Contract

Requirement Contracts

- A promise to purchase all the buyers requirements for a particular goods for or from a particular seller

If we have a contract, the writing is sufficient when it:

1. Reasonably identifies the subject matter of the contract 2. Sets forth the material terms [who & what] 3. It must be signed by the party to be charged

Covenant Not to Compete

A covenant not-to-compete must be reasonable. Typically, one of 3 approaches may be used to resolve an unreasonable covenant: • Refuse to enforce the covenant; • Blue pencil rule (delete certain terms to render the contract enforceable) • Rewrite it, based on a reasonable contract between the parties

Doctrine of Promissory Estoppel under the Restatement (Second) of Contracts [Section 90]:

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Output Contracts

For you that's an output contract. You're giving me all of your output and I am in fact taking that. That's a contract. You're giving me all your output and I am in fact taking that. That's a contract that is called an output contract on your side.

Public Policy (Promissory Estoppel supports charity subscription.)

It is more logical to bind charitable subscriptions without requiring & showing of consideration of detrimental reliance. Charitable subscription often serve the public interest by making possible projects which otherwise could never come about.

Quasi contract

Not a contract at all, constructed by courts to make restitution - has the defendant pay restitution.

Charity Subscription (promissory estoppel)

Restatement (Second) Sub-Section 90 provides A charitable subscription is binding without proof that the promise induced action or forbearance.

AUCTIONS

The auctioneer invites offers from bidders. WITH RESERVE → may withdraw goods at any time until the completion of the sale is announced. WITHOUT RESERVE → auctioneer calls bids on an article, that article cannot be withdrawn unless no bid is made within a reasonable time. Example: when the auctioneer puts down the hammer, the bidder's offer is accepted unless the auction is without reserve.

NOMINAL CONSIDERATION

The court does not look into the adequacy of consideration only the sufficiency. Nominal consideration is not sufficient consideration.

Expressed contract

done by words

Goods (6 types of contracts must be in writing: M Y L E G S)

$500 or more must be in writing! -- [less than $500 would be outside the Statute of Frauds] [EXCEPTION: 1) specially manufactured goods; 2) goods received or accepted 3) where defendant admits under oath that contract was made 4) where there is a conformity memorandum. *Recipient has 10 days to object in writing, if they do not - the Statute of Frauds DOES NOT apply!

Measuring And Compensating Loss Resulting From A Breach 2nd Restatement states the "purposes" of contract remedies:

(a) His "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed (b) His "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or (c) His "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party

PAST CONSIDERATION

- If something happened in the past it cannot be consideration for a present promise. This is the traditional view. And the reason this is so is because the bargain aspect talked about earlier is missing. If it's past consideration it's not bargained for because it already happened.

Marriage (6 types of contracts must be in writing: M Y L E G S)

- a promise in consideration of marriage [ex: pre-nuptial]. Mutual promises do not require writing.

7 Basic Remedial Policies:

1) Material breach vs. Non-material breach 2) Compensation, not jail 3) Recovery of loss from breach 4) Recovery for party's loss vs. punish breacher 5) Translating losses from breach into $ 6) Parties can discuss recovery and remedies 7) Recover interest plus cost associated with litigation, but no attorney fees regarding delays.

Under the UCC, a signature is any mark that is intended to authenticate the writing. Memo requirements under the UCC:

1) Need a writing signed by the party to be charged containing the essential terms of the deal. For a sale of good: -Indicate a contract has been made -Identify the parties to the contract -Specify the quantity -Signed by the party against whom the contract is being enforced *Can tack together writings to show that all these requirements have been met. 2) There is no delivery requirement. Just has to be in writing.

Elements for the statute of frauds

1. Identify subject of contract 2. Agreement made 3. Essential terms 4. Signed by the party to be charged

Modification can be enforced on one of the following grounds to avoid the preexisting rule:

1. In some jurisdictions, Rescind old contract and form a new contract 2. In some jurisdictions, Something different promised or done 3. Unforeseen hardship (restatement view - Angel v. Murray) • unforeseen hardship • voluntarily it agree to • if it's a fair and equitable modification the court may uphold it. 4. Some courts - modification should be enforced because party is giving up the power to breach the contract.] • the party always has the ability to breach the contract and the giving up of the power to breach the contract is in fact the consideration to support the modification. 5. UCC-2-209 - eliminates requirement of new consideration. Only requirement is good faith. • MA: Do not need new consideration • UCC: Good Faith

There are four key elements to acceptance

1. It must be the party to whom the offer was made. The offeree can accept nobody else. 2. The acceptance must be in the terms of the offer. 3. The offeree must know about the offer to accept it. 4. It must be communicated.

