Ch. 10 Consideration

Certain agreements are not enforceable because they lack consideration, that include:

1. Barren promises 2. Gratuitous promises 3. Illusory promises 4. Agreements supported by: • Moral consideration • Past consideration

What are the characteristics of valid consideration?

1. Legality 2. Adequacy 3. Possibility of Perfomance

3. Possibility of Performance

A legally enforceable contract cannot be based on a promise that is impossible to fulfill.

(c) A Pledge or Subscription

A pledge is a promise to DONATE money to such organizations as churches, temples, mosques, hospitals, colleges, cultural institutions, charitable organizations, and other groups. Because pledges are for a worthy cause, courts have deemed them to be ENFORCEABLE even when you're not getting anything in return • Example: John Peterson makes a pledge of $20.00 to the local firefighters association.

Kinds of Valid Considerations: (a) A Promise for a Promise

A promise of an act by one party in exchange for the promise of an act by another is a valid consideration. Bilateral Contract: promise for a promise Unilateral: promise for an action • The exchange of money is not a requirement, but is the most common Example: Joanne promised to paint Elaine's office room if Elaine helps with her landscape project.

Barren Promises

A promise to do something that is already required to do either by law or by contract represents no additional sacrifice and is not valid consideration. A promise to pay an existing debt or to obey the law, or similar promise is called a barren promise

1. Legality of Consideration

A valid contract does not exist if the consideration is a promise to perform an illegal act (or to avoid performing an act that was legally required to be performed). Ex: If a contract made by uncle required the nephew to obey all traffic laws, it wouldn't be enforceable because the nephew is legally required to obey these laws anyways

General Release

A written agreement in which an aggrieved party can discharge in whole or part a claim resulting from an alleged breach of contract. Statutes that permit a person who has a claim against another to give up, or release, his or her claim without an exchange of consideration by making a written statement to that effect. • A general release may be regarded as valid consideration if the parties so intend. In such cases, the general release would be viewed as forebearance. • In some states, a general release is supported by consideration only where the original claim that is being released is not regarded by the courts as frivolous.

2. Adequacy of Consideration

Judging whether or not the exchange of promises in a contract was fair. • In an attempt to level the playing field, many consumer protection statutes have been passed. • The notions of unconscionable contracts and contracts of adhesion are now widely applied.

(b) A Promise of Forbearance

One party to a contract may wish to exchange his or her promise to pay money for a promise of inaction from the other party. • Refraining from something you have a legal right to do

Agreements Supported by Moral Consideration

Something that a person is not legally bound to do what he or she may feel obligated to do, but may feel bound to because of love, friendship, honor, sympathy, conscience, or some other moral consideration. • Some courts, however, will justify the enforcement of some contracts, even though there is no consideration, by stating that there was "moral consideration."

Preexisting Duty

The obligation to perform acts already required to do

Promisee

The party to whom a promise is made in the making of a contract

Gratuitous Promise

a promise that doesn't require some benefit in return Agreements based on such one sided promises are generally not enforceable Example: A golf pro promises to give her golf clubs to her friend after a tournament is over. She realizes that they are worth more than she originally thought and changes her mind. The pro is not obliged to give her friend the clubs as it was a gratuitous promise. The friend was getting nothing in return, no consideration.

Agreements Supported by Past Consideration

a promise to repay someone for a benefit after it has been received. This type of promise is generally not a valid consideration and is considered a gratuitous promise. Example: Mike promised his brother Joe that he would give him two Super bowl tickets when Joe graduated from college. As planned, Joe graduated and Mike gave him the tickets. When Joe realized how expensive the tickets were, he promised to pay Mike one-half of the ticket price. Joe later changed his mind and decided not to keep his promise. Joe will not be legally held to his promise since it was based on past consideration.

Promissory Estoppel

a term used in contract law that applies where, although there may not otherwise be a enforceable contract, because one party had relied on the promise of the other, it would be unfair not to enforce the agreement.

Illusory Promise

consists of an indefinite, open-ended statement purporting to be an agreement. A person who make an illusory promise never commits to a specific or absolute act; neither consideration nor enforceable Example: The manager of a fleet of delivery trucks tells the owner of an auto repair shop "If your tires are high quality, I will purchase all the tires I need from you."

Promisor

the party that makes the promise

Forbearance

the promise to refrain from doing something that a party has a legal right to do, or the promise of inaction