chapter 14 consideration twomey, business law and the regulatory environment (14th ed.)

Chapter 14Chapter 14

ConsiderationConsideration

Twomey, Business Law and the Regulatory Environment (14th Ed.)

(c) West Legal Studies Chapter 14 2

The Nature of Consideration The Nature of Consideration [14-1][14-1]

Contract for the sale of a Ford Torino by Jake Plumber to Tom Irvin for $1272

benefit detriment$1272

Jake Plumber Tom Irvindetriment benefitFord Torino

Loan by Bank Two to Tom Irvin for purchase of Ford Torino

benefit detrimentRepayment of $1272 plus 8% interest

Bank Two Tom Irvin

benefit$1272Gift of Ford Torino by Tom Irvin to his sister Becky, as a graduation gift

benefit detrimentnone

Tom Irvin Becky Irvin

detriment benefitFord Torino

detriment

A gift does not have consideration. A promise to make a gift is not enforceable.


Consideration and PromisesConsideration and PromisesConsideration as the Price

Act PromiseTo Act To Forbear

The Promise Binding+

Exceptions to ConsiderationCharitable Subscription

Uniform Commercial CodeSealed and Written Instruments

Promissory Estoppel

What Is Not ConsiderationUnrequested Benefit

Promise to Perform Existing ObligationMoral Obligation

Illegal Consideration

Not Binding


Chapter 14 SummaryChapter 14 Summary

A promise is not binding if there is no consideration for the promise. Consideration is what the promisor requires as the price for the promise. That price may be doing an act, refraining from the doing of an act, or merely promising to do or to refrain. In a bilateral contract, it is necessary to find that the promise of each party is supported by consideration. If either promise is not so supported, it is not binding, and the agreement of the parties is not a contract.


Consequently, the agreement cannot be enforced. When a promise is the consideration, it must be a binding promise. The binding character of a promise is not affected by the circumstance that there is a condition precedent to the performance promised. Likewise, the binding character of the promise and of the contract is not affected by a provision in the contract for its cancellation by either one or both of the parties.

Chapter 14 Summary Chapter 14 Summary [2][2]


A promise to do what one is already obligated to do is not consideration, although some exceptions are made. Such exceptions include the rendering of a partial performance or a modified performance accepted as a good-faith adjustment to a changed situation, a compromise and release of claims, a part-payment check, and a compromise of creditors.

Chapter 14 SummaryChapter 14 Summary [3][3]


Because consideration is the price that is given to obtain the promise, past benefits conferred on the promissor cannot be consideration. In the case of a complex transaction, however, the past benefit and the subsequent transaction relating to the promise may in fact have been intended by the parties as one transaction. In such a case, the earlier benefit is not past consideration but is the consideration contemplated by the promissor as the price for the promise subsequently made.



A promise to refrain from doing an act can be consideration. A promise to refrain from suing or asserting a particular claim can be consideration. Generally, the promise to forbear must be for a specified time as distinguished from agreeing to forbear at will. When consideration is forbearance to assert a claim, it is immaterial whether the claim is valid as long as the claim has been asserted in good faith in the belief that it was valid.



When the promissor obtains the consideration specified for the promise, the law is not ordinarily concerned with the value or adequacy of that consideration. Exceptions are sometimes made in the case of fraud or unconscionability and under consumer protection statutes.



There is a current trend to abandon the requirement of consideration, with promissory estoppel the most extensive repudiation of that requirement.

All transactions must be lawful; therefore, consideration for a promise must be legal. If it is not, there is no consideration, and the promise is not binding.



When the promissor does not actually receive the price promised for the promise, there is a failure of consideration, which constitutes a breach of the contract.



Although consideration is required to make a promise binding, the promise that is not supported by consideration is not unlawful or illegal. If the promissor voluntarily performs the promise, the promissor cannot undo the performance and restore matters to their position prior to the making of the agreement. The parties are free to perform their agreement, but the courts will not help either of them because there is no contract.


chapter 14 consideration twomey, business law and the regulatory environment (14th ed.)

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