Chapter 15: Consideration

bilateral contract

A contract that is a promise for a promise.

Unilateral contract

A contract that is a promise for an act.

True

A court will enforce one party's promise only if the other party promised some consideration in exchange.

Unliquidated debt

A debt for which the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.

Preexisting duty

A promise to do something that one is already obligated to do. It is not considered valid consideration.

True

A promise to do something that you are already obligated to do is not valid consideration.

illusory promise

A situation in which a party appears to commit to something but really has not committed to anything. It is not a promise and thus not consideration.

Accord and satisfaction

An arrangement between contracting parties whereby one of the parties substitutes a different performance for his or her original duty under the contract. The promise to perform the new duty is the ACCORD, and the actual performance of that new duty is the SATISFACTION.

True

An illusory promise is not consideration.

Liquidated debt

Debt for which there is no dispute between the parties about the fact that money is owed and the amount of money owed.

1. Unforeseen circumstances 2. Additional work 3. UCC Article 2, sale of goods

Exceptions to the Preexisting Duty Rule

True

For a promise to be enforced by the courts, there must be consideration.

True

If a party to a contract agrees to do additional work, more than the contract requires, the promise to do it is valid consideration.

True

If unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is valid consideration.

True

Partial payment of a debt may or may not be valid consideration, depending on whether the debt is liquidated or unliquidated.

True

Past consideration is no consideration at all.

True

Promissory estoppel and contracts under seal are two exceptions to the common law rule requiring consideration.

True

Promissory estoppel is not awarded regularly, but in the right case it can provide a remedy where no other remedy exists.

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

Promissory estoppel occurs when three conditions are met:

1. For a promise to be enforced by the courts, there must be consideration. 2. Exception: Promissory estoppel occurs when one party makes a promise knowing the other party will rely on it, the other party does rely on it, and the only way to avoid injustice is to enforce the promise even though it is not supported by consideration. 3. The court seldom considers adequacy of consideration. 4. An illusory promise is not consideration. 5. Past consideration is no consideration at all. 6. A promise to do something you are already obligated to do is not valid consideration. (This is the preexisting duty rule.)

Rules of Consideration

Consideration

The bargained-for exchange; what each party gets in exchange for his or her promise under a contract.

True

The court seldom considers adequacy of consideration.

True

The exception to the rule regarding the liquidated debt occurs when the debtor offers different performance.

promissory estoppel

The legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract. Example: Amanda's reliance on the job offer.

1. The debt is unliquidated, the amount or existence of the debt is in dispute. 2. The creditor agrees to accept as full payment than it claims is owed. 3. The debtor pays the amount they have agreed on.

Three requirements of accord and satisfaction to be enforceable:

1. Business organizations can receive thousands of checks each day. To protect themselves, they may notify their debtors that any offer to settle a claim for less than the amount owed must be sent to a particular address and/or person. 2. If a business does inadvertently cash a "paid-in-full" check, it has 90 days to offer the debtor repayment in the same amount.

Two exceptions of UCC Section 3-311

1. Performance of a duty you are obligated to do under the law is not good consideration. 2. Performance of an existing contractual duty is not good consideration.

Two parts to the preexisting duty rule.

True

Under the Restatement (Second) of Contracts ( a persuasive, though not binding, authority), promises based on past consideration may be enforceable "to the extent necessary to avoid injustice." In some cases, if past consideration was given with expectation of future payment, the court may enforce the promise.