Business Law Chapter 15

Types of Consideration (4)

1. A benefit to the promisee Ex. A promise to stay in a job until the project is complete 2. A detriment to the promisor Ex. Promising your coach you won't ride your motorcycle until season is over 3. A promise to do something Ex. Promise to cook dinner for roommate for next 6 months 4. Promise to refrain from doing something Ex. Promise to stop going out during exam week

Accord and Satisfaction (3 parts)

1. Debt is unliquidated 2. Creditor agrees to accept as full payment less than it claims is owed 3. Debtor pays the amount they agreed on

Promissory Estoppel Occurs When (3)

1. One party makes a promise and either knows or should know that the other party will reasonably act on it 2. The other party does reasonably rely on the promise 3. The only way to avoid injustice is to enforce the promise

Exceptions to the Rule For Consideration (2)

1. Promissory Estoppel 2. Contract Under Seal

Exceptions for Preexisting Duty (2)

1. Unforeseen circumstances: cause a party to make a promise regarding an unfinished project, that promise is valid consideration 2. Additional Work: if a party to a contract to do more work, the promise to do it is valid consideration

Preexisting Duty (2 parts)

A promise to do something that you're already obligated to do isn't valid consideration 1. Performance of a duty you are obligated to do under the law 2. Performance of an existing contractual duty

Lack of Consideration

Bilateral: Court will enforce a party's promise only if the other party promised some consideration in exchange Unilateral: one party's consideration is the promise and the other party's consideration is the act

Adequacy of Consideration

Court doesn't care if you made a good bargain If the court believes fraud or undue influence occurred, the court may look at adequacy of consideration

Contract under Seal

Largely an obsolete legal issue Only 10 states allow a contract without consideration to be enforced it it's under seal

Partial Payment of a Debt

May or may not be valid consideration, depending on if the debt is liquidated or unliquidated

Past Consideration

Not valid consideration There must be a bargained for exchange Promise can't be based on consideration already provided in the past, before the promise was made

Exception to Past Consideration

Promises based on past consideration may be enforceable to the extent to prevent injustice In some cases, if the past consideration was given with expectation of future payment, the court may enforce the promise

Exception to Liquidated Debt

When the debtor offers different performance

Conditional Payment

any payment that is less than the full balance but is marked "paid in full"

Exception to Accord and Satisfaction

concerning credit card companies paid in full clauses

Satisfaction

debtor's payment of the reduced amount

Reliance Damages

money spent in reliance on a promise

Illusory Promise

not a promise at all (not consideration) Not enforceable - only the illusion of a contract

Promissory Estoppel

one exception to the rule requiring consideration.

Unliquidated Debt

parties either disagree about whether money is owed, or dispute the amount Can settle for less than the full amount if they enter into an accord and satisfaction

Accord

the new agreement to pay less than the creditor claims is owed

Liquidated Debt

there is no dispute that money is owed or how much

Consideration

what a person will receive in return for performing a contract obligation Required in every contract Can be anything as long as it's the product of a bargained-for-exchange Often but not always money

Lack of mutuality

where only one side is bound to perform