provisions
the obligation of a party to use “best efforts” in performing an obligation is legal consideration and whether best efforts were exerted will be tested against a reasonable standard and the contract is not illusory
a pre-existing contractual obligation ….
is not consideration supporting enforcement of anew promise
common law modification of an existing contract
consideration required to support the modification agreement
UCC 2-209 modification of an existing contract
no consideration required to support the modification agreement (but modification must be requested in good faith and not by coercion)
restatement (second) of contracts 89
modification of an executory contract is binding without consideration if it is fair and equitable in light of facts that could not be reasonably anticipated by the parties (sometimes referred to as the unforeseen difficulties rule)
creditor
a person who is owed money by a person who is referred to as a debtor
as to a liquidated and undisputed debt
a partial payment, even if offered as payment in full, will not discharge the entire debt; but If additional or different consideration is given (paying early, paying in dif. form) debt is discharged (economic equivalency of dif. consideration)
as to unliquidated and disputed debt
(a legitimate dispute as to what is owed by the debtor)
-acceptance by the creditor of a lesser sum discharges the debt if certain elements are present
elements that need to be present to discharge the debt (as to unliquidated and disputed debt)
- the dispute as to what is owed is genuine end not frivolous
- the debtor in good faith offers a partial payment as payment in full
- the partial payment accepted by the creditor
payment by check exceptions under UCC
- large orgs can advise a debtor that any offer to settle for less than the debt must be made to a particular official (because they receive thousands of checks each day)
- if within 90 days of cashing a full payment check the creditor offers repayment of the same amount to the debtor there is no accord and satisfaction (applies to all creditors)
promissory estoppel
enforceable agreement w/o consideration
-technically an equitable remedy, no contract was actually formed, and this remedy is baed on promisee’s detrimental reliance on the promise made by the promisor
equitable remedy
to avoid an unjust situation -where the aggrieved party cannot sue for breach of contract because no contract exists-but where the aggrieved party has suffered losses similar to those he or she would have suffered if a contract existed and the other party failed to perform
elements of promissory estoppel
1) a promise made (but doesn’t have to be as certain and definite)
2) reasonable reliance by promisee
3) substantial economic detriment to the promisee results- the promisee’s reliance results in financial losses to the promisee
4) an injustice would occur without relief (i.e. so remedy to the promisee)- a subjective element
ruling of Hoffman v. red owl stores inc
all negotiations are verbal - no contract
sue but they sued on the grounds of promissory estoppel and won :
-a contractor is bound by its bid to a general contractor if the subcontractor’s bid induced the general contractor to submit a bid and accept an offer for a construction project.
-if the subcontractor fails to honor that promise, injustice to the general contractor can only be avoided by enforcement of the subcontractor’s bid.
equitable remedy
court order to force party to perform their part of the contract-can’t sue for breach, but can get what you were promised
