B Law Ch 12 Consideration
Contracts Enforceable Without Consideration
-Promise to pay debt barred by the Statute of Limitations -Promise to pay debt Discharged in Bankruptcy -Detrimental Reliance or Promissory Estoppel -Charitable Subscriptions -Promises Enforceable by Statute
Legal Detriment
1) The doing of (undertaking) that which the Promisee was under no prior legal obligation OR 2) the refrain from the doing of that which they were under no previous legal obligation to refrain from doing.
Exclusive Dealing
A manufacturer of goods grants to a distributor an exclusive right to sell its products in a designated market.
Past Consideration
A promise in exchange for an act completed prior to the making of the promise (nonbinding) will not be enforced because the act was not done in exchange for the promise. It is past Consideration and there is no Bargained-For Exchange.
Unilateral Contracts
A promise is exchanged for a completed act or a forbearance to act. Ex: Promisor promises to pay $2,000 for Promisee to paint a house.
Illusory Promises
A promise where the Promisor is free to perform or not perform the promise based on the language used in the promise. There is uncertainty regarding the performance of the promise, therefore there is no Consideration and no Mutuality of Obligation. Ex: "You will receive a bonus at the end of the year if management thinks it is warranted." Exceptions: Output/Requirement Contracts are UCC enforced as well as Exclusive Dealings
Legal Sufficiency
Consists of either a benefit to the Promisor or a detriment to the Promisee.
Release of Settlement of Claims
Contract that bars any further recovery beyond the terms stated in the agreement, enforceable if supported by consideration. Ex: Release forms that stop you from suing.
Charitable Subscriptions
Follows the Promissory Estoppel rule, in the sense that charities (despite being gifts) detrimentally rely on the promise of subscription gifts. So it is enforceable.
Unforeseen Difficulties
If a party encounters substantial and unforeseen difficulties that they could not have anticipated at the time the contract was entered, the court may enforce an agreement to pay extra compensation for the unforeseen difficulties.
Preexisting Duty Rule
If one promises to do something that one is already legally obligated to do, the promise will not be enforceable because it lacks consideration. There is no legal benefit or detriment. Ex: Promise not to commit a crime/tort, an act that one is required to perform by law (police, firemen, mayors, tell the truth at trial, etc...), or an act that one is already under contract to perform (paying someone more to build faster, Promisor is already building, thus not binding)
Mutuality of Obligation
In Bilateral Contracts, each promise is the Consideration for the other.
Settlement of an Undisputed Debt
Liquidated. As in the debt is not disputed, not contested as to existence of debt and amount due, preexisting legal obligation. Payment of less than full amount owed will not be legally sufficient to support promise to discharge balance due. Unless the lesser amount was accepted prior to due date or there is a new Consideration for payment (the fountain pen).
Promise to pay debt Discharged in Bankruptcy
May be enforceable without consideration
Bargained-For Exchange
Mutually agreed upon exchange. Ex: A birthday present is without Consideration because the Promisor delivers a gift but receives nothing.
Moral Obligation
Promises based upon moral obligations are generally not enforced by the court because they lack consideration. Ex: Love, Family ties, Hard work...
Legal Benefit
The Promisor obtains which they had no prior legal right to.
Promise to pay debt barred by the Statute of Limitations
The Statute of Limitations (a period of time to initiate a lawsuit) forces a debtor to pay a debt. This does overrule the Past Consideration rule?
Modification of a Contract for Sale of Goods
The UCC allows modification even WITHOUT new Consideration, but it must be made in good faith.
Requirement Contract
The agreement of a purchaser to purchase from a particular seller all the materials of a particular kind that the purchaser needs. Ensures the buyer a ready source of inventory. Does not state X amount, only says as much "needed."
Output Contract
The agreement of a seller to to sell their entire production to a particular purchaser. This gives the seller an ensured market for the product. Does not state X amount, only says "entirety."
Bilateral Contracts
The exchange of promises. Ex: Person X promises Person Y to give him cash if Person Y promises Person X to give them a car.
Adequacy of Consideration
The general rule is that the courts will not inquire into the adequacy or fairness of Consideration. Parties have freedom of contract. In other words, parties are free to enter contracts as they please, and courts will not come to the rescue if someone makes a bad deal. Exceptions: Fraud, Duress, Undue Influence...
Consideration
The inducement to enter into a contract. It requires Legal Sufficiency and Bargained-for Exchange.
Detrimental Reliance or Promissory Estoppel
The making of promises lacking consideration on both sides, enforceable to avoid injustice. These can be enforceable.
Substitute Contract
The parties mutually agree to rescind the old contract and enter into a new one. Three Contracts in this: Old one, One to Rescind, and the New enforceable one.
Promises Enforceable by Statute
UCC allows contract modifications without new consideration. Renunciations and Firm offers
Settlement of a Disputed Debt
Unliquidated/services. As in the existence or amount of debt is disputed. Payment of a lesser sum of money to discharge a disputed debt is legally sufficient Consideration, its over when the "paid in full" check is cashed. No right to dispute and no right to further collection.
Modification of a Contract
When parties mutually agree to change one or more of the contracts terms. Must be supported by mutual Consideration to be enforceable and this new Consideration must be beyond what was in original contract.