Consideration

Front 1

Contract = Offer + Acceptance (mutual assent) + Consideration (promises or performances)

Back 1

Consideration is the bargained for exchange that induces current performance, offers detriment, and is binding ($100.00/specific dollar amount or the nominal fee of 1 dollar works unless you are exchanging currency or an equivalent of currency-like beads for beads). Past consideration is no consideration.

Front 2

What is Consideration?

Back 2

The bargained for exchange of promises or performances that make the contract enforceable; performance may be consideration in a unilateral contract; promise may be consideration in a bilateral contract; the offeror must seek something in return -either a promise or performance; this is the bargain test-something has to be swapped-exchanged.

Front 3

Forbearance of a legal right is sufficient consideration

Back 3

Schnell v. Nell:

(1) forbearance of a legal right is sufficient consideration if the general right is valid like giving up smoking….

(2) Moral consideration (the moral obligation to return a favor because someone was nice to you) will not support a contract.

(3) Past consideration is not valid.

Front 4

Gratuitous Promise

Benefit to the promisor separates consideration from a mere gratuitous condition

Back 4

Rule: A gratuitous promise is not enforceable even if a party has reasonably relied upon that promise and has suffered loss and inconvenience. Benefit to the promisor separates consideration from a mere gratuitous condition.

Kirksey v. Kirksey: here in response to the promise, Kirksey suffered a detriment. Her coming to live was a pre-condition of her accepting the gift. This was a substantial detriment. What this points out to you is how do you know there is a bargain or a precondition in the analysis of consideration? You must ask whether the occurrence or condition is of benefit to the promisor. Here, does the sister-in-law's visit to the promisor something the promisor actively desired. If yes, the promisee's action was bargained for. If not: the action was a necessary precondition.

We need to see why you are making this deal when money is exchanged. Just because you offer a nominal fee doesn’t mean there is consideration if it doesn’t look like there is a bargained for exchange. If something is only going one way, it is a gift:

Front 5

Illusory Promise: “in law no promise.”

Back 5

A promise whose condition of performance is entirely upon the whim of a promisor. Such a promise cannot support a finding of valuable consideration for an enforceable contract. It’s not enforceable; an empty or meaningless promise. A promise is illusory if the person making the promise retains complete discretion over its performance.

Hooter’s gave nothing but illusory promises because it reserved the right to decide later the nature or extent of its performance by reserving the right to modify the rules, or terminate the agreement, at its choice, while denying the same to Phillips.

Front 6

Consideration and contract modification:

Just offer to do something different even if it’s a peppercorn you have valid consideration; you would have to argue sham consideration if the consideration offered is extremely lopsided

Back 6

Alaska Packers’ ASS’N v. Domenico: For a contract to be modified with a preexisting duty there must be consideration. A party cannot demand additional compensation for what he has already obligated himself to do. If the consideration differs from the original slightly it can be valid.

Had P offered just a little more work than what was agreed, the new contract would have been valid. Had P offered to stay another day or to work for less money on the piece rate of the contract the modification would have been valid. Had P simply given D a token or a piece of jewelry worth practically nothing to seal the new deal, this modification would have been valid. But, there is still a problem with the fact that the superintendent clearly informed Ps that he had no authority to negotiate new contracts.

Front 7

Preexisting Duty Rule

Back 7

The new public duty purpose of the preexisting duty rule is to prevent modifications of contracts when they are procured by duress or coercion.

This ruling is in line with the Restatement 2nd section 89. Under the UCC 2-209(1): no additional consideration is required to modify a contract if that modification is bargained for in good faith.

Ways to avoid the pre-existing duty rule:

1) The promise can add something new 2) the parties can agree to rescind the deal and start over with a new contract with new executor promises: so long as neither party has fully performed under the original promise; and so long as the forbearance of rights by each party will be consideration for each other’s promises under the original agreement.

Front 8

Moral consideration: exceptions when moral consideration is binding

Back 8

Moral consideration is enforced if the promisor has received a material benefit constituting a valid consideration for his promise.


Debts barred by statute of limitations: Restatement (Second) of Contracts § 82 (1981) (1) A promise to pay all or part of an antecedent contractual or quasi-contractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be except for the effect of a statute of limitations.

Debts discharged in bankruptcy: Restatement (Second) of Contracts § 83 (1981)
An express promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in bankruptcy proceedings begun before the promise is made, is binding.


Debts incurred by Minors (incapacity): Restatement (Second) of Contracts § 85 (1981)
Except as stated in § 93, a promise to perform all or part of an antecedent contract of the promisor, previously voidable by him, but not avoided prior to the making of the promise, is binding.

Front 9

Detrimental Reliance and Promissory Estoppel

PE=cause of action

Back 9

Promissory Estoppel generally involves a promise by one party upon which another relies to his detriment and which the promisor should reasonably have forseen would cause the promisee to so rely.

Contracts without consideration; when to apply promissory estoppel:

Teacher’s Definition: 2d § 90 (1981) Promise Reasonably Inducing Action Or Forbearance; (use the objective 3rd person standard as to the nature of the promise)

i) a promise; ii) which the promisor should reasonably expect to induce action or forbearance on the part of the promisee (did the promisor induce reliance?); iii) which does induce such action of forbearance (did the P rely on the promise?) and iv) injustice can be avoided only by enforcement of the promise (maybe limited as justice requires)(limited to reliance damages).

NEVER USE PROMISSORY ESTOPPEL IF THERE IS CONSIDERATION PRESENT.

2d § 90 (1981); Promise Reasonably Inducing Action Or Forbearance
(2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. The promisor is bound immediately

Front 10

Equitable Estoppel is only a defense

Back 10

The elements of estoppel are 'conduct by which one . . . induces another to believe . . . in certain material facts, which inducement results in acts in reliance thereon, justifiably taken, which cause injury

However, 'equitable estoppel is a shield, not a sword; that is, it is available only as a defense by the party who has relied when the misrepresenting party seeks to enforce some claim against him. It is not a basis for a cause of action for damages against the misrepresenting party.'

Things done in the past. Equitable estoppel involves only representations and inducements.