Chapter 13 Consideration

Requirements to Establish Promissory Estoppel

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.

What are the two parts of consideration?

1. something of legally sufficient value must be given in exchange for a promise 2. there must be a bargained-for exchange

Promissory Estoppel

A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies; such a promise is binding if justice will be better served by the enforcement of the promise.

Application of the Doctrine

Initially applied to situations involving the promise of gifts or donations to a charity on which the charity detrimentally relies. Courts began to apply estoppel to hardship or inequitable cases.

Exceptions to the Consideration Requirement

There are some exceptions to the rule that only promises supported by consideration are enforceable. the following types of promises may be enforced despite the lack of consideration: 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

Accord and Satisfaction

a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed the accord is the agreement and the satisfaction is the performance (usually payment) a basic rule is that there can be no satisfaction unless there is first an accord. in addition, for accord and satisfaction to occur, the amount of the debt must be in dispute

A claim may be settled through

an accord and satisfaction, a release, or a covenant not to sue

What element of consideration distinguishes contracts from mere gifts?

bargained-for exchange

Bargained-For Exchange

distinguishes contracts from mere gifts; exchange that parties engage in that leads to an enforceable contract

Liquidated Debts

if a debt is liquidated, accord and satisfaction cannot take place one whose amount has been ascertained, fixed, agreed on, settled, or exactly determined

Unforeseen Difficulties (under preexisting duty)

if during the performance of a contract, extraordinary difficulties arise that were totally unforeseen at the time the contract was formed, a court may allow an exception to the rule

Option-to-Cancel Clauses

if promisor has option to cancel contract BEFORE performance has begun, promise is illusory

Release

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

Example of Legally Sufficient Value

lucy says to her neighbor, "when you finish painting the garage, I will pay you $800." lucy's neighbor paints the garage. the act of painting the garage is the CONSIDERATION that creates lucy's contractual obligation to pay her neighbor $800

What are the three examples listed in the text of agreements that lack consideration?

pre-existing duty, past consideration, illusory promise

Pre-existing Duty

promise to do what one already has a legal duty to do does not constitute legally sufficient consideration example: a sheriff has a duty to investigate crime and to arrest criminals. hence, a sheriff cannot collect a reward for providing information leading to the capture of a criminal

Illusory Promises

promisor has not definitely promised to do anything (no promise at all) -- when a contract expresses uncertainty of performance

Past Consideration

something given or some act done in the past, which cannot ordinarily be a consideration for a later bargain past consideration = no consideration

Covenant Not to Sue

substitute contractual obligation for some other type of legal action based on a valid claim

Unliquidated Debts

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

Adequacy of Consideration

the fairness of the bargain. general rule: a court will not normally question the adequacy of consideration based solely on the comparative value of the things exchanged *exception is when voluntary consent is lacking (under duress, intoxication, etc..)

Rescission

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

Legally Sufficient Value

to be legally sufficient, consideration must be something of value in the eyes of the law: 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