consideration€¦ · escape the legal obligation. ―if i have time, i’ll take out the trash‖...
TRANSCRIPT
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Chapter 8
Consideration
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Section 1
Types of
Consideration
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Types of Consideration
• A promise
• Forbearance
• A change in a legal relation of the
parties
• Money
• Other property
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Consideration
What a person
demands and
generally must receive
in order to make
her/his promise legally
binding.
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John, a writer, gets a call from his editor has
to leave immediately on a research trip to
Newfoundland in Canada. As the trip should
take a couple of weeks, he leaves a note
offering to pay his neighbor, Jordan, $100 to
watch his house and feed and walk his dog
during John’s absence. John then leaves
without ever speaking to Jordan. Jordan gets
the note and complies.
Is there an enforceable contract?
What is the consideration for each party?
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3 Requirements of Consideration
1. Each party must give an act,
forbearance, or promise to the
other party.
2. Each party must trade what they
contribute to the other party.
3. What they trade MUST be of legal
value (in the law’s eye) .
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Gift(not consideration)
Transfer of
ownership
WITHOUT
receiving
anything in
return**A promise to make a gift is
usually NOT legally enforceable
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To not do something
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Legal Value
• Definition: Changing a party’s legal
position as a result of a contract.*Buying a ring for $500. Both people have
changed their legal position as a result of
this contract.
*Detriment (injury/harm/loss) arises when
you promise forbearance. Your uncle says
he will give you 1 million if you don’t get
your drivers license until you are 21. When
you agree, you give up (lose) a legal right.
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Because you needed money urgently, you
offered to sell a friend your $600 stereo for
$200. Your friend accepted the offer and
you delivered the stereo. A short time later
you demanded that the stereo be returned
because the consideration was too small.
Since your friend legally accepted your offer
and gave the consideration you requested,
you are bound by the agreement even
though the stereo is worth $600.
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Nominal Consideration
• Definition: $1 or other small sum of
money used to bind a contract.
This is done, because the actual
parties does NOT want to publicize
the real consideration amount.
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Section 2
Questionable
Consideration
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Ms. Miller, a high school government
teacher, says to her students. ―All of
you have worked hard, and if you
continue to perform at this high level,
I’ll pay for a pizza party for the class at
the end of the year—if I think it is
warranted.‖ The students continued to
work hard, and class grades are high,
but no pizza party is given.
Can the students enforce the promise?
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Illusory Promises
Making a promise that allows you to
escape the legal obligation.
―If I have time, I’ll take out the trash‖
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Output Contract
Purchasing all
of a particular
product.
Requirements Contract
Supplying as much as
you can make.
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Existing Duty
A person sometimes promises to do
something that he/she already is
obligated to do by law or prior contract
• Existing Public Duty
• Existing Private Duty
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• Creditor:
A person to
whom money is
owed
• Debtor:
A person who
owes money
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Liquidation Debt
You paid off most the debt,
but both parties agree that
you still owe the remaining
amount.*No consideration
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Unliquidated Debt - disagreement
about how much is owed.
Accord and Satisfaction –
compromising on the
unliquidated debt. *Creditor says
$1000, Debitor says $500. You
both agree on $750 and Debitor
pays the amount.
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Composition of Creditors
• Companies accept some of what
you owe as full payment, so you
won’t file bankruptcy.
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Frank, a pedestrian, saw a car pulled over by the side of the road with a flat tire. He came to the driver’s aid, replacing the flat with a spare tire. Then he accompanied the driver, Betty. To the nearest gas station where her flat tire was repaired. She thanked him and said she would give him $100 for his kindness. Later she changed her mind, and Frank sued.
Can Frank win the $100?
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False Consideration
• Mutual Gifts – *see story
• Past consideration – NOT
consideration. The offeror is
not bound by a promise to pay
money for an act performed
prior to the promise
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Section 3
When Consideration is
NOT REQUIRED
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In memory of their father who passed away
from cancer, the Cole children promised to
pay for the local hospital’s purchase of new
cancer-fighting equipment. As a
consequence, the board of directors of the
facility entered into a contract for more than
$450,000 worth of advanced devices. When
presented with the bill, the Cole children,
refused to pay saying they weren’t
contractually obligated.
Can they be held to their pledge?
YES
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Court generally enforce promises provided the charity states a specific use for the money and actually acts in reliance on the pledge.
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4 Exceptions to the
requirement of consideration
• Promises to charitable
organizations
• Promises covered by the UCC
• Promises barred from collection by
statute
• Promissory Estoppel
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Promises covered by the
Uniform Commercial Code
UCC
• Firm Offers • Modifications
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Promises Barred from collection
by Statute
Statute of Limitations –
Specifies a time limit for
bringing a lawsuit.
Torts expire in
3 yrs.
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Promise is
enforced even
though no
consideration is
given
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Promissory Estoppel
Conditions• The promisor should reasonably
foresee that the promisee will rely on the promise.
• The promisee does, in fact, act in reliance on the promise.
• The promisee would suffer a substantial economic loss if the promise is not enforced
• Injustice can be avoided only by enforcement of the promise.