1. Chapter 11 Consideration and Promissory Estoppel

2. Consideration
Consideration: something of legal value given in exchange for a promise
Necessary for the existence of a contract
Elements:
Something of legal value must be given
There must be a bargained-for exchange
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3. Consideration Legal value
A contract is considered supported by legal value if:
The promisee suffers a legal detriment
The promisor receives a legal benefit
Most commonly involves tangible payment or performance of an act
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4. Consideration Bargained-for exchange
Process of bargaining or inducement that leads to an enforceable contract
Naturally present in most commercial transactions
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5. Case 11.1: Consideration Case In The Matter of Wirth Issue
14 A.D.3d 572, 789 N.Y.S.2d 69, Web 2005 N.Y. App. Div. Lexis 424 (2005)
Supreme Court of New York, Appellate Division
Issue
Is the pledge agreement supported by consideration and therefore enforceable against the estate of Wirth?
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6. Gift Promise Gratuitous promises
Unenforceable due to lack of consideration
Promise freely given and not induced by promise of some benefit
Completed gift promises are not revocable
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7. Case 11.2: Gifts and Gift Promises
Cooper v. Smith
800 N.E.2d 372, Web 2003 Ohio App. Lexis (2003)
Court of Appeals of Ohio
Issue
Can Cooper recover the gifts or the value of the gifts he gave to Julie and Janet Smith?
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8. Promises that Lack Consideration
Illegal consideration
Illusory promise
Preexisting duty
Past consideration
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9. Promises that Lack Consideration
Illegal consideration
A promise to refrain from doing an illegal act
Illusory promise
A contract that both parties enter, but one or both of the parties can choose not to perform their contractual obligations
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10. Promises that Lack Consideration
Preexisting duty
A promise to do something the party is already under an obligation to do
arises when one party to an existing contract seeks to change the terms of the contract during the course of its performance
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11. Promises that Lack Consideration
Past consideration
A prior act or performance that does not support a new contract
Problems of past consideration often arise when a party to a contract promises to pay additional compensation for work done in the past
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12. Special Business Contracts
Output contract: a contract in which the seller agrees to sell all of its production to a single buyer
Purposes
Assuring the seller of a purchaser for all its output
Assuring the buyer of a source of supply for the goods it needs
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13. Special Business Contracts
Requirements contract: a contract in which a buyer agrees to purchase all of its requirements for an item from one seller
Purposes
Assuring the buyer of a uniform source of supply
Providing the seller with reduced selling costs
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14. Special Business Contracts
Best-efforts contract: A contract which contains a clause that requires one or both of the parties to use their best efforts to achieve the objective of the contract
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15. Settlement of Claims
Law promotes voluntary settlement of disputed claims
Saves judicial resources
Serves the interests of the parties entering into the settlement
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16. Settlement of Claims
Accord: an agreement whereby the parties agree to accept something different in satisfaction of the original contract
Satisfaction: the performance of an accord
If the accord is not satisfied, the other party can sue to enforce either the accord or the original contract
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17. Equity: Promissory Estoppel
Promissory estoppel: An equitable doctrine that prevents the withdrawal of a promise by a promisor if it will adversely affect a promisee who has adjusted his or her position in justifiable reliance on the promise
Also known as detrimental reliance
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18. Equity: Promissory Estoppel
Elements to be proven
The promisor made a promise
The promisor should have reasonably expected that promisee would rely on the promise
The promisee actually relied on the promise and engaged in an action or forbearance of a right of a definite and substantial nature
Injustice would result if the promise were not enforced
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