A contract requires two things:

1. Legal Detriment 2. Bargain

6 types of contracts must be in writing: M Y L E G S

1. Marriage - a promise in consideration of marriage [ex: pre-nuptial]. Mutual promises do not require writing. 2. Year - a service contract not capable of being performed within a year from the time of the making of the contract. One year starts from the time of the making of the contract. [Exception: lifetime employment contracts do not need to be in writing] 3. Land - transfers in real estate require writing [selling a house], building a house does not require writing. Exception: PIP [1. payments, 2. improvement to real estate, and/or 3. possession] Most jurisdictions require 2 out of 3, MA requires all three! The court looks at the oral agreement made. 4. Executorship - promises by the executor to answer personally for the debts of the decedent. 5. Goods - $500 or more must be in writing! -- [less than $500 would be outside the Statute of Frauds] [Exception: 1) specially manufactured goods; 2) goods received or accepted 3) where defendant admits under oath that contract was made 4) where there is a conformity memorandum. *Recipient has 10 days to object in writing, if they do not - the Statute of Frauds DOES NOT apply! 6. Surety - promise to answer the debts of another must be in writing. [Exception: Main Purpose Rule - if main purpose of promise is a benefit to the promisor, it is outside the statute of frauds.]

There are 2 major issues when you look at the Statute of Frauds

1. Whether the contract must be in writing? 2. If the contract must be in writing, is the writing sufficient to satisfy the Statute of Frauds?

Key Elements of Contract:

1. mutual assent = offer and acceptance 2. consideration 3. parties must have legal capacity 4. must be a legal objective or there cannot be a prohibition by law on whatever the subject matter of the contract is.

Promises may be enforceable under:

1] Consideration 2] Reliance 3] Promise in writing and under seal 4] Unjust enrichment

Massachusetts and preexisting duty rule

: does not follow pre-existing duty rule. Mass. finds that there is consideration for a promise to perform what one is already legally obligated to do because the new promise is given in place of an action for damages to secure performance.

FORBEARANCE FROM SUING ON A CLAIM

A promise not to prosecute or not to sue somebody is enforceable. It will in fact be consideration. The difficulty arises when the claim becomes invalid. One of the cases study is Feige. It's a situation where this woman is pregnant and she believes a certain man is father. She goes to him and says that she won't sue him in bastardy proceedings if in fact you'll pay me a certain amount of money each month. He agrees to do this. He starts to make the payments and then realizes he is not the father. And so his argument is that there was not good consideration to support the promise. Her saying she won't sue me is worthless because I'm not truly the father. The court said no, it doesn't matter. At the time you two entered into he contract she honestly believed that you were the father and therefore it is a good promise. Just because it doesn't turn out afterwards not to be a valid claim it doesn't matter. As long as there was an honest belief at the time it was asserted that in fact it was true. The policy reason behind this is that the law does favor compromises. We have a backlog in the courts in which if people can work out their differences, the law wants to encourage that.

PREEXISTING DUTY RULE

An act that is promised or performed as consideration must be something the person otherwise is not obligated to do.

Advertisements

General Rule: Ads are not an offer, it is merely a solicitation for an offer. Exception: If the AD is: 1. Clear; 2. Definite; 3. Specific, and; 4. Promissory in nature then the court is more likely to say the ad rose to the level of an offer. [Lefkowitz v. Great Minneapolis]

What happens with contracts in the past?

If something happened in the past it cannot be consideration for a present promise. This is the traditional view. And the reason this is so is because the bargain aspect talked about earlier is missing. If it's past consideration it's not bargained for because it already happened. But there are a few states that have an interesting twist on this. They say if the promisor receives a material benefit and makes a promise then even though the consideration was in the past it will be enforceable. [Webb v. McGowan]

UCC 2-206

If the parties act as if there was a contract, the court will fill in the gaps and enforce a contract even though there was no contract. The code rejects the bilateral unilateral distinction. You can accept under the UCC in any reasonable manner.

