Chapter 11 Consideration

Learning Objectives What is consideration? What is required for consideration to be legally sufficient? What are some examples of contracts that lack consideration? What is an accord and satisfaction? In what circumstances might a promise be enforced despite a lack of consideration? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Elements of Consideration Generally, consideration must have: “Legally Sufficient Value”  and a “Bargained-for-Exchange.”  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Elements of Consideration Legal Value can mean: Promise, Performance, or Forbearance.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Elements of Consideration Bargained-For-Exchange: Must provide basis for the bargain. Something of legal value (a promise, or a performance) must be exchanged between the parties. The promise must be either: Legally detrimental to the promisee, or Legally beneficial to the promisor. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Legal Sufficiency and Adequacy of Consideration Courts Typically Will Not Consider Adequacy of Consideration. Law does not protect a person from entering into an unwise contract. Cases of “shockingly inadequate consideration” may raise a red flags, and be rules unconscionable . © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Contracts That Lack Consideration Preexisting Duty: promise to do what one already has a legal duty to do does not constitute legally sufficient consideration. Exceptions: Unforeseen Difficulties. Rescission and New Contract. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Contracts That Lack Consideration Past Consideration is no consideration because the bargained-for exchange element is missing. CASE 11.1 Access Organics, Inc. Hernandez (2003). What would have made this non-compete enforceable? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Contracts That Lack Consideration Illusory Promises. Promisor has not definitely promised to do anything (no promise at all). Option-to-Cancel Clauses. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Settlement of Claims Accord and Satisfaction: debtor offers to pay a lesser amount than the creditor purports to be owed. Liquidated Debt: amount has been ascertained, fixed, agreed on, settled, or exactly determined. Unliquidated Debt: Parties give up legal right to contest the amount in dispute, and thus consideration is given. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Settlement of Claims Release bars any further recovery beyond the terms stated in the release. Covenant not to Sue is an agreement to substitute contractual obligation for some other type of legal action based on a valid claim. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Promissory Estoppel Promissory Estoppel (detrimental reliance). Exception to the consideration requirement. A person who has reasonably and substantially relied on the promise of another can obtain some measure of recovery, to avoid injustice.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Promissory Estoppel Required elements: Must be clear and definite promise. Promisee must justifiably rely on the promise. Reliance is reasonable and substantial. Justice will be served by enforcing promise. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Promissory Estoppel Application of the Doctrine of Promissory Estoppel. Courts began to apply estoppel to hardship or inequitable cases. CASE 11.2 1861 Group, LLC v. Wild Oats Markets, Inc. (2010). What could the landlord have done to make the contract enforceable? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.