Ch 13: Consideration in Contracts

Estopped

Prevented

Promissory estoppel

Also called detrimental reliance. The doctrine whereby a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery.

Covenant not to sue

An agreement where the parties substitute a contractual obligation for some other type of legal action based on a valid claim.

Conditions by which something may be of legally sufficient value

1) A promise to do something that one has no prior legal duty to do 2) The performance of an action that one is otherwise not obligated to undertake 3) The refraining from an action that one has a legal right to undertake (forbearance)

Situations that lack consideration (3)

1) Preexisting duty 2) Past consideration 3) Illusory promises

Exceptions to the consideration requirement (3)

1) Promises that induce detrimental reliance, under the doctrine of promissory estoppel 2) Promises to pay debts that are barred by a statute of limitations 3) Promises to make charitable contributions

Two parts to consideration

1) Something of legally sufficient value must be given in exchange for the promise 2) There must be a bargained-for exchange

Requirements for a binding release (3)

1) The agreement is made in good faith (honesty) 2) The release contract is in a signed writing (required in many states) 3) The contract is accompanied by consideration

Requirements for a promissory estoppel claim (5)

1) There must be a clear and definite promise 2) The promisor should have expected that the promisee would rely on the promise 3) The promisee reasonably relied on the promise by acting or refraining from some act 4) The promisee's reliance was definite and resulted in substantial detriment 5) Enforcement of the promise is necessary to avoid injustice

Release

A contract in which one party forfeits the right to pursue a legal claim against the other party.

Requirements contract

A contract wherein a buyer and seller agree that the buyer will purchase from the seller all of the goods of a designated type that the buyer needs, or requires.

Output contract

A contract wherein the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the seller's output.

Liquidated debt

A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.

Illusory promise

A promise that fails to bind the promisor. It is without consideration and unenforceable. The terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything.

"Accord and satisfaction"

A way in which claims are settled where the debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed. For this to occur the amount of debt must be in dispute.

Noncompete agreement (covenant not to compete)

An agreement whereby an employee agrees not to compete with the employer for a certain period of time after the employment relationship ends. To be valid the contract must be signed before the employee begins work (otherwise past consideration).

Adequacy of consideration

Aspect concerning how much consideration is given. In other words, the fairness of the bargain.

Unliquidated debt

Debt where the amount is not settled, fixed, agreed on, ascertained, or determined, and reasonable persons may differ over the amount owed.

Past consideration

The principle by which you can bargain for something to take place now or in the future but not for something that has already taken place.

Forbearance

The refraining from an action that one has a legal right to undertake

"Causa"

The requirement under Roman law, by which a promise could not be enforceable without a reason for making that promise that was also deemed to be sufficient reason for enforcing it.

Rescission

The unmaking of a contract so as to return the parties to the positions they occupied before the contract was made.

Consideration

The value (such as cash) given in return for a promise (in a bilateral contract) or in return for a performance (in a unilateral contract).