OPTION CONTRACTS

Irrevocable Offer Under the Restatement 25 - "An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer" We said that offers are generally revocable at any time by the offeror. But there is something called an irrevocable offer. There are, in certain situations, offers that are irrevocable. 1. If I have made an enforceable promise to you not to revoke my offer it's called an option contract and the offer is irrevocable. If the offeror promises to keep the offer open for a specific period of time and if the oferree has paid consideration to keep that offer open, the offer is irrevocable during the time it was agreed to. 2. Another example of an irrevocable offer is where the offeree has begun performance. It's the part performance doctrine. So if the offeree has begun to perform as opposed to mere preparation, they have begun part performance then the offer may be irrevocable.

Illusory Promise

Is not a contract. (E.g., I promise to sell you my car next week, If I feel like it)

Is it always necessary for the promisor to benefit?

It is not necessary that the promisor actually derive any benefit from the promise or from the act. That is not a necessary aspect of consideration. So the courts will enforce promises even if the promisor receives no benefit from their promise.

What about different terms?

Knock out rule. Different terms never become part of the contract. They knock each other out. They cancel. Different terms are not part of the contract If the differ terms are of a non material nature, you just delete them. They knock each other out. What do you do with a situation where different terms prevent contract formation because they are of such a material aspect? Some merchants decide on cars offer says I'll sell you these cars for $15,000. The buyer says I accept for $10,000. You can't have a contract because you have disagreement over a material aspect of the contract - the price. But what if the parties act as though they have a contract. The seller ships the cars and the buyer accepts them.

COMMON LAW: for sending an offer

MUST RESPOND TO AN OFFER THE WAY IT WAS OFFERED TO YOU. EX: IF I SEND YOU AN OFFER BY CARRIER PIGEON, YOU MUST ANSWER IT BY CARRIER PIGEON

Modification

New Consideration must be furnished to modify a contract. Exceptions include: • Rescind old contract and form a new contract; • Something different promised or done; • Unforeseen hardship; • Some courts - modification should be enforced because party is giving up the power to breach the contract • UCC 2-209 eliminates requirement of new consideration; only requirement is good-faith.

Assignee's writing checks

Now if I write out a check to my brother, for example, the writing of the check and the handing of the check is not an assignment. The funds are not transferred. Why because I could stop payment on it, I could close my account. So the important thing for you to remember is that the writing out of a new check is not the assignment of the funds in the account. An assignee gets whatever rights to the contract that the assignor had. But the assignee takes subjects to defenses that the other party could have raised against the assignor. So example: If I agree to paint your house for $1000 and I assign my right to the $1000 to Prof. Coyne, you could raise any defenses you have against me, against Prof. Coyne. I mean that's only fair. So, those are some of your key issues in assignment although there are many more. This is intended to serve only as an introduction.

LIMITS TO RECOVERY

Plaintiff must prove damages with reasonable certainty. Plaintiff in a duty to attempt to mitigate damages. Failure to do so bars recovery

Debt Paying:

Promise to pay debts that are bared from the statute of limitation. A promise to pay a debt that is bared from the statute of limitation IS ENFORECABLE, EVEN IF THERE IS NO CONSIDERATION, because it rests on a legally obligation. Hypo: I owe the dean $10,000, but it is no longer enforceable, because the obligation is bar by the statute of limitation. Meaning, if he was going to sue me to collect it, he should have already done so, he wanted too long. So he can no longer sue me for the money. So I do not have to legally pay him. BUT if I see him and say Dean I feel horrible that I haven't paid you back your money (even though I don't have to anymore because it is bared by the statute of limitation), I will pay you back (there is no consideration to support my promise). Then it becomes ENFORECABLE because I reaffirmed that I will pay him.

PROMISSORY ESTOPPEL

Promise without consideration, but the promisee has relied on the promise. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or the third party and which does induce action or forbearance is binding if injustice can only be avoided by enforcing the contract or the promise. Since legal detriment is required the basic theory of promissory estoppel is a substitute. You substitute the reliance for the consideration or for the bargain.

Exception(s) to silence cannot operate as acceptance

Silence can be acceptance where the offeree takes the benefit of the offer with a reasonable belief by the offeror that that would constitute an acceptance. That would be a valid acceptance. 2. Also where the offeror has stated or given the offeree reason to understand the assent may be by inaction or it may be because of previous dealings between the parties. So in those situations silence can be acceptance

Assignee, Obligtor etc..

