chapter 9 section1-3

Business Law

Chapter 9 Section 1-2Mr. Whisel

Section 9.1 Goals Define consideration Determine when there is no consideration Standards

Reading and Writing 1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11 BCD, 1.5.11

ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC

Civics and Government 5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG, 5.3.12 AB

HOT DEBATE For a college graduation present, a wealthy

aunt promised to give Maureen two round-trip tickets for a cruise for her and a friend. The promised trip was to be along the “Mexican Riviera” from Long Beach, California, to Acapulco, Mexico. At the graduation exercises however, her aunt gave a kiss instead and said, “The stock market is down, Sorry, darling!”

Where do you stand?

What’s Your Verdict? Your Neighbors are going skiing in the

Canadian Rockies near Calgary, Alberta. Their vacation will last 10 days. They unilaterally offer to pay you $30 on their return if you pick up their mail each day they are gone. You accept by picking up their mail every day.

Is there consideration for both parties? Is the contract enforceable?

ConsiderationMain purpose of consideration

Distinguish between social promise and more serious transactions

Exchanging one thing for anotherGift

Is the transfer of ownership without receiving anything in return

Promise to give a gift is usually never enforceable

Consideration Donor

Person giving the gift Donee

Person receiving the gift Three Requirements of Consideration

Each party must give an act, forbearance, or promise to the other party

Each party must trade what they contribute to the transaction for the other party’s contribution

What each party trades must have legal value, that is, it must be worth something in the eyes of the law.

Act, Forbearance, or Promise

Act Something you do for the promise

Forbearance Something that you are told not to do

Trading What’s your verdict

Pick up the mail for $30

TradingPromisor

Person promising an action or forbearancePromisee

Person to whom the promise is madeConsideration must be mutual when

trading occurs

Legal Value Legal Value

There has been a change in the party’s legal position as a result of the contract.

Picking up the mail benefited the neighbor because he didn’t have to have his mail stopped.

You gained $30 for providing this act

Adequacy of Consideration Need not be of equal economic value As long as there is a genuine agreement Economic value could lead to a mutual mistake,

duress, fraud, or undue influence

More ConsiderationNominal Consideration

Token amount known when either or both parties do not want to publicize the exchange of something

Section 9.1 Goals Define consideration Determine when there is no consideration Standards


ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC


End of Section 9.1 Questions

Think About Legal ConceptsThink Critically About Evidence

Section 9.2 Goals Identify when there is legal value. Determine when there is a bargained for

exchange Standards


ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC


What’s Your Verdict? Lemsky employed Vork under a three-year

contract. The contract called for Vork to manage a motel for Lemsky at $25,000 a year, as well as receive a free apartment. After six months, Flemming offered Vork $30,000 a year to manage a larger motel. Upon learning of the offer, Lemsky said to Vork, “You’re competent. You’re honest. I need you. I’ll meet any offer you get from anyone else.” Vork remains on the job.

Must Lemsky pay her the higher salary?

Legal Value Changing the legal position of the party as a

result of the contract Illusory Promises

To be consideration a promise must be binding. In other words the promise must create a duty or impose an obligation

Contract with the clause stating you can escape the legal obligation

Painting the house, when you have time. You may never have time to paint the house

Promises Termination Clauses

Power to withdraw from a contract if business circumstances change.

Illusory promise- for any reason Not-Illusory promise- specific reason

Output and Requirement Contracts Output Contract

Supplying all of the output to a company Requirements Contract

Only supplying what is needed

Promises Implied Duty or Fair Dealings

Means that the clause cannot be exercised arbitrarily, but must be exercised in a way that constitutes fair dealings.

Existing Duty Something that you are already required to

do by law Not consideration because your supposed

to be doing this by law.

Existing Duties Existing Public Duty

Making a promise not to drink until your 21 for $10,000 dollars.

Your already required to do so, so your legal value didn’t change

Existing Private Duty If a contract creates a duty, this duty cannot be the

basis of consideration in a different contract Lemsky promising money is unenforceable due to

the current contract.

Existing Duties Settlement of Liquidated Debts

One where the parties agree that the debt exists and on the amount of the debt.

Settlement of Unliquidated Debts Making a mutual forbearance from litigating the amount owed

Also called Accord and Satisfaction

Release Party that settles a claim before the damages are certain

Composition of Creditors Creditors accepting less that what they are entitled to, in full

satisfaction of their claims against the debtor, in turn the debtor cannot file bankruptcy

What’s Your Verdict? Francis, a pedestrian, saw a car pulled over

by the side of the road with a flat tire. He came to the drivers aid, replacing the flat with the spare tire. Then he accompanied the driver to the nearest gas station where her flat was repaired. She thanked Francis and said she would give him $20 on her next payday. Later she changed her mind, and Francis sued.

Can Francis win $20?

Bargained-For Exchange Mutual Gifts

A consideration must be traded one for the other, otherwise there is no consideration.

Bargained-For Exchange Agreeing before something happens Happens immediately or for future performance by

both parties. An act already performed cannot serve as consideration

Called Past Consideration

Section 9.2 Goals Identify when there is legal value. Determine when there is a bargained for

exchange Standards


ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC



Think About Legal ConceptsThink Critically About Evidence

Section 9.3 Goals Identify when promissory estoppel applies Discuss situations in which consideration is

not needed Standards


ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC


What’s Your Verdict? Silverstone, a wealthy financier, strongly

believes that world travel is essential for a balanced education. Accordingly, he told his twin niece and nephew that if they would “ cap their college degrees with a trip around the world.” he would pay all their expenses upon their return, up to $9,500 for each. Using saving and some borrowed money, the twins took off on a 90-day journey. Total reasonable expenses for each exceeded $9,500 by the time they returned home.

Is Silverstone liable to the twins?

Promissory Estoppel When someone intends a gift but consideration is not

present, a promise may be enforced under this doctrine.

Must meet the following: The promisor should reasonably foresee that the promisee

will rely on the promise The promisee does, in fact, act in reliance on the promise. The promisee would suffer a substantial economic loss if the

promise is not enforced. Injustice can be avoided only by enforcement of the promise.

What’s Your Verdict?Branyan pledged $25,000 to the

building fund of a community hospital. Relying on this the other pledges, the hospital’s board of directors entered into a contract for construction of a new section.

Can the Branyans be held to their pledge?

Exceptions to Consideration Promises to Charitable Organizations

Courts will enforce Statue of Limitations

Specifies a time limit for bringing a lawsuit. Breach of Contract- 3 Years

Uniform Commercial Code Option Contract

Leaving an offer open until its accepted Firm Offer

Promise to leave an offer open for a time limit without consideration

Modifications to contracts Good-faith agreement

Section 9.3 Goals Identify when promissory estoppel applies Discuss situations in which consideration is

not needed Standards


ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC



Think About Legal ConceptsThink Critically About EvidenceChapter in Review

chapter 9 section1-3

Economy & Finance