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8 Cards in this Set

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Mutuality of Obligation

What are the requirements of consideration to enforce a mutual promises of performance.
(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or

(b) equivalence in the values exchanged; or

a. Rationale. In such typical bargains as the ordinary sale of goods each party gives up something of economic value, and the values exchanged are often roughly or exactly equivalent by standards independent of the particular bargain. Quite often promise is exchanged for promise, and the promised performances are sometimes divisible into matching parts. See § 31. Hence it has sometimes been said that consideration must consist of a "benefit to the promisor" or a "detriment to the promisee"; it has frequently been claimed that there was no consideration because the economic value given in exchange was much less than that of the promise or the promised performance; "mutuality of obligation" has been said to be essential to a contract. But experience has shown that these are not essential elements of a bargain or of an enforceable contract, and they are negated as requirements by the rules stated in §§ 71-78. This Section makes that negation explicit.

b. Benefit and detriment. Historically, the common law action of debt was said to require a quid pro quo, and that requirement may have led to statements that consideration must be a benefit to the promisor. But contracts were enforced in the common-law action of assumpsit without any such requirement; in actions of assumpsit the emphasis was rather on the harm to the promisee, and detrimental reliance on a promise may still be the basis of contractual relief. See § 90. But reliance is not essential to the formation of a bargain, and remedies for breach have longbeen given in cases of exchange of promise for promise where neither party has begun to perform. Today when it is said that consideration must involve a detriment to the promisee, the supposed requirement is often qualified by a statement that a "legal detriment" is sufficient even though there is no economic detriment or other actual loss. It is more realistic to say simply that there is no requirement of detriment.
Consideration Requirements to enforce mutual propmises of performance

@ Common Law
originally both parties had to provide something of value for the contract to be enforceable.

This was done by seal.

Then by notary

then by signature

Now consideration can be suffient by promise.
§ 71 Requirement of Exchange;

What Types of Exchange must be made to constitute consideration for a promise to be enforced?
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
(3) The performance may consist of

(a) an act other than a promise, or

(b) a forbearance, or

(c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.
What does "Bargained for." mean?
In the typical bargain, the consideration and the promise bear a reciprocal relation of motive or inducement: the consideration induces the making of the promise and the promise induces the furnishing of the consideration.

Here, as in the matter of mutual assent, the law is concerned with the external manifestation rather than the undisclosed mental state: it is enough that one party manifests an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement. See § 81; compare §§ 19, 20.

But it is not enough that the promise induces the conduct of the promisee or that the conduct of the promisee induces the making of the promise; both elements must be present, or there is no bargain.

Moreover, a mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration and the promise is enforced, if at all, as a promise binding without consideration under §§ 82-94. See Comments b and c to § 87.
Is there sufficient consideration to enforce:

1. A offers to buy a book owned by B and to pay B $ 10 in exchange; B accepts the offer and delivers the book to A.
But what if A at the time he makes the offer secretly intends to pay B $ 10 whether or not he gets the book,
or
even though B at the time he accepts secretly intends not to collect the $ 10.

2. A receives a gift from B of a book worth $ 10. Subsequently A promises to pay B the value of the book.

What if B at the time he makes the gift secretly hopes that A will pay him for it.

3. A promises to make a gift of $ 10 to B. In reliance on the promise B buys a book from C and promises to pay C $ 10 for it.

4. A desires to make a binding promise to give $ 1000 to his son B. Being advised that a gratuitous promise is not binding, A writes out and signs a false recital that B has sold him a car for $ 1000 and a promise to pay that amount.

5. A desires to make a binding promise to give $ 1000 to his son B. Being advised that a gratuitous promise is not binding, A offers to buy from B for $ 1000 a book worth less than $ 1. B accepts the offer knowing that the purchase of the book is a mere pretense.
Illustrations:

1.The transfer and delivery of the book constitute a performance and are consideration for A's promise. See Uniform Commercial Code §§ 2-106, 2-301. This is so even though A at the time he makes the offer secretly intends to pay B $ 10 whether or not he gets the book, or even though B at the time he accepts secretly intends not to collect the $ 10.

2. There is no consideration for A's promise. This is so even though B at the time he makes the gift secretly hopes that A will pay him for it. As to the enforcement of such promises, see § 86.

3. There is no consideration for A's promise.

4. There is no consideration for A's promise.

5. There is no consideration for A's promise to pay $ 1000.
Why does the court usually not try to but into determining if there was an exchange for equal value?
But the social functions of bargains include the provision of opportunity for free individual action and exercise of judgment and the fixing of values by private action, either generally or for purposes of the particular transaction. Those functions would be impaired by judicial review of the values so fixed. Ordinarily, therefore, courts do not inquire into the adequacy of consideration, particularly where one or both of the values exchanged are difficult to measure. See § 79. Even where both parties know that a transaction is in part a bargain and in part a gift, the element of bargain may nevertheless furnish consideration for the entire transaction.

On the other hand, a gift is not ordinarily treated as a bargain, and a promise to make a gift is not made a bargain by the promise of the prospective donee to accept the gift, or by his acceptance of part of it. This may be true even though the terms of gift impose a burden on the donee as well as the donor. See Illustration 2 to § 24. In such cases the distinction between bargain and gift may be a fine one, depending on the motives manifested by the parties.

In some cases there may be no bargain so long as the agreement is entirely executory, but performance may furnish consideration or the agreement may become fully or partly enforceable by virtue of the reliance of one party or the unjust enrichment of the other. Compare § 90.
6. A offers to buy a book owned by B and to pay B $ 10 in exchange therefor. B's transfer and delivery of the book are consideration for A's promise even though both parties know that such books regularly sell for $ 5 and that part of A's motive in making the offer is to make a gift to B. See §§ 79, 81.

7. A owns land worth $ 10,000 which is subject to a mortgage to secure a debt of $ 5,000. A promises to make a gift of the land to his son B and to pay off the mortgage, and later gives B a deed subject to the mortgage. B's acceptance of the deed is not consideration for A's promise to pay the mortgage debt.

8. A and B agree that A will advance $ 1000 to B as a gratuitous loan. B's promise to accept the loan is not consideration for A's promise to make it. But the loan when made is consideration for B's promise to repay.
mixtures of bargain and gift
d. What are the 3 responses to a promise that will esablish consideration?
Consideration may consist of a

performance
or
of a return promise.

Consideration by way of performance may be a specified act of forbearance, or any one of several specified acts or forbearances of which the offeree is given the choice, or such conduct as will produce a specified result.

Or either the offeror or the offeree may request as consideration the creation, modification or destruction of a purely intangible legal relation.

Not infrequently the consideration bargained for is an act with the added requirement that a certain legal result shall be produced.

the consideration invited may be a performance or a return promise in the alternative.