So, let me give you the following hypothetical: assume I enter into a contract with you whereby I promise to mow your lawn for the summer for $500 and I'm going to collect the money at the end of the summer. We will say that I have a right to the $500 and I have a duty of mow your lawn. So I have a right to the money and I have a duty to mow your lawn. I can assign my right to the $500 and if I do assign my right let's say I assign it to Easy Bank. We need to give labels to the players. This is the most difficult part of assignment law. If I assign my right to the $500 to Easy Bank and they're going to give me a loan if I assign my right to that $500 my title is an assignor. I am the assignor. If I'm going to mow your lawn you are the obligor because you're obligated to pay me the $500. Easy Bank is the assignee. I have assigned the right to Easy Bank they're the assignee, I'm the assignor, you owe the money, you're the obligor. If I get somebody else to mow your lawn, I get one of the professors, I get Prof. Rudnick to mow the lawn in my place, in that situation I'm the delegator, you're the obligee, you're owed the obligation and Prof. Rudnick is the delegatee. So that's the most difficult part is trying to get that terminology down but basically rights are freely assignable we have a policy that an assignment is a transfer of rights and the general rule is contract rights are freely assignable. The exception would be if they would materially increase the risk or the duty of the obligor or if in the contract we say any assignment is void, you must use the word VOID, ALL ASSIGNMENTS UNDER THIS CONTRACT ARE VOID. Then they are not assignable. It's interesting, if I said something in the contract like assignments are prohibited, they're not prohibited. Even though it says they are the law says contracts are freely assignable and those words do not stand. So if you want to prohibit assignment you must use the word void because we've made a policy decision that assignments, transfer of rights, should be, in fact, freely assignable.

RECITAL OF CONSIDERATION

That language is evidence that consideration was paid. It is not per say consideration. So the parties can go in and they can challenge whether the consideration was in fact ever paid. So just because you say for good and other valuable consideration doesn't not make it consideration. Just reciting the words is not consideration. Consideration still must pass hands.

REWARDS ARE OFFERS!!

The person has to know about the reward before getting the reward. If you for example, help the cops out and you found out later there was an award for that information. It is to late. (Private rewards).

Parol Evidence

The writing may be: its one of the three issue under parol evidence • Total Integration - final and complete • Partial Integration - final expression as the matters covered by the writing • No Integration - writing not intended to the total agreement. o The type of writing is typically decided by a trial judge. Then Apply the Rules • If fully integrated, then no evidence that varies or contradicts the writing is admissible (Contradictory Parol Evidence) • Factors to consider are formality and the existence of merger clauses (if a merger clause exists, then it is probably intended to be a complete and exclusive writing). o The more complete and formal, the less likely of getting in other evidence.

Liquidated Damages

Two prongs of liquidated damages are (1) reasonableness and (2) can they be calculated?

Anticipatory Repudiation

Two ways to treat a repudiation: • As an anticipatory breach and immediately seek damages for breach of contract; • Treat it as an empty threat and wait until the time for performance arrives and then exercise remedies. o Note! - If you choose to wait for the date, and the other party retracts there breach, then the party is back in the contract.

donee

Under the first restatement of contracts and sometimes the bar references this so I want to tell you about it beneficiaries who could sue under a contract as a third party were labeled either to be a donee or a creditor beneficiary. A donee would basically be a gift recipient, and a creditor would be, you can figure that out, somebody to whom an obligation is owed. So we say a credit beneficiary will be a beneficiary who will be looking to satisfy an obligation that they're owed or we can say a donee beneficiary is the recipient of a gift promise. Under the second restatement of contracts these two classes of beneficiary are called now intended beneficiaries. Intended beneficiaries are those beneficiaries that are able to sue on the contract. Everybody else is an incident beneficiary and they do not have rights under the contract. So that's the most important thing I think you need to know I think you should also know that only intended beneficiaries can sue and their rights vest upon assent or when they change their position in reliance or they bring suit on the contract.

Employee-at-will doctrine

Vast majority are unprotected and terminated by good, bad, or no reason at all. Federal - Age Discrimination (40+) State - Title VII of Civil Rights Act of 1964 (religion, race, color, origin, sex, etc)

CONTRACT REMEDIES:

You may have a party that repudiates on a promise or you may have a party that is preventing the other side from completing their contractual duty. In most cases, that would be in bad faith. In each one of those, a non-breaching party has options: 1. Material Breach - the non-breaching party can suspend or cancel a contract and sue for damages. 2. Non-material breach - cannot breach or suspend performance, but can sue for damages. 3. Specific Performance - rarely awarded, but when: Curtice Brothers v. Catts (a) subject matter is unique or (b) there is no adequate remedy at law. 4. Monetary Damages - compensate the non-breaching party but not to punish the breaching party. Splits into two parts: (a) Compensatory (b) Consequential - Hadley v. Baxendale - court stated that consequential damages must flow from breach naturally, proximately and foreseeably. And court also held that defendant cannot foresee/know that the plaintiff needed a new shaft.

