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The Requirement of Consideration

Consideration: something of value given by each party to bind an agreement.

© 2011 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.

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Promisor and Promisee

Promisor: one who makes a promise.

Promisee: person to whom a promise is made.

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Gifts

A promise to make a gift is unenforceable.

Gift: voluntary transfer of property without consideration.

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The Nature of Consideration

Consideration may consist of a sacrifice by the offeree.

Legal detriment: consideration that is a sacrifice by the offeree.

© 2011 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.

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Legal Detriment

Legal detriment is consideration when the offeree:

Does or promises to do something he is not legally bound to do.

Refrains or promises to refrain from doing something he has a legal right to do.

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Forbearance

Forbearance: refraining from doing something one has a legal right to do.

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Adequacy of Consideration

The presence of consideration in an agreement is essential.

Whether it is sufficient or fair has been another question, historically.

Courts may question the adequacy of consideration in extreme cases.

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Nominal Consideration

Nominal consideration: dollar or other small sum of money used to bind a contract.

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Moral Consideration

Sometimes an offeror makes a promise because he or she feels it is the right thing to do.

A moral promise is no more enforceable than any other promise unsupported by consideration.

© 2011 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.

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Past Consideration

Past consideration: promise made for an act that has already taken place.

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Special Problems Relating to Consideration

Preexisting contractual agreement.

Preexisting duty to pay a debt.

Preexisting duty to perform a legal obligation.

© 2011 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.

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Liquidated and Unliquidated Claims

Liquidated claim: debt, amount of which is not in dispute

Unliquidated claim: debt, amount of which is subject to an honest dispute.

© 2011 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.

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Composition of Creditors

Composition of creditors: agreement among creditors to accept a percentage of total owed by debtor in full settlement of debt.

© 2011 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.

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Agreements Enforceable Without Consideration

Promises to charitable organizations.

Pledge: promise to make a gift to a charitable, religious, educational, or scientific institution; bailment created when personal property is deposited as security for repayment of a debt.

© 2011 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.

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Pledge