Business Law and Ethics Questions !
Blacksmith G
Mann_Essentials13e_PPT_Ch12.pptxChapter 12
Consideration
Chapter 12 Title Slide
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Topics Covered in Chapter 12: Consideration
A. Legal Sufficiency
B. Bargained-For-Exchange
C. Contracts Without Consideration
2
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
2
Legal Sufficiency
Definition – the inducement to enter into a contract.
Elements – legal sufficiency and bargained-for exchange.
3
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3
Legal Sufficiency
Legal Sufficiency – consists of either a benefit to the promisor or a detriment to the promise.
Legal Benefit – obtaining something to which one had no prior legal right.
Legal Detriment – doing or not doing an act when one has a legal right to do so.
4
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
4
Legal Sufficiency
Legal Sufficiency
Adequacy – not required where the parties have freely agreed to the exchange.
Unilateral Contract – promise is exchanged for a completed act, or a forbearance to act.
5
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
5
Legal Sufficiency
Legal Sufficiency
Bilateral Contract – promise exchanged for a promise; both promises must be supported by consideration.
6
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
6
Legal Sufficiency
Illusory Promises – promise that imposes no obligation on the promisor.
7
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
7
Legal Sufficiency
Illusory Promises – the following promises are not illusory:
Output Contract – agreement to sell all of one's production to a single buyer.
Requirements Contract – agreement to buy all of one's needs from a single producer.
8
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8
Legal Sufficiency
Illusory Promises – the following promises are not illusory:
Exclusive Dealing Contract – grant by a manufacturer to sell goods in a defined market.
Conditional Contract – the obligations are contingent upon the occurrence of a stated event.
9
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
9
Legal Sufficiency
Preexisting Public Obligations – public duties such as those imposed by tort or criminal law are neither a legal detriment nor a legal benefit.
Preexisting Contractual Duty – performance of a preexisting contractual duty is not consideration.
10
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
10
Legal Sufficiency
Modification of a Preexisting Contract
Under the common law a modification must be supported by mutual consideration; under the Code a contract can be modified without new consideration.
11
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
11
Modification of a Preexisting Contract
12
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
12
Legal Sufficiency
Substituted Contracts – the parties agree to rescind their original contract and to enter into a new one; rescission and new contract are supported by consideration.
Settlement of an Undisputed Debt – payment of a lesser sum of money to discharge an undisputed debt does not constitute legally sufficient consideration.
13
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
13
Legal Sufficiency
Settlement of a Disputed Debt – payment of a lesser sum of money to discharge a disputed debt is legally sufficient consideration.
14
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
14
Bargained-For Exchange
Definition – a mutually agreed-upon exchange.
Past Consideration – an act done before the contract is made is not consideration.
Third Parties – consideration may be given to another person.
15
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
15
Contracts without Consideration
Promises to Perform Unenforceable Obligations
Promise to Pay Debt Barred by the Statute of Limitations – a new promise by the debtor to pay the debt renews the running of the statute for a second statutory period.
16
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
16
Contracts without Consideration
Promises to Perform Unenforceable Obligations
Promise to Pay Debt Discharged in Bankruptcy – may be enforceable without consideration.
Voidable Promises – new promise to perform a voidable obligation that has not been previously voided is enforceable.
17
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
17
Contracts without Consideration
Promises to Perform Unenforceable Obligations
Moral Obligation – a promise made to satisfy a preexisting moral obligation is generally unenforceable for lack of consideration.
18
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
18
Contracts without Consideration
Promissory Estoppel – doctrine that prohibits a party from denying her promise when the promisee takes action or forbearance to his detriment reasonably based upon the promise.
19
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
Contracts without Consideration
Contracts Under Seal – where still recognized, the seal acts as a substitute for consideration.
20
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
20
Contracts without Consideration
Promises Made Enforceable by Statute
Some gratuitous promises have been made enforceable by statute.
The Code makes enforceable: (1) contract modifications, (2) renunciations, and (3) firm offers.
21
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
21
Consideration
22
© 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
22