MORAL OBLIGATION

[1] Standing alone is not valid consideration. [2] When you have moral obligation and material benefit, you have sufficient consideration, although there was no original duty - [minority view]. Webb v. McGowin [3] Moral obligation and Material benefit do not have sufficient consideration, therefore a good Samaritan does not get paid. [majority view] Massachusetts Reaffirmation of debt is enforceable

STATUTE OF FRAUDS

a defense against contract formation or mechanism of enforcement.

Bilateral Contracts

a promise for a promise. [each party is both a promisor and promisee] . The offeror is a loud to revoke the offer until that get that notice of acceptance. (Need notice of acceptance)

Unilateral Contracts

a promise for an act. [unilateral offers must be accepted by doing an act] (Don't need notice of acceptance. Offeree can do that act. Unless the offeror is unlikely to know that the offeree is doing that act then need notice of acceptance.)

Year (6 types of contracts must be in writing: M Y L E G S)

a service contract not capable of being performed within a year from the time of the making of the contract. One year starts from the time of the making of the contract. [EXCEPTION: lifetime employment contracts do not need to be in writing]

Implied contract

agreement is formed by virtue of conduct as to express words

LEGAL DETRIMENT

aspect of consideration what we're referring to is the promisee giving or doing one of the following: The promisee must: 1. Do an act; or 2. Promise to do an act; or 3. Forbear; from doing an act; or 4. Promise to forbear.

CONSIDERATION

bargained for legal detriment • The legal detriment is the thing what is given for the promise. • The other aspect of consideration is bargain. It's the process.

General Contract/Subcontractor

charitable contribution cases this doctrine went to the subcontractor/contractor situation. What would happen is the subcontractor would put in bids to general contractors. The general contractors would rely on those bids and they would submit an overall master sheet to bid on a project and sometimes they would be awarded the bid and then they would go back to the subcontractor wanting them to honor their subcontractor bid and the subcontractor would back out and say there was no consideration. There was no bargaining. It was really very unjust. because now you would have general contractors who have the job based on the price from the subcontractor so the courts next extended this doctrine to the subcontractor situation and it's gone on from there. So, once again, substitute for consideration.

EXPECTANCY damages

compensating plaintiff for expectation, putting plaintiff in POST-CONTRACT position. Putting plaintiff in benefit of bargain.

Subsection 3 of 2-207

deals with acceptance by conduct. The parties act as though they have a contract even though the writings don't agree. What 2-207-3 says is conduct by both parties that recognizes the existence of a contract will be sufficient to establish the contract. It is formed by virtue of the conduct. If you have a contract then what are the terms going to be? You take the writings and match them up. The terms that are in agreement are part of the contract. As to other terms that disagree or are absent you knock them out and use the UCC to gap fill. 2-207-3 is the section of 2-207 in which you do not have agreement according to the papers. However, the conduct of the party acts as if there is a contract. We use the conduct to recognize the existence of a contract. Very difficult concept for 1st year law students.

Good Faith Dispute under the preexisting rule:

good faith dispute about the amount of the indebtedness. . . ➢ Example: Suppose Mass. Electric Company sends a bill for $1000 bill for the month of February. Well, I know it was cold but I also know that in my whole lifetime I have never paid more than $80 for the month of February for my fuel bill. So I know there's a mistake and we hassle back and forth and finally I go to Mass. Electric (I don't want to hire an attorney, I know it will cost me too much money) so I say Mass. Electric Company I will pay you $400 and we're having a good faith dispute. I send them a letter, I send them a check for $400 and I say this is in full satisfaction of the debt. Well because we have a dispute over what the amount of the bill is, if they agree to take that, then that is in fact sufficient consideration.

ACCEPTANCE

is the assent by the offeree to the proposal that has been made by the offeror. Once again, it is assent by the offeree to the deal that is on the table.

Delegation

means you get somebody else to perform your obligation. The general rule is obligations under a contract can be freely delegated. The exception is personal service contracts that involve a special skill or there's a prohibition in the contract. Unlike assignments, prohibitions in the contract against delegation are, in fact, upheld. So those are some of the key things on assignment and delegation.

Statute of Fraud defense

o If you decide the contract has to be in writing because it is one of the contracts that are in MYLEGS, that requires a writing. And there is not a writing, then you plead the statute of frauds as a defense.

Mailbox rule:

o Once you say I accept and you put that acceptance letter out of your reach into the mailbox or outbox, that's a valid acceptance. Adams v. Lindsell o The moment of acceptance is when you put it in the mail.

Mirror Image Rule

o Once you say I accept and you put that acceptance letter out of your reach into the mailbox or outbox, that's a valid acceptance. Adams v. Lindsell o The moment of acceptance is when you put it in the mail.

Whether silence can operate as acceptance?

o The general rule says that silence normally does not operate as acceptance. • Hypo: I sell you my car for $10,000. Is it reasonable for me to walk away and think we have a contract? NO!!!!!!!!

What is a firm offer?

o UCC 2-205 states "it is a signed writing by the offeror to buy or sell goods. It is a promise that is irrevocable for a period not to exceed 90 days. o Firm offer rule ONLY APPLIES WHEN THE OFFEROR IS A MERCHANT! • Meaning, if I try to sell my car to you the rule will not apply, but if a car dealer tries to sell you a car it will apply.

Surety (6 types of contracts must be in writing: M Y L E G S)

promise to answer the debts of another must be in writing. [EXCEPTION: Main Purpose Rule - if main purpose of promise is a benefit to the promisor, it is outside the statute of frauds.]

Executorship (6 types of contracts must be in writing: M Y L E G S)

promises by the executor to answer personally for the debts of the decedent.

CONTRACT

promissory set of promises for law to enforce, provide a remedy for its breach.

RELIANCE damages

reimbursing plaintiff for lost cause by plaintiff reliance. Act as if contract never happened [PRE-CONTRACT POSITION]

The first provision of UCC 2-207: 2-207-1

reverses the mirror image rule of traditional contracts. What it says is: A definite and seasonable expression of acceptance or a written confirmation that is sent within a reasonable time operates as an acceptance even though it states terms that are additional or different, unless acceptance is expressly made conditional on assent to the additional or different terms. Example: A situation in which under the UCC we're dealing with the sale of goods and there has been an offer comes in the mail. There is an acceptance that comes back with additional terms. Does that defeat contract formation? Under traditional contract law, the answer is yes it does because we said there's a mirror image rule. The offer and the acceptance have to mirror each other

RESTITUTION damages

the court restore to plaintiff an benefit that was conferred to the other side. [PRE-CONTRACT position]

Land (6 types of contracts must be in writing: M Y L E G S)

transfers in real estate require writing [selling a house], building a house does not require writing. EXCEPTION: PIP [1. payments, 2. improvement to real estate, and/or 3. possession] Most jurisdictions require 2 out of 3, MA requires all three! The court looks at the oral agreement made.

Adequacy v. Sufficiency

• Courts do not look at the adequacy of the consideration • But it looks at the sufficiency of the consideration, that it was actually bargained for in exchange.

Payment of debt with lesser amount:

➢ Example 1 - If I say to you I will pay you $1000 if you stop trespassing across my yard, my driveway. That would not be an enforceable promise. Why? You have a preexisting duty not to trespass across my yard. So there is no good consideration to support that promise. ➢ Example 2- If a creditor promises a full discharge and you as the person owing the obligation promise to pay less, the creditor can take your money and sue you for the balance. Why? You have a preexisting duty to pay the full amount of the obligation. That is something that is often tested on the bar exam. But watch for the following. There are some exceptions to that rule.

Gratuitous Promises:

➢ Something voluntarily given and acquired without a bargained-for exchange. • A gift is just a gift; • All gifts have the condition that you must accept. • Contract v. gift with condition upon it. • Intent and motivation help to determine the two.

Restatement of Contracts (current view of preexisting duty rule and Majority Jurisdiction)

➢ When you agreed to a modification, even if there is NO new consideration, BUT there are unanticipated difficulties or circumstances, and the agree modification IS fair, equitable and voluntary; then the court will look into enforcing the contract. The restatement requires and agreement without the "gun to the head." Second, the agreement has to be VOLUNTARY. Third, it has to be FAIR.