1. David P. Twomey - Boston College
Marianne M. Jennings - Arizona State University
© 2014 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.
David P. Twomey - Boston College
Marianne M. Jennings - Arizona State University
© 2011 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.

2. Chapter 15 Consideration
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

3. A. General Principles 1. Consideration Defined and Explained 2. Gifts
3. Adequacy of Consideration
4. Forbearance as Consideration
5. Illusory Promises
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

4. A. General Principles [LO.1]
Consideration Defined and Explained:
(A) Bargained-for-Exchange. Consideration is what each party gives up in the making an agreement. Something of value must be given or promised in return for the performance of promise of another.
(B) Benefit-Detriment Approach. Some jurisdictions define consideration as a benefit received by the promisor or a detriment incurred by the promisee.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

5. A. General Principles Gifts:
Promises to make a gift are unenforceable because they lack consideration.
Charitable subscriptions are binding to the extent the donor reasonably should have known the charity was relying on the promise.  Salsbury v. Northwestern Bell Telephone Co.: Promise for charitable contribution is binding even though there was no consideration for it.
Love and affection are not consideration for a contract.  Williams v. Ormsby: Not an enforceable contract because the only consideration was resumption of a romantic relationship.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

6. A. General Principles 3. Adequacy of Consideration:
Courts do not ordinarily consider the adequacy of consideration given as it is up to parties to decide if each is getting a fair return.  Emberson v. Hartley: The adequacy of the consideration is not relevant. It is sufficient that a promise was exchanged for a promise and the sister is bound by her promise to divide the shares.
The fact that the consideration is disappointing does not affect the binding character of the contract.  Atlas Construction Co., Inc. v. Aqua Drilling Co.: Atlas expected water but Aqua did not warranty that it would be so. As such there was no failure of consideration.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

7. A. General Principles Forbearance as Consideration: Illusory Promises:
Refraining from an act can be consideration.
Illusory Promises:
If one party’s promise is no obligation or an apparent obligation the contract fails for lack of mutuality.
(A) Cancellation Provisions. Does not make the promise illusory. Not a free way out – must live up to the terms of the cancellation provision.
(B) Conditional Promise. Depends on the occurrence of a specified condition to be valid.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

8. B. Special Situations 6. Preexisting Legal Obligation
7. Past Consideration
8. Moral Obligation
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

9. B. Special Situations [LO.2-LO.3]
Preexisting Legal Obligations:
Promising (or refraining) to do what has already been agreed to is not legal consideration.
(A) Completion of Contract. Promises for requirements included in the first contract are not binding.  Crookham & Vessels, Inc. v. Larry Moyer Trucking, Inc.: Moyer was bound by the original contract and no additional consideration was necessary because performance was more difficult than expected.
If the promise is to do something not part of the first contract, then the new promise is binding. .
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

10. B. Special Situations Preexisting Legal Obligations:
(1) Good Faith Adjustment. Enforceable with the original contract if extraordinary and unforeseeable difficulties. .  Angel v. Murray: When a promise modifies a contract due to unexpected circumstances and the modification is fair and equitable, the good faith adjustment will be enforced.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

11. B. Special Situations [LO.2-LO.3]
Preexisting Legal Obligations:
(2) Contract for Sale of Goods. Any modification made in good faith is binding without consideration.
Compromise and Release of Claims. A promise to pay part of an amount owed is not consideration for a promise to discharge the balance.
Part-Payment Checks. When a good faith dispute about the amount of the debt exists and a debtor tenders a check saying “paid in full” , cashing the check discharges the debt.
Composition of Creditors. Group of creditors agree to accept partial payment in full settlement of debt.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

12. B. Special Situations Past Consideration: Moral Obligation:
Past consideration is no consideration.
Moral Obligation:
Promises based on “moral obligation” lack consideration and are not enforceable.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

13. C. Exceptions to the Laws of Consideration
9. Exceptions to Consideration
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.

14. C. Exceptions to Laws of Consideration [LO.4-LO.5]
Exceptions to Consideration:
(A) Charitable Subscriptions. Reliance on a pledge in undertaking a project is a substitute for consideration.
(B) Uniform Commercial Code. Abolishes the requirement of consideration in some situations.
(C) Promissory Estoppel. If reliance and detriment, promisor is prevented from claiming promise is unenforceable.  Chrysler Corp. v. Chaplake Holdings, Ltd.: A promise was made by Chrysler and they should have reasonably expected it would be relied on. Injustice can only be avoided by the enforcement of the promise.
Twomey – Jennings, Anderson’s Business Law and the Legal Environment, 22nd Ed.
© 2014 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.