Chp. 8

Definition of consideration:

The bargained for exchange of something of value by the parties to a contract. This is normally required for a contract to be enforceable.

Example: I promise to clean your car in exchange for your promise to drive me to work all week.

Benefits and Detriments

A benefit is something that a party was not previously entitled to receive.

A detriment is any loss suffered.

Example: I give you $500 in exchange for the cell phone you are selling.

Cell phone is my benefit (the thing I’m gaining). The detriment is the $500 I’m paying.

Big image

Types of Consideration

Money - one party will offer money in exchange for another party's promise or performance

Property or Services - barter agreements involving goods and services rather than money

A Promise Not to Sue - one party has the right to sue another party but gives up that right in exchange for something of value (should sign a release.

  • Forbearance: not doing something that you have the legal right to do

Charitable Pledges - If you promise to donate to an organization you must do so as they depend on that donation. The court enforces these as if they are contracts.

Disputes can be settled by Accord and Satisfaction

*Creditor accepts a payment that is less than the amount due as full payment.

Accord = acceptance by creditor of less than billed amount
Satisfaction = agreed to settlement amount

Example: I owe Chase Bank $1M but cannot pay. They agree to take $750,000 as full payment.

Agreements without Consideration

Promises Under Seal

Seal - mark or an impression placed on a written contract indicating it was executed (signed) and accepted in a formal manner

Promises After Discharge in Bankruptcy

Court hearings must be held when someone has agreed to reaffirm a debt discharged in bankruptcy to prevent abuse by creditors who might pressure debtors into making such promises.

Debts Barred by Statutes of Limitations

Statute of limitation - Establishes the time frame within which a party is allowed to bring suit. (different state set different times)

Promises Enforced by Promissory Estoppel

Promissory Estoppel is a promise that may be enforceable without consideration (used to prevent injustice when a person changes his position significantly based on another person’s promise)

Example: Bob promised you a job in Texas. Based on this promise you quit your current job and move to Texas. When you arrive there is no job available. (You relied on his promise and believed his promise)

Three Elements of Promissory Estoppel

1. The promise must be made to bring about action or forbearance by another person who gave no consideration.

2. The one who gave no consideration must have relied on the promise and changed his or her position in a significant way.

3. Injustice can be avoided only by enforcing the agreement.

Unenforceable Agreements Without Consideration

*There are promises that courts will not enforce.

Illusory promises - they appear to be contracts but really aren’t…both parties must be under obligation to do something
Example: You promise to complete any work a business may need during the next year…the business never needed any work so you did not receive any payment

Past consideration - consideration that took place in the past or that is given for something that has already been done is not regarded as legal by the courts
Example: fixing someone’s car and then the next day telling them they owe you money for fixing the car….nothing agreed upon before the repairs, cannot demand payment later

Pre-existing duty: a person is already under legal obligation to do something, cannot promise to do that same thing as consideration for a contract
Example: police officer cannot ask for payment (or demand payment that was offered) for patrolling a neighborhood…they are already expected to do so

Promises to Attend a Social Engagement

Would not be legally binding because there’s nothing given in exchange for a promise to attend a social engagement.

Example: You can’t sue your friend if they don’t come to your party but said they would.
Big image