Chapter 13 Consideration

What phrase explains how a requirements contract can be valid?

"in good faith"

Jamie is building a house on her lot. She invites Earnie of Earnie's Excavation to bid on the excavation job. Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky. Based on the assumption that the soil in Jamie's lot will be similar, he and Jamie agree that the excavation will cost $3,000. When Earnie starts digging, he learns there is solid rock under Jamie's lot. Earnie says it will cost an extra $2,500 for the excavation work. Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000. If Earnie sues, the most likely result would be

Earnie wins, as the modification was due to unforeseen difficulties.

A completed act can be the basis for consideration.

False

An illusory promise is valid consideration.

False

Billy owes a liquidated debt of $3,000 to Rayna, his personal weight trainer. Billy sends Rayna a check for $300 on which he has marked, "Payment in Full." If Rayna cashes the check, she will NOT be able to successfully sue Billy for the remainder of the debt.

False

Contracts in which one party agrees in good faith to buy all his requirements of certain goods from the other party are generally unenforceable because there is no definite amount.

False

Denton agreed to build a cedar deck for the Thrashers for $7,000. After he began the work, the Thrashers asked him to add cedar flower boxes at one side. Denton replied he would, but it would cost an additional $600. In this case, the Thrashers would not be obligated to pay the additional sum because the original agreement already obligated Denton to complete the deck for $7,000.

False

Section 2-306 of the UCC expressly disallows output contracts in the sale of goods.

False

The UCC requires consideration for agreements modifying contracts for the sale of goods.

False

The two basic elements of consideration are intention and agreement.

False

Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1. The contract contained a provision that required all modifications to be written and signed by the company presidents. In early August, an executive of Mid-American talked with the purchasing agent of NSB who orally agreed to two shipments of oil; one in September and the second one in December. By September 30, when only 500 gallons had been delivered, NSB sued. The likely outcome of this lawsuit is

NSB wins because the modification has to be in writing.

Yolanda was shoveling snow from her sidewalk, and just to be nice, she also shoveled snow from her neighbor Melody's walk. The next day, Melody promises that she will pay Yolanda $25 for shoveling snow from her walk. Has a contract been created?

No, past consideration is not valid consideration.

A debt that is disputed because the parties disagree over its existence or amount is an unliquidated debt.

True

A forbearance is, in essence, the opposite of an act.

True

A promise to do (or not do) something in the future counts as consideration.

True

Agreeing not to open a competing business could be consideration.

True

Consideration is the inducement, price, or promise that causes a person to enter into a contract and forms the basis for the parties' exchange.

True

Hilda owes Lex $3,000, which is an undisputed amount. If she offers him her car in full settlement of the debt and he accepts, the agreement is binding and he can no longer claim she owes him anything on the original debt.

True

Pastor Tom was employed by the First Church for 40 years. On Pastor Tom's retirement, there was no adequate pension plan. Two months after the retirement, a wealthy parishioner, in consideration for Pastor Tom's 40 years of faithful service and for being such a "sweet" man, promised to pay him $500 per month for the rest of his life. This promise probably is not enforceable.

True

Zero, Inc. agreed to build Millie a storage building for $8,000. After beginning the project, Zero realized that it could not complete the job and make a profit. Zero demanded $9,500 to complete the building. Millie agreed to pay the $9,500. When the project was complete, Millie tendered $8,000 to Zero for the job. If Zero sues Millie for the remaining $1,500,

Zero will lose because there was no legal consideration to support the additional $1,500.

What is an output contract?

a contract in which the seller guarantees to sell all of its output to one buyer, and the buyer agrees to accept the entire quantity

An unliquidated debt can be described as

a debt in which the existence or amount is in dispute.

If someone provides a service that he or she is already obligated to do, it is an example of

a preexisting duty.

Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning. Which of the following is true? a. If Wilde's agrees to accept less than the full amount as full payment, the agreement is not binding. b. The undisputed amount is also known as an unliquidated amount. c. If the parties agree to settle for less than the full amount, their agreement is governed by the ruling in Henches v. Taylor. d. If Wilde's agrees to accept less than the full amount, the agreement is only binding if it is in writing and signed by Bernie.

a. If Wilde's agrees to accept less than the full amount as full payment, the agreement is not binding.

If Crosby and Dash are in disagreement as to the exact amount of money that Crosby owes Dash, then they may choose to form a new agreement at a set amount. If they both perform the new agreement, their conduct would be an example of

an accord and satisfaction.

An agreement to settle a debt for less than the sum claimed is referred to as

an accord.

Bailey Co. and Spryt Bros. enter into a contract for the manufacture and sale of 400 lawn chairs. If both parties agree that a modification is necessary,

an agreement to rescind the contract will terminate the contractual rights of Bailey Co. and Spryt Bros. if neither of them had completed their obligations.

Marco agrees to sell Clowns R Us some balloons. The contract states that Clowns may buy as many balloons as it wishes. This agreement is

an illusory contract.

In January, Alex promised to pay Y-K Inc. $5,000 if it would refrain from filing suit against him on a breach of contract action. Y-K agreed and accepted a $5,000 check from Alex. Which of the following statements is correct? a. Y-K's promise to refrain from suing Alex was not supported by legal consideration. b. Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable. c. This is an accord and satisfaction, and Y-K cannot sue. d. The courts would apply promissory estoppel in this situation.

b. Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable.

Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers. Which of the following statements is true? a. Police Officer Paul is not entitled to the reward because past consideration is never valid consideration. b. Police Officer Paul is entitled to the reward because he puts his life on the line every day. c. Police Officer Paul is not entitled to the reward because he was under a preexisting duty to make the arrest. d. Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel.

c. Police Officer Paul is not entitled to the reward because he was under a preexisting duty to make the arrest.

As it pertains to consideration, which of the following constitutes value? a. an illusory promise b. a preexisting duty c. a forbearance d. All of these are correct.

c. a forbearance

Juan agrees to paint Michelle's house for $1,000. Halfway through the job, Juan tells Michelle that he will need an extra $250 to finish the job. Which of the following is a correct evaluation of the situation? a. Michelle will have to pay because she and Juan did not have a bargained-for exchange. b. Michelle will have to pay the extra $250 because Juan has promised not to finish the job unless she does. c. Michelle will not have to pay the extra $250 because Juan made an illusory promise about only charging $1,000. d. Michelle will not have to pay the extra $250 because Juan has a preexisting duty to paint the house for $1,000.

d. Michelle will not have to pay the extra $250 because Juan has a preexisting duty to paint the house for $1,000.

Regarding consideration, an act occurs when a person

does something not legally required.

A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an

enforceable requirements contract.

An agreement between two parties to pay a lesser amount to settle an unliquidated debt is

enforceable, as there is consideration.

If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000, the agreement is

not enforceable because Becky does not have a legal right to drink alcohol.

Upon graduating from college, Kathy announced her plans to enter law school the following fall and to marry Rick in December. Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her studies or cause her to drop out of school. He called Kathy and promised her $10,000 if she postponed her wedding until after completion of her first year of law school. Kathy agreed and postponed the wedding for a year. Kathy successfully completed her first year of law school, but soon thereafter, Kathy's father died. The administrator of her father's estate claimed she was not entitled to the $10,000 because there was no consideration for her father's promise. If Kathy sues the estate, she will probably be

successful because there was consideration.

Mary owes $3,800 on her credit card. She sends the credit card company a check for $800 with the notation "payment in full" on the check. If the credit card issuer cashes the check,

the check may be subject to a UCC exception to the general rules for accord and satisfaction cases involving checks.

A liquidated debt is one in which

there is no dispute about the amount owed.

In the historic case of Hamer v. Sidway, the nephew

won, as the Court found there was consideration.