Law Writing Assignment
khalid89
chapter_12.pptChapter 12
Contracts: Consideration
Miller Cross
BUSINESS LAW
Alternate Edition 12thEd.
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§1: Elements of Consideration
- Consideration must have “legally sufficient value” and a “bargain-for-exchange.”
- “Legal Value” can mean:
- Promise,
- Performance, or
- Forbearance.
- CASE 12.1 Hamer v. Sidway (1891).
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Bargain-for-Exchange
- Second element of consideration:
- Must provide basis for the bargain.
- Something of legal value (a promise, or a performance) must be exchanged between the parties.
- The promise must be either:
Legally detrimental to the promisee, or Legally beneficial to the promisor.
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§2: Adequacy of Consideration
- A Court will not question the fairness of the bargain if legally sufficient.
- Law does not protect a person from entering into an unwise contract.
- In extreme cases, a court may find that a party lacks legal capacity or that contract was unconscionable.
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§3: Agreements That Lack Consideration
- Preexisting Duty.
- A promise to do what one already has a legal duty to do does not constitute legally sufficient consideration.
- Exceptions:
Unforeseen Difficulties.
Rescission and New Contract.
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Consideration Issues
- Past Consideration is no consideration because the bargained-for exchange element is missing.
- CASE 12.3 Access Organics, Inc. v. Hernandez (2008).
- Illusory Promises.
- Promisor has not definitely promised to do anything (no promise at all).
- Option-to-Cancel Clauses.
- Requirements and Output Contracts.
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§4: Settlement of Claims
- Debtor offers to pay a lesser amount than the creditor purports to be owed.
- Accord and Satisfaction.
- Liquidated Debt.
Amount has been ascertained, fixed, agreed on, settled, or exactly determined.
- Unliquidated Debt.
Parties give up legal right to contest the amount in dispute, and thus consideration is given.
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Settlement of Claims
- Release bars any further recovery beyond the terms stated in the release.
- Covenant not to Sue is an agreement to substitute contractual obligation for some other type of legal action based on a valid claim.
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- Promissory Estoppel:
- Must be clear and definite promise.
- Promisee must justifiably rely on the promise.
- Reliance is substantial.
- Justice will be served by enforcing promise.
- Promises to pay Debts Barred by Statute of Limitations.
- Charitable Subscriptions.
§5: Exceptions to the Consideration Requirement
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- Promises to Pay Debt Barred by a Statute of Limitations.
- Detrimental Reliance and Promissory Estoppel:
- Must be definite promise.
- Promisee must justifiably rely on the promise.
- Reliance is substantial.
- Justice will be served by enforcing promise.
§5: Exceptions to the Consideration Requirement
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