1. “Lesson 9-1”- Consideration
Chapter 9
“Lesson 9-1”- Consideration

2. What will you learn in this lesson..
How consideration is defined
The 3 elements needed to prove consideration exists
Why consideration is an important thing in “every” contract agreement

3. What do you think?
You are finishing your senior year of college when a “wealthy” aunt calls you in March and says “Dora, I am so impressed with the great work you have done in high school that I want to reward you and a friend of your choice with 2 tickets to take a cruise ship around the world so you can explore some”. Dora, excited about her world exploration starts to decide who she can take with her and decides on Boots. She and Boots talk about all the places they plan on seeing when at graduation, Dora’s aunt comes to her and says “I’m sorry honey, the stock market is down and I can’t afford the trip right now. I have this card for you instead”
Can Dora force her Aunt to give her the trip she has planned on getting?
Can Dora’s Aunt back out legally?

4. What does it mean to take on a legal detriment?
A legal Detriment means you decide to do something based on what someone else promises you
Ex) I decide to move out of my home based on a promise from some other person they will buy it. I took on expenses and made choices to change I would NOT have done if the promise was not made

5. What is consideration?
Consideration means both parties in a contract “Gain” something as a result of the agreement
It is meant to distinguish between “Social Promises” and serious transactions
Social Promises are things like gifts

6. What do you think the difference is between?
A promise and a legally enforceable agreement?
Can a promise be legally enforceable?
If so, how?
If not, why?

7. What are the 3 elements needed to prove consideration?
Each party must give an act, forbearance or a promise to the other party
Each party must trade what they agreed to contribute to the transaction (If I say I will pay you $30 to mow my lawn, you have a right to expect payment)
What each party trades, must have legal value (Worth something in the eyes of the law)

8. What does it mean to give an act, forbearance or a promise?
If a person promises an act, they are saying “I will paint your home in exchange for payment”
Forbearance means promising NOT to do something I have a legal right to do (Banks extend loans using this)
A promise means you promise to do something in exchange for another promise

9. How does a forbearance work?
You graduate from college with $40,000 worth of student loans and your monthly payment is $450
You cannot get a job right out of college to afford your payment and you contact your bank to ask what you may do
They offer a forbearance
You would sign a contract stating “I choose NOT to pay you for (6 months or 1 year) even though I know I must in the future”. Contract protects the bank

10. What does it mean to Trade what they agree to trade?
Contracts are created based on an exchange of promises, a promise for an act or an act for a promise
Once “one party” does what they agree to, they have a right to expect that the other party does what they agreed to
The trade means the promise or act took place

11. What does it mean that the consideration has legal value?
Legal value means what was traded has some kind of value
Ex) If I sell someone swamp land in Florida claiming its ready for business development, it does not have value because it can’t be built on
Legal value from the parties perspective means both sides gain something fair, not necessarily equal
HUGE POINT: Courts don’t evaluate value, they interpret fairness. Did both parties get what they expected to get

12. How is legal value defined?
Legal value is defined as an exchange in the parties position as a result of the contract
What does this mean? It means you now have “property Rights”
Ex) You go into Tops and buy a bag of chips. Once you pay for the chips, you have a right to say they are your property

13. What does “Adequacy of consideration” mean?
Adequacy of Consideration means both parties receive something “Fair” not necessarily equal
“Courts do not determine adequacy, they consider fairness”
Reason is the parties involved in the agreement determine the value, courts just make sure they get what they expected
Ex) If a party expects to get a car that runs and it does not, the trade of consideration is not “Fair”

14. How is value determined?
Supply and demand
What’s valuable to one party may not be to another
Ex) I may be willing to pay someone $300 for a 1930’s camera because I am a collector where some other person may not think its worth even $3, since their cell phone takes better photos..

15. Tell me this?
What is something you give GREAT value to that you think someone else may not?
How is it possible for you to overvalue something where someone else may undervalue something?
Why is value of an item a personal thing?

16. Can economic value ever be challenged?
Only if there is no Genuine agreement present
If there is a big difference in the value of what one party receives in the trade, this could be evidence of a mutual mistake, duress, undue influence or fraud
Ex) If I purchase a 1971 Collector Car thinking its original and offer $25,000 for it only later to find its NOT original, I can tell a court the trade was NOT fair, as it was not worth what I expected (Misrep or fraud present)

17. What does nominal consideration mean?
Nominal consideration means a “Token or Small” amount of consideration
Usually something like $1.00
It serves as proof of a contract
Some people would rather contract with a person rather than give them a gift, so it requires some kind of consideration

18. What questions do you have?
How is a forbearance different than missing a loan payment?
Why is consideration fair and not usually equal?
Why don’t courts judge adequacy of consideration in most cases?
Can one side do better in an agreement and it still be fair?