Chapter 8: Consideration

Why are courts willing to enforce a promise to pay a voluntary subscription that lacks consideration?

-One theory for enforcing the promise is that subscribers promise is supported by the promises of other subscribers -Another theory is that a subscription is an offer of a unilateral contract that is accepted by the charity creating liabilities or making expenditures-by relying on the promise.

The theory has gained support as a means of realizing justice. The elements of promissory estoppel include:

1. A promise is made. 2. The promisor reasonably expects the promise to induce action by the promisee. 3. The promisee does act. 4. Justice requires enforcement of the promise

When does forbearance not constitute valid consideration?

Consideration is invalid when it consists of a promise to forbear doing something that one has no right to do, such as to commit an unlawful act

debts of record

Consideration is not necessary to support an obligation of record, such as a judgment, on the basis that such an obligation is enforceable as a matter of public policy

When will courts apply the doctrine of promissory estoppel?

Courts will apply the doctrine of promissory estoppel when the promisor should reasonably expect to cause and does cause action by the promisee and the promisee would be harmed substantially if the promise is not enforced

Performing or Promising to Perform What One Is Already Obligated to Do

If the supposed consideration consists merely of a promise to do what one is already legally obligated to do, consideration is invalid. If the consideration is invalid, the contract is invalid. In such case, the promise gives nothing new to the other contracting party.

nature of consideration

In most contracts, the parties require and are content with a promise by the other party as the price for their own promises -By its nature, this exchange of a promise for a promise occurs at the same time creates a contract

If a friend gratuitously helps do yard work one weekend with no promise to pay, can he then enforce a promise to pay made the following week after the work is done?

No, The promise to pay must induce the friend to do the work, and this cannot be done if the promise is made after the work is completed

What may parties to a contract be allowed to do?

Parties to a contract may at any time mutually agree to cancel an old contract and replace it with a new one. For this new contract to be enforceable, there must be some added features that benefit both parties, although not necessarily to an equal extent

forbearance

Refraining from doing something

promissory estoppel

Substitute for consideration when another acts in reliance on a promisor's promise

Promising to refrain from suing another constitutes consideration if the promisor has a reasonable right to demand damages and intends to file a suit

Such a promise is even valid when a suit lacks merit if the promisor mistakenly, but honestly and reasonably, believes a suit would be valid

Modification of Sales Contracts

The Uniform Commercial Code regulates sales of goods. The code provides that when a contract for the sale of goods is modified by agreement of the parties, no consideration is necessary to make it enforceable

past performance

an act performed prior to the promise does not constitute valid consideration. If a carpenter gratuitously helps a neighbor build a house with no promise of pay, a promise to pay made after the house is completed cannot be enforced. The promise to pay must induce the carpenter to do the work, and this cannot be done if the promise is made after the work is completed.

Another theory is that a subscription is an offer of a unilateral contract that is accepted by the charity creating liabilities or making expenditures

by relying on the promise

Courts will find that justice requires:

enforcement of the promise when the promisee would be substantially harmed if it were not enforced

Why is consideration unnecessary to support an obligation of record?

on the basis that such an obligation is enforceable as a matter of public policy

For a promise to constitute consideration, the promise must:

the promise must impose an obligation on the person making it

Generally, why is the law not concerned with the adequacy of consideration?

The adequacy of the consideration is IRRELEVANT because the law does not prohibit bargains

foreseeable difficulties

not bound to agree to pay more because of unforeseen difficulties, but if such an agreement is made, these difficulties will constitute a consideration even though the contractor does not agree to do anything additional

part payment

of a past-due debt is not consideration to support the creditor's promise to cancel the balance of the debt. The creditor is already entitled to the part payment. Promising to give something to which the other party is already entitled is not consideration

Refraining or Promising to Refrain from Doing What One Has No Right to Do

When one refrains or promises to refrain from doing something, this conduct is called forbearance. If the promisor had a right to do the act, forbearance is a valid consideration. Consideration is invalid when it consists of a promise to forbear doing something that one has no right to do, such as to commit an unlawful act

When does a promise constitute consideration?

