Chapter 8 Consideration 11/14/2018 Chapter 8 Consideration 8-1 Types of Consideration 8-2 Questionable Consideration 8-3 When Consideration Is Not Required Chapter 8 LAW

8-1 Types of Consideration GOALS Identify the three requirements of consideration Discuss the adequacy of consideration Chapter 8

CONSIDERATION Promise, act, or forbearance Contractual exchange Legal value Adequacy of consideration Nominal consideration Chapter 8

List the three requirements of consideration. Chapter 8

8-2 Questionable Consideration GOALS Describe situations in which consideration is present only under limited circumstances Recognize when what appears to be binding consideration is not Chapter 8

CIRCUMSTANTIAL CONSIDERATION Illusory promises Termination clauses Output and requirements contracts Continued on the next slide Chapter 8

CIRCUMSTANTIAL CONSIDERATION Existing duty Existing public duty Existing private duty Settlement of liquidated debts Settlement of unliquidated debts Release Composition of creditors Chapter 8

Why is consideration not binding in illusory contracts? Chapter 8

FALSE CONSIDERATION Mutual gifts Past performance Chapter 8

What distinguishes a gift from a valid contract? Chapter 8

8-3 When Consideration Is Not Required GOALS Distinguish situations in which consideration is not needed Recognize when the doctrine of promissory estoppel can be applied Chapter 8

EXCEPTIONS TO THE REQUIREMENT OF CONSIDERATION Promises to charitable organizations Promises covered by the UCC Firm offers Modifications Promises barred from collection by statute Statute of limitations Debts discharged in bankruptcy Promissory estoppel Chapter 8

Name four exceptions to the requirement of consideration. Chapter 8

PREVENT LEGAL DIFFICULTIES Remember that under contract law . . . Generally both parties must give and receive consideration if their agreement is to be enforceable as a contract. Adequacy of consideration generally is immaterial to whether or not a contractual promise is enforceable. Accepting money in exchange for giving up a legal right constitutes consideration and is binding. Consult a lawyer before making such an agreement in any major dispute. Continued on the next slide Chapter 8

PREVENT LEGAL DIFFICULTIES A pledge to a charitable institution is generally binding without consideration and should not be made unless you intend to fulfill it. Generally, however, promises to make gifts cannot be enforced by the intended donee. You should use care and good judgment in making contracts. Courts generally will not rescue you from “bad bargains” or unfavorable deals voluntarily made. Chapter 8