Law, Contracts

Front 1

Elements for consideration

Back 1

There must be a bargained-for exchange between the parties, and

That which is bargained for must be considered of legal value or, as it is traditionally states, it must constitute a benefit to the promisor or a detriment to the promisee.

Front 2

Walk-through bargained-for exchange

Back 2

The promise must induce the detriment and the detriment must induce the promise.

Meaning, there is no bargain involved when one party gives a gift to another.

Front 3

Concerning the act or forbearance by the promisee, is it sufficient consideration to form a contract the benefit is not economic?

Back 3

Yes, the gratification of influencing the mind of another is sufficient.

Front 4

Rule regarding past or moral consideration.

Back 4

A promise given in exchange for something already done does not satisfy the bargain requirement.

But there are exceptions.

Front 5

What are the exceptions to the general rule regarding past or moral consideration?

Back 5

Where a past obligation is unenforceable b/c of a technical defense (e.g., SoL), that obligation will be enforceable if a new promise is made in writing or is partially performed.

Also, the modern trend is to allow a past act benefited by the promisee at the promisor's request or in response to an emergency, a subsequent promise to pay for that act will be enforceable.

Front 6

Do court inquire into the adequacy of consideration?

Back 6

Generally, no. However, if something is entirely devoid of value, it is insufficient.

Front 7

What is sham consideration?

Back 7

Sham consideration is an insignificant sum recited in the contract, and is also insufficient consideration if not paid.

But if there is a possibility of value in the thing bargained for, consideration will be found even if the value never comes into existence.

Front 8

Pre-existing legal duty rule, go.

Back 8

Traditionally, performing or promising to perform an existing legal duty is insufficient consideration.

Front 9

What are the exceptions to the pre-existing legal duty rule?

Back 9

1. New or different consideration is promised,

2. The promise is to ratify a voidable obligation,

3. The PED is owed to a third person rather than to the promisor,

4. There is honest dispute as to the duty, or

5. There are unforeseen circumstances sufficient to discharge a party,

or under the modern view, if the modification is fair & equitable in view of circumstances not anticipated when the contract was made.

A good faith agreement modifying a U.C.C. contract needs no consideration to be binding.

Front 10

Is forbearance to sue consideration?

Back 10

A promise to refrain from suing on a claim may constitute consideration if the claim is valid or the claimant in good faith believe the claim was valid.

Front 11

Rule for illusory promises, go.

Back 11

Consideration must exist on both sides of a contract. If only one part is bound to perform, the promise is illusory and will not be enforced.

Courts often supply implied promises to infer mutuality.

Front 12

Typical examples of contracts that trigger (but satisfy) mutuality/illusory promises.

Back 12

Requirements and output contracts,

Conditional promises (unless condition is entirely w/n the promisor's control),

Contracts where a party has the right to cancel (party must give 60 days' notice),

Exclusivity agreements (b/c court will find implied promise to use best efforts),

Unilateral and option contracts, and

Gratuitous suretyship promises made before or at the same time that consideration flows to the principal debtor.

Front 13

Rule regarding alternative courses options in contracts with respect to consideration.

Back 13

A promise to choose one of several alternative means of performance is illusory unless every alternative involves legal detriment to the promisor. The promise will not be found illusory if:

1. at least one alternative involves legal detriment and the power to choose rests with the promisee or a third party, or

2. a valuable alternative is actually selected.

Front 14

Promissory estoppel rule, go.

Back 14

Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if necessary to prevent injustice if:

1. The promisor should reasonably expect to induce action or forbearance, and

2. such action or forbearance is in fact induced.

Front 15

Damages concerning promissory estoppel:

Back 15

Second restatement provides that the remedy, "may be limited as justice requires," meaning a court may award reliance damages (whatever the promisee spent in reliance on the promise - which is usually less than expectation damages).

Whereas, some jurisdictions will award expectation damages (what was promised under the contract).