Consideration may be another promise. For a promise to be consideration, the promise must impose an obligation upon the person making the promise. Consideration may be the performance of an act or the making of a promise to refrain from performing a lawful act. A promise constitutes consideration when the promise imposes an obligation on the person making it

Objectives:

Valid and invalid considerations Definition and application of Forbearance Definition and application of promissory estoppel

consideration

What promisor requires as the price for a promise

composition of creditors

When all of multiple creditors settle in full for a fraction of the amount owed

voluntary subscription

When charitable enterprises are financed by voluntary subscriptions of many people, the promise of each person is generally held to be enforceable. When a number of people make pledges to or subscribe to a charitable association or to a church, for example, the pledges or subscriptions are binding. One theory for enforcing the promise is that each subscriber's promise is supported by the promises of other subscribers

Courts will compel compliance with an agreement only when it is supported by:

consideration -Consideration distinguishes mere agreements from legally enforceable obligations

When can partial payment of a past-due debt constitute consideration to support the creditor's promise to cancel the balance of the debt?

1.) If the amount of the debt is in dispute, the debt is canceled if a lesser sum than that claimed is accepted in full settlement 2.) If there is more than one creditor, and each one agrees, in consideration of the others' agreement, to accept full settlement a percentage of the amount due, this agreement will cancel the unpaid balance due to these creditors 3.) If the debt is evidence by a note or other written evidence, cancellation and return of the written evidence cancels the debt 4.) If the payment of the lesser sum is accompanied by a receipt in full and some indication that a gift is made of the balance, the debt may be cancelled 5.) If a secured note for a lesser amount is given and accepted of an unsecured note for a greater amount, the difference between the two notes is discharged.

debt

A debt that is discharged by bankruptcy may be revived under certain circumstances, usually by the debtor's agreeing, with approval from the bankruptcy court, to pay it. Such promises are enforceable even though the creditor, the promisee, gives no new consideration to support the promise. The debtor is said to have waived the defense of discharge in bankruptcy; the original debt, therefore, is deemed to remain in force

conditional promises

A promise that is conditional can still be consideration for a contract. Such a promise is consideration even if the condition is unlikely to occur

promissory estoppel doctrine

According to this doctrine, if one person makes a promise to another, and that other person acts in reliance on the promise, the promisor will not be permitted to claim lack of consideration. Enforcement is held to be proper when the promisor should reasonably expect to cause, and does cause, action by the promisee, and the promisee would be harmed substantially if the promise were not enforced

when consideration is not required

As a general rule, a promise must be supported by consideration. Certain exceptions to the rule involve voluntary subscriptions, debts of record, promissory estoppel, and modification of sales contracts.

adequacy of consideration

As a general rule, the adequacy of the consideration is irrelevant because the law does not prohibit bargains Except in cases in which the contract calls for a performance or the sale of goods that have a standard or recognized market value, it is impossible to fix the money value of each promise. If the consideration given by one party is grossly inadequate, this is a relevant fact in proving fraud, undue influence, duress, or mistake.

Consideration can include?

is whatever the promisor demands and receives as the price for a promise. This could be money, personal or real property, a service, a promise regarding behavior, or another item.

What can consideration also be?

may also be the doing of an act or the making of a promise to refrain from doing an act that can be lawfully done

the forbearance consists of promising to:

refrain from suing the other party.

Several exceptions apply to this rule:

1. If the amount of the debt is in dispute, the debt is canceled if a lesser sum than that claimed is accepted in full settlement. 2. If there is more than one creditor, and each one agrees, in consideration of the others' agreement, to accept in full settlement a percentage of the amount due, this agreement will cancel the unpaid balance due these creditors. This arrangement is known as a composition of creditors. 3. If the debt is evidenced by a note or other written evidence, cancellation and return of the written evidence cancels the debt. 4. If the payment of the lesser sum is accompanied by a receipt in full and some indication that a gift is made of the balance, the debt may be cancelled. 5. If a secured note for a lesser amount is given and accepted in discharge of an unsecured note for a greater amount, the difference between the two notes is discharged. The security is the consideration to support the contract to settle for a lesser sum.

Many apparent considerations lack the full force and effect necessary to make enforceable agreements. Consideration of the following classes is either insufficient or invalid:

1. Performing or promising to perform what one is already obligated to do 2. Refraining or promising to refrain from doing what one has no right to do 3. Past performance