consideration chapter 8. consideration – what a person demands and generally must receive in order...
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ConsiderationConsideration – what a – what a person demands and person demands and generally must receive generally must receive in order to make a in order to make a contract legally contract legally bindingbinding
3 Requirements of Consideration3 Requirements of Consideration
1.1.Each party must give an Each party must give an act, forbearance, or act, forbearance, or promise to the other partypromise to the other party
ForbearanceForbearance – refraining – refraining from doing something you from doing something you have the right to dohave the right to do
3 Requirements of Consideration3 Requirements of Consideration
2.2. Each party must trade Each party must trade what they contribute to the what they contribute to the transactiontransaction
3.3. What each party trades What each party trades
must have legal valuemust have legal value
** Consideration ** Consideration distinguishes a distinguishes a
contractual promise contractual promise
from a promise to from a promise to
give a gift **give a gift **
GiftGift – transfer of ownership without – transfer of ownership without receiving anything in returnreceiving anything in return
generally not legally enforceablegenerally not legally enforceable
Donor – givesDonor – gives
Donee – receivesDonee – receives
After gift exchange occurs, After gift exchange occurs, transaction becomes bindingtransaction becomes binding
Nominal ConsiderationNominal Consideration – – token amount identified in a token amount identified in a written contract when parties written contract when parties either cannot or do not wish either cannot or do not wish to state the amount to state the amount specificallyspecifically
Ex.Ex. $1 and other valuable $1 and other valuable consideration in exchange for a carconsideration in exchange for a car
IIllusory Promisesllusory PromisesA contract clause that A contract clause that
allows you to escape legal allows you to escape legal obligationobligation
Ex.Ex. I promise to paint your I promise to paint your house…house…ifif I have time. I have time.
Termination ClausesTermination Clauses
Gives power to withdraw from Gives power to withdraw from a contract if certain a contract if certain circumstances change, or after circumstances change, or after the passage of a certain length the passage of a certain length of timeof time Exceptions must be definedExceptions must be defined
Output and Requirement ContractsOutput and Requirement Contracts
Output ContractOutput Contract – A buyer’s – A buyer’s agreement to purchase agreement to purchase allall of a of a particular producer’s productionparticular producer’s production
Requirements ContractRequirements Contract – A – A seller’s agreement to supply seller’s agreement to supply allall of the needs of a buyerof the needs of a buyer
Existing DutyExisting DutyA promise to do something that A promise to do something that
you are already obligated to do you are already obligated to do by law or prior contract does by law or prior contract does notnot serve as consideration serve as consideration
This is called…This is called…
Existing Public/Private DutyExisting Public/Private Duty
Liquidated DebtLiquidated Debt
Where an agreement is made Where an agreement is made that a debt and the true that a debt and the true amount of that debt exists and amount of that debt exists and must be repaidmust be repaid
All debt must be recoveredAll debt must be recovered
Unliquidated DebtsUnliquidated DebtsWhere an agreement cannot Where an agreement cannot
be reached as to the be reached as to the amount of debt owedamount of debt owed
Accord and SatisfactionAccord and Satisfaction
- a compromise must be- a compromise must be mademade
Once an agreement is Once an agreement is reached concerning reached concerning unliquidated debt, this unliquidated debt, this is called a is called a releaserelease
Composition of CreditorsComposition of Creditors
When a group of creditors When a group of creditors cooperatively agree to cooperatively agree to accept less than what they accept less than what they are entitled to in exchange are entitled to in exchange for the debtor not filing for the debtor not filing bankruptcybankruptcy
Past PerformancePast Performance
An act that has already been An act that has already been performed performed cannotcannot serve as serve as consideration for an consideration for an immediate or future contractimmediate or future contractThis is known as This is known as past past
considerationconsideration
1.1.Promises to Charitable Promises to Charitable OrganizationsOrganizations
2.2.Promises covered by the Promises covered by the UCCUCC Firm OffersFirm Offers ModificationsModifications
3.3. Promises barred from Collection Promises barred from Collection by Statuteby Statute
Statute of LimitationsStatute of LimitationsA specific time limit for bringing a A specific time limit for bringing a
lawsuitlawsuit
Debts Discharged in BankruptcyDebts Discharged in BankruptcySome debt lost in bankruptcy can Some debt lost in bankruptcy can
still be reinstated by a promise of still be reinstated by a promise of the debtorthe debtor
4.4. Promissory Estoppel Promissory Estoppel
Prevents a promisor from Prevents a promisor from stating in court that they stating in court that they did not receive did not receive consideration for their consideration for their promisespromises
Requirements for P.E.Requirements for P.E.
1.1.Must forsee reliability Must forsee reliability on the promiseon the promise
2.2.Promisee does act in Promisee does act in reliance of the promisereliance of the promise