When is consideration “not” required Lesson 9-3 When is consideration “not” required

What will you learn? What is “Promissory Estoppel” Identify when Promissory Estoppel applies Discuss situations in which consideration is not required to complete a valid agreement Why is the Statute of Limitations important when dealing with a contract dispute What must happen when a contract is modified

Exceptions to consideration rule In “Most” agreements, consideration must be present in order for their to be a valid agreement Contracts: Agreed that both parties will promise something (Give), then act on that promise (Trade) and what they trade will have legal value Promises of a gift are usually “Not” an enforceable agreement unless Promissory Estoppel is present

What is promissory Estoppel? Promissory Estoppel is when a gift is expected and the person the gift was offered to expected the gift, therefore took on a detriment they would not have unless the gift was offered Promissory estoppel can be a gift, promise of some act or something where a charitable organization expects a donation (Gift)

Elements of promissory Estoppel? The promisor understands that the promise will rely on the promise The promise does act in reliance of the promise that was made The promise would suffer a “Substantial” economic loss if the promise was not enforced Courts are asked to intervene to enforce the promise to avoid injustice

Example of promissory Estoppel? Jimmy, the owner of a local barbershop, also lives in the back of the business he owns and operates. A large international company, FrontierMart, comes to Jimmy one day and says “Sell us your property for $750,000, which is more than $400,000 more than its valued at and move out in 30 days and we have a deal”. If at the last minute, FrontierMart changes their mind and drops the price to $300,00, Jimmy can ask the courts to enforce the contract based on Promissory Estoppel

How does Jimmys example apply? Jimmy “relied” on the promise of $750,000 from FrontierMart to make his decision to sell and move “If” Jimmy acts and moves out by the end of the month as promised, he did what he promised If FrontierMart is allowed to drop the price at the last minute to $300,000, Jimmy would suffer a “Substantial” economic loss of $450,000 Jimmy asks the courts help to force FrontierMart to live up to their promise of $750,000

How does this effect charities? A Pledge, is the promise of a gift to a charitable organization Pledges are open ended gifts, UNLESS the charitable organization states a specific use for the pledge and acts in reliance of the expectation the pledge will be made Ex) If a school starts building a new sports stadium thinking a pledge of $2,000,000 will be coming from a wealthy businessman, they can claim the pledge should be fulfilled if the person attempts to back out

What is the statute of limitations? The Statute of Limitations specifies a time limit for filing a lawsuit or claiming a legal action against someone else Once the statute of limitation has passed, a person loses the right to sue someone else Time limits for statute of limitations go from 3 years to over 20 years (6 in New York State for contract issues) If a promise is not fulfilled, some states will enforce a promise passed the time of the Statute of Limitations as long as its in writing

Common Law promises? Promises made under common law agreements to leave an offer open are usually not enforceable Ex) If you want to buy something off craigslist, you must offer an “Option” to keep an offer open Option is usually Money or something of value to buy time to make a decision The Offeree must offer consideration (An Option) to make the promise enforceable

UCC Law promises? UCC (Uniform Commercial Code)- Business Law Applies to merchants or business people Offers to keep an offer open must be in writing Written UCC Law agreements (Firm Offers) are good for at least 3 months Ex) Rainchecks

What if a person wants to modify a contract? When a contract is modified, someone wants to change it If a modification is attempted, additional consideration must be offered Ex) If you offer to buy a house for $200,000 and after buying it learn that the seller wants to take a swing set from the back yard to take with them, you would need to offer additional consideration ($$) to the person so the swing set can stay in the yard as part of the sale

Finally? How can a promise to a charity be enforceable? What legal idea means a person’s promise, even if it’s a gift, can be considered an enforceable agreement? What are the 4 elements needed to prove Promissory Estoppel? Why does the statute of limitations exist? How are common law promises enforced? UCC? What must be given to make modifications to a contract?