Chapter 13: Consideration
Bargained-for Exchange
*Second element of Consideration -the consideration must provide the basis for the bargain struck between the contracting parties. -The item of value must be given or promised by the promisor (offeror) or promise of performance. ***Distinguishes contracts from gifts!
Covenant Not to Sue
*does not always var further recovery The parties substitute a contractual obligation for some other type of legal action based on a valid claim. an agreement not to sue. -will pay for damages if other person doesn't sue.
Liquidated Debts
If a debt is liquidated, accord and satisfaction cannot take place. Liquidated Debt: one whose amount has been ascertained, fixed, agreed on, settled, or exactly determined.
Illusory Promises
When the nature or extent of performance is too uncertain, the promise is rendered illusory and unenforceable.
Option-to-cancel Clauses
When the promisor has the option to cancel the contract before the performance has begun, the promise is illusory.
Rescission and New Contract
two parties can mutually agree to rescind (cancel their contract), at least to the extent it is executory (still to be carried out). Rescission—> the unmaking of a contract to return the parties to their positions previously occupied before the contract.
Release
A contract in which one party forfeits the right ti pursue a legal claim against the other party. -bars any further recovery beyond the terms in the release -A release is binding if it meets this criteria: 1) The agreement is made in good faith and (honesty) 2) The release contract is in a signed writing (required in many states) 3) The contract is accompanied by consideration.
Accord and Satisfaction
A debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed. accord—> agreement, one party undertakes to give or perform, and the other to accept, in satisfaction of a claim, something other than that which the parties originally agreed Basic Rule: There can be no satisfaction until there is first accord. for accord and satisfaction to occur, the amount in debt must be in dispute.
Past Consideration
Actions or events that have already taken place do not constitute legally sufficient consideration.
Consideration
Broken into two parts: 1) Something of LEGALLY SUFFICIENT VALUE must be given in exchange for the promise, and 2) There must be a BARGAINED-FOR exchange
Preexisting Duty
Consideration is not legally sufficient if one is either by law or by contract under a preexisting duty to perform the action being offered as consideration for a new contract.
Requirements to a State Claim
For the Promissory Estoppel doctrine to be applied, the following elements are required: 1) There must be a clear and definitive promise 2) The promisor should have 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) Enforceable of the promise is necessary to avoid injustice.
Exceptions to the Consideration Requirement
May be enforceable 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 statue of limitations 3) Promises to make charitable contributions
Requirements and Output Contracts
Requirements Contract—> a buyer and a seller agree that the buyer will purchase from the seller all of the goods of a designated type that the buyer needs, or requires Output Contract—> the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the seller's output.
The General Rule
The Court will not question the adequacy of consideration based solely on the comparative value of the things exchanged. determination of whether consideration exists does not depend on a comparison of value of the things exchanged!
Unliquidated Debts
The amount of the debt is NOT ascertained, fixed, agreed on, settled, or exactly determined, and reasonable persons may differ over the amounts owed.
Promissory Estoppel
a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery. -under this doctrine, a court may enforce am otherwise unenforceable promise to avoid the injustice that would otherwise result.
Settlement of Claims
business persons often enter contracts to settle legal claims.
Adequacy of Consideration
involves how much consideration is given concerns the fairness of the bargain.
Unforeseen Difficulties
meant to prevent extortion and the so-called holdup game. -If during a performance of a contract, unforeseen extraordinary difficulties arise after the contract is formed, a court may allow an exception to the rule.
Agreements That Lack Consideration
sometimes, one or both parties to an agreement may think that consideration has been exchanged when it in fact has not.
Legally Sufficient Value
to be legally sufficient, consideration must be something of value before the law. Must consist of the following... 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 (called a FORBEARANCE)