1. Chapter 9
Consideration
Chapter 9: Consideration

2. Chapter 9 Case Hypothetical Seattle Shoestring Sales, Inc
Chapter 9 Case Hypothetical Seattle Shoestring Sales, Inc. arranged to sell shoestrings to Victory, Inc., a tennis shoe manufacturer. According to the terms of the deal, Seattle Shoestring Sales committed to sell Victory whatever number of shoestrings it will produce next year, at seventy-five cents per pair. Since entering into their agreement, the price of cotton has skyrocketed five hundred percent. To produce shoestrings, Seattle Shoestring Sales’ cost alone will be approximately $1.50 per pair. Seattle Shoestring Sales has informed Victory that it cannot and will not honor the deal. Is there an enforceable contract between Seattle Shoestring Sales, Inc. and Victory, Inc.? Is the failure to include a quantity term in the agreement fatal to its enforceability? What about the fact that the price of cotton dramatically increased after the companies reached their agreement? Should a court or other arbiter increase the per-pair contract price to account for the increase in the price of cotton, and then enforce the agreement?
Chapter 9 Case Hypothetical: Seattle Shoestring Sales, Inc. arranged to sell shoestrings to Victory, Inc., a tennis shoe manufacturer. According to the terms of the deal, Seattle Shoestring Sales committed to sell Victory whatever number of shoestrings it will produce next year, at seventy-five cents per pair.
Since entering into their agreement, the price of cotton has skyrocketed five hundred percent. To produce shoestrings, Seattle Shoestring Sales’ cost alone will be approximately $1.50 per pair. Seattle Shoestring Sales has informed Victory that it cannot and will not honor the deal.
Is there an enforceable contract between Seattle Shoestring Sales, Inc. and Victory, Inc.? Is the failure to include a quantity term in the agreement fatal to its enforceability? What about the fact that the price of cotton dramatically increased after the companies reached their agreement? Should a court or other arbiter increase the per-pair contract price to account for the increase in the price of cotton, and then enforce the agreement?

3. Chapter 9 Case Hypothetical and Ethical Dilemma John Harrington, Jr
Chapter 9 Case Hypothetical and Ethical Dilemma John Harrington, Jr. (“Junior”) is a 24-year-old, 3-pack-per-day smoker. John Harrington, Sr. (“Senior”) is a very concerned parent. On January 1, father announces to son, “Junior, if you will stop smoking for the entire year, I will pay you $5,000.” Senior believes that if Junior will stop smoking for one year, he will “kick the habit.” Junior reluctantly accepts his father’s terms, and extinguishes his half-smoked cigarette with the heel of his boot. On January 1 of the following year, Junior approaches Senior and says “Dad, time to pay up.” Senior has no reason to doubt that Junior has refrained from smoking for an entire year, but states “Son, this was for your benefit. The gift I have given you is the gift of life, and you are now likely to enjoy that gift longer, because you are now much less likely to contract cancer. Health statistics show that non-smokers live ten years longer than smokers. Enjoy your newfound life, but I will not pay you the $5,000.” Does Senior owe Junior the $5,000? Is there an enforceable contract between father and son? If there is not an enforceable contract, does Junior have any other legal or equitable theory of recovery? Is Senior ethically obligated to pay Junior the $5,000?
Chapter 9 Case Hypothetical and Ethical Dilemma: John Harrington, Jr. (“Junior”) is a 24-year-old, 3-pack-per-day smoker. John Harrington, Sr. (“Senior”) is a very concerned parent. On January 1, father announces to son, “Junior, if you will stop smoking for the entire year, I will pay you $5,000.” Senior believes that if Junior will stop smoking for one year, he will “kick the habit.” Junior reluctantly accepts his father’s terms, and extinguishes his half-smoked cigarette with the heel of his boot.
On January 1 of the following year, Junior approaches Senior and says “Dad, time to pay up.” Senior has no reason to doubt that Junior has refrained from smoking for an entire year, but states “Son, this was for your benefit. The gift I have given you is the gift of life, and you are now likely to enjoy that gift longer, because you are now much less likely to contract cancer. Health statistics show that non-smokers live ten years longer than smokers. Enjoy your newfound life, but I will not pay you the $5,000.”
Does Senior owe Junior the $5,000? Is there an enforceable contract between father and son? If there is not an enforceable contract, does Junior have any other legal or equitable theory of recovery? Is Senior ethically obligated to pay Junior the $5,000?

4. Consideration
Definition: Something of value, given in exchange for something else of value, that is the product of a mutually bargained-for exchange
Consideration is defined as something of value, given in exchange for something else of value, that is the product of a mutually bargained-for exchange. To support the enforceability of a contract, mutual consideration is required, meaning that both parties must give consideration.

5. Examples of Consideration
Benefit to promisor
Detriment to promisee
Promise to do something
Promise to refrain from doing something
Examples of consideration include a benefit to the promisor, a detriment to the promisee, a promise to do something, or a promise to refrain from doing something.

6. Rules of Consideration
For a promise to be enforced legally, there must be consideration
-Exception—Promissory Estoppel:
One party makes promise knowing other party will rely on it
Other party relies on promise (“actual reliance”)
Justice dictates enforcement of promise, even though it is not supported by consideration
Court rarely considers adequacy of consideration
There are several important rules concerning the contractual requirement of consideration. First, as a general rule, there must be consideration given for a promise in order to legally enforce the promise. An exception is promissory estoppel, which occurs when one party makes a promise knowing the other party will rely on it, and the other party in fact relies on the promise to his or her detriment. In a promissory estoppel situation, justice dictates enforcement of the promise, even though the promise is not supported by consideration. Second, courts rarely consider the adequacy of consideration; in other words, so long as the parties have given mutual consideration, a court will not weigh the relative value of the consideration given to determine whether they are equal in value.

7. Rules of Consideration (Continued)
Illusory promise does not constitute consideration
Past consideration does not constitute consideration for purposes of present contract
Promise to do something you are already legally obligated to do is not valid consideration (“Pre-existing duty rule”)
An illusory promise does not constitute consideration, and past consideration does not constitute consideration for the purposes of a present contract. Finally, according to the “pre-existing duty” rule, a promise to do something you are already legally obligated to do is not valid consideration.

8. Uniform Commercial Code: Requirement and Output Contracts
“Requirement” Contract
-Buyer agrees to purchase all goods needed/required from designated seller
“Output” Contract
-Seller agrees to provide all it produces to designated buyer
No quantity specification necessary in either requirement or output contract
As a general rule, in order to enforce a contract, the contract must specify quantity. Two exceptions to this rule are recognized under the Uniform Commercial Code: “requirements” contracts, and “output” contracts. In a “requirements” contract, the buyer agrees to purchase all the goods the buyer needs or requires from a designated seller. In an “output” contract, the seller agrees to provide all it produces to a designated buyer. In both requirements and output contracts, no quantity specification is necessary.

9. Partial Payment of Debt
Liquidated Debt: No dispute as to amount of money owed
Unliquidated Debt: Parties either (in good faith) dispute fact money owed, or dispute amount of money owed
Several terms apply to a partial payment of debt situation. A “liquidated” debt exists when there is no dispute as to the amount of money owed. In an “unliquidated” debt scenario, the parties either (in good faith) dispute the fact that money is owed, or dispute the amount of money owed.

10. Partial Payment of Debt (Continued)
“Accord and Satisfaction” Requirements (“Accord” represents agreement, “satisfaction” represents payment; accord and satisfaction means partial payment of disputed debt discharges remaining balance allegedly owed):
-Unliquidated debt
-Creditor agrees to accept, as full payment, less than creditor claims owed
-Debtor pays agreed-upon amount
An “accord and satisfaction” occurs when the debtor and creditor agree that the debtor will pay a portion of a disputed debt, an amount less than the creditor claims is owed. The “accord” represents the agreement, and the “satisfaction” represents part payment. An accord and satisfaction discharges the remaining balance allegedly owed.