1. Section 8.1

2. Agreements without Consideration
Chapter 8
Consideration
Section 8.1
Consideration
Section 8.2
Agreements without Consideration

3. What You’ll Learn
How to explain the legal concept of consideration (p. 164)
How to explain the types of consideration (p. 166)

4. What You’ll Learn
How to identify certain problems regarding consideration (p. 169)
How to identify the principles that apply to consideration in everyday life (p. 172)

5. Why It’s Important
By understanding the concept of consideration, you will be able to avoid problems that frequently result when agreements lack this important contractual element.

6. Legal Terms
gratuitous (p. 164)
consideration (p. 164)
benefit (p. 164)
detriment (p. 164)
forbearance (p. 164)

7. Legal Terms
bargained-for exchange (p. 164)
unconscionable (p. 166)
release (p. 169)
accord and satisfaction (p. 170)

8. Section Outline Requirements of Consideration
The Legal Concept of Consideration
The Characteristics of Consideration

9. Section Outline Types of Consideration Money as Consideration
Property and Services as Consideration
A Promise Not to Sue
Charitable Pledges

10. Section Outline Problems with Consideration
Disputed Amounts
Undisputed Amounts
Consideration in Your Everyday Life

11. Pre-Learning Question
Why is consideration one of the six elements of a legally binding contract?

12. Requirements of Consideration
The law has always refused to enforce most gratuitous, or free, agreements.
Parties to an agreement must surrender something of value in exchange for something else of value.

13. Requirements of Consideration
This exchange, or the promise to exchange things of value, is what binds the parties to each other in a contractual relationship.
This binding element is known as consideration.

14. Requirements of Consideration
Consideration distinguishes a legally binding agreement from other types of agreements, such as social agreements that contain an offer and an acceptance.

15. The Nature of Consideration
Consideration is the exchange of benefits and detriments by parties to an agreement.

16. The Nature of Consideration
A benefit is something that a party was not previously entitled to receive.
A detriment is any loss suffered.

17. 8.1
Consideration

18. The Nature of Consideration
There are three types of consideration.
Giving up or promising to give up something that you have the legal right to keep.

19. The Nature of Consideration
Doing something or promising to do something that you have the legal right not to do.
Not doing something that you have the legal right to do, which is known as forbearance.

20. The Characteristics of Consideration
Consideration must involve these key characteristics:
Bargained-for exchange
Something of value
Legal benefits and detriments

21. What is the difference between a benefit and a detriment?

22. ANSWER
A benefit is something that a party was not previously entitled to receive, and a detriment is any loss suffered.

23. Bargained-for Exchange
An agreement involves a bargained-for exchange when a promise is made in return for another promise, an act, or a promise not to act.

24. Something of Value
The law has no specific value requirements on consideration.
All that matters is that the parties agreed freely on the value and the price.

25. Something of Value
Usually the courts will not even consider whether the value of the consideration is adequate.
However, a contract may be deemed unconscionable, when the courts believe the consideration is completely out of line.

26. Legality of Consideration
The courts require that the consideration involved in an agreement be legal. If the consideration is illegal, the contract is invalid.

27. Pre-Learning Question
Name one type of consideration.

28. Types of Consideration
These include:
Money
Property
Services
Promises not to sue
Charitable pledges

29. Money as Consideration
Unless price limits have been placed on certain transactions by administrative regulations, legislative fiat, or executive ruling, parties to a contract are free to exchange any amount of money that they negotiate.

30. Property and Services as Consideration
Before money was accepted as a medium of exchange, it was common to use property and services as consideration.

31. Property and Services as Consideration
Some parties still prefer to engage in barter agreements that involve goods and services.

32. A Promise Not to Sue
If one party has the right to sue another party but gives up that right in exchange for something of value, the court will generally uphold the exchange as valid consideration.

33. A Promise Not to Sue
Pending lawsuits are frequently settled in this manner.
When a person accepts an offer and agrees not to sue, he or she is asked to sign an agreement, which is called a release.

34. Charitable Pledges
Charitable organizations and nonprofit institutions often depend upon contributions.
This dependency has led the court to enforce charitable pledges just as if they were contracts.

35. Pre-Learning Question
What do you think happens when the parties to a contract cannot agree as to the actual amount of money owed?

36. Problems with Consideration
When parties disagree about the amount of