Business 18 Ch. 9 - Consideration

Promissory Estoppel occurs when three other conditions are met:

- One party makes a promise knowing the other party will rely on it. - The other party does not rely on the promise. - The only way to avoid injustice is to enforce the promise

There are three exceptions to the Preexisting-Duty rule, what are they?

- Unforseen circumstances - Additional work - UCC - sale of goods

What two parts are there to a preexisting duty rule?

-First, performance of a duty you are obligated to do under the law is not good consideration. *for example, if someone offers a reward for the capture of a suspected criminal, the police officer may not collect the reward, as he or she was already obligated to apprehend the suspect. -Second, performance of an existing contractual duty it not good consideration. *for example, the pool contractor comes to gene and explains due to a shortage of workers, the completion date cannot be met; however, if gene pays 5,000 to hire more help it can. If contractor hires employees and finishes on time, gene is not required to pay him the additional 5,000 due to the preexisting contractual duty.

Under UCC Section 2-209

1. An agreement modifying a contract within this Article needs no consideration to be binding. 2. A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

For an Accord and Satisfaction to be enforceable, what three requirements must be met?

1. The debt is unliquidated (i.e., the amount or existence of the debt is in dispute). 2. The creditor agrees to accept as full payment less than the creditor claims is owed. 3. The debtor pays the amount they agree on.

Liquidated Debt

Debt for which there is no dispute between the parties about the fact that money is owed and the amount of money owed. *for example, a creditor's promise to accept less than owed, when the debtor is already obligated to pay the full amount, is not binding. *exception to the rule occurs when the debtor offers different performance.

Unforeseen Circumstances

Events that a reasonable person would not be expected to anticipate.

The Uniform Commercial Code (UCC) has changed the common law in significant ways.

Rule: Under Article 2 of the UCC (sale of goods), an agreement modifying a contract needs no consideration to be binding. This is an exception to the preexisting-duty rule.

Requirement Contract

an agreement whereby the buyer agrees to purchase all of his or her goods from one seller and no quantity is stated in the contract; valid under the UCC but not under common law.

Output Contract

an agreement whereby the seller guarantees to sell everything he or she produces to one buyer and no quantity is stated; valid under the UCC but not under common law.

Accord and Satisfaction

an arrangement between contracting parties whereby one of the parties substitutes a different performance for his or her original duty under the contract.

For a promise to be enforced by the courts, there must be _______?

consideration. *a court will enforce one party's promise only if the other party promised something (an act, money, etc.) in exchange.

Unliquidated Debt

debt for which the parties either dispute the fact that any money is owed or agree that some money is owed but dispute the amount.

Consideration

is what a person will receive in return for performing a contract obligation. *consideration can be anything, as long as it is the product of a bargained-for exchange. in a business context it is often (but not always) money.

Is preexisting duty a valid consideration?

no, a promise to do something that you are already obligated to do is not valid consideration.

Are past consideration's recognized according to U.S rule?

no, past consideration is no consideration at all. *a promise cannot be based on consideration that was provided before the promise was made.

Under UCC Section 2-306

requirement and output contracts are permitted for the sale of goods.

Under an accord and satisfaction, the actual performance of that new duty is the what?

satisfaction. *The satisfaction is the payment, by the debtor, of the reduced amount.

Under an accord and satisfaction, the promise to perform the new duty is what?

the accord. *The accord is the new agreement to pay less than the creditor claims.

Adequacy of Consideration

the court seldom considers adequacy of consideration. *what this rule mean is that the court does not weigh whether you made a good bargain. *there are exceptions to the rule though. Courts seldom consider the adequacy of consideration but will do so if an item was sold for a low sum in order to avoid claims of creditors.

Promissory Estoppel

the legal enforcement of an otherwise unenforceable contract due to a party's detrimental reliance on the contract.

Under UCC Section 3-311, effective in 30 states,....

the rule under common law that creates an accord and satisfaction, when a creditor cashed a check, he or she was bound to accept the lesser amount as payment in full, the rule remains in place but has two exceptions.

Forebearance

to not engage in particular activities.