Business Law Ch 15

Promissory Estoppel, Contract under Seal

2 Exceptions to the Rule for Consideration

Preexisting Duty

2 Parts of the Rule 1. A promise to do something you are already obligated to do under the law is not value consideration. • Ex- a police officer cannot collect an award for catching a criminal, he/she is already under the obligation to do the job 2. Performance of an existing contractual duty is not good consideration • Ex- extra money to complete the pool by a certain date, that you are already obligated to do

Lack of Consideration

A promise must have consideration for a court to enforce it. o Ex- Bilateral- a promise for a promise is the consideration o Unilateral- the consideration is the promise on one side and the act on another

Adequacy of Consideration

Courts rarely consider whether consideration is adequate—they just want to know it exists. o It is still on the parties to make sure they got a good deal o Ex- purchasing a TV for $500 when its only worth $100 o The court may pay attention if the is fraud or undue influence involved

Unliquidated debt

The parties disagree about whether money is owed or dispute the amount o Parties can settle for less than the full amount if they enter into an accord and satisfaction

Unforeseen Circumstances

additional consideration for additional work o Ex- contractor having to remove a boulder to complete a project- addition $5000 will be enforced

Promissory Estoppel

detrimental reliance)- 3 Elements- o When one party makes a promise knowing the other party will reasonable rely on it, o The other party does reasonable rely on it, and o The only way to avoid injustice is to enforce the promise even though it is not supported by consideration.

Additional Work

more that the contract required, the promise to do so is valid consideration

Contract under Seal

old days they were sealed with wax- today these contracts are stamped or identified by L.S. o Largely an obsolete legal issue o Only 10 states allow a contract without consideration to be enforced if it's under seal

Consideration

something of value given in exchange for something else of value. o It can be anything but it must be the product of a mutually bargained-for exchange. o Ex- $1000 for a car- both the money and the car are___

Liquidated debt

there is no dispute that money is owed or how much o A creditors promise to accept less than owed, when the debtor is already obligated to pay the full amount is not binding

illusory promise

• An ________ is not consideration o Ex- Offer to sell skies for $300- offeree responds that she will look at them and pay him if she wants them- she has not committed to anything and is not bound

accord and satisfaction

• An __________________ requires: 3 Elements o an unliquidated debt (the amount or existence is in dispute) o the creditor agrees to accept as full payment less than is owed o the debtor pays the amount agreed on

Past Consideration

• Past consideration is not consideration • There must be a bargained for exchange- o A promise cannot be based on consideration already provided in the past, before the promise was made • Ex- a promise by a boss for more money after you have already been paid in the past for the job- have to depend on good will

Exceptions to the Preexisting Duty Rule

3 Exceptions - 1. Unforeseen Circumstances- additional consideration for additional work o Ex- contractor having to remove a boulder to complete a project- addition $5000 will be enforced - 2. Additional Work- more that the contract required, the promise to do so is valid consideration - 3. UCC Article 2 (sale of goods)