Contracts - Consideration And Promissory Estoppel

Front 1

Gratuitous Promise

Back 1

Promise to make a gift.

Not consideration.

Generally this is unenforceable.

Front 2

Want of Consideration vs. Failure of Consideration

Back 2

Want of Consideration:
--Absence of a bargain for exchange.
--Results in no contract.

Failure of Consideration:
--failure to perform in accordance with the promise.
--Results in a breach of contract.

Front 3

Legal Detriment Test

Back 3

Whether the promisee is doing something he had a legal right not to do or is foregoing some activity in which he had a legal right to engage.

Front 4

Inadequacy of Consideration

Back 4

Modern rule is that the courts do not police the equivalence or the fairness of the exchange for the purposes of applying the consideration doctrine.

Exception: In some jurisdictions, an element in securing specific performance is showing there was a fair or adequate exchange.

Front 5

Insufficient vs Inadequate Consideration

Back 5

Insufficient: no consideration so no bargain

Inadequate: consideration but someone claiming it was not enough so deal is unfair

Front 6

Illusory Promise

Back 6

A promise to perform that leaves performance to the discretion of the promising party—that is an illusory promise and won’t constitute consideration.

Ex: I promise I'll pay you when i feel like it.

Front 7

Executed Gifts

Back 7

Gratuitous transfers are legally enforceable.

What does it take to “execute” a gift?
1. Intent to give a gift
2. Actual or symbolic delivery

Front 8

Recitals of Consideration

Back 8

The requirement of consideration is not satisfied by a false recital.

A minority of courts recognize an exception to this rule where written option contracts contain a false recital of consideration.

Front 9

Distinguish a “Condition on a Gratuitous Promise” from “Consideration”

Back 9

1. Language of the parties:
--Words suggesting benevolence rather than self-interest may indicate a gratuitous promise.

2. Context
--In the commercial context, gratuitous promises are rare. They are much more common in the family and charitable context.

3. Benefit to the promisor
--Where the promisee’s detriment creates no benefit to the promisor, it more than likely indicates a condition to a gift rather than consideration.

Front 10

Past or Moral Consideration

Back 10

A promise in exchange for something already given or performed is not supported by consideration.

The Exceptions to the “Past Consideration” Rule
1. A written promise to pay a debt barred by limitations is enforceable.
2. A written promise to pay a debt discharged by bankruptcy is enforceable.

Front 11

Material Benefit Test

Back 11

Minority Rule

A promise made in recognition of a past benefit conferred will be enforceable as long as:
a) The promisee conferred the benefit on the promisor and not on a third party.
b) The benefit is material.

Exception:
A promise made based on part benefits will not be enforceable if the benefits were previously contracted for by the promisor

Front 12

Promissory Estoppel

Back 12

A promisee that reasonably relies to his detriment on a gratuitous promise may be able to enforce that promise, even though consideration is lacking.

Four requirements:
1. promise
2. foreseeable reliance
3. actual reliance
4. injustice results if no enforcement

Injustice results:
--strength of proof of other 3 requirements
--willfulness of breach
--relative position or equities of the parties
--extent to which reliance was detrimental
--availability of alternatives short of enforcing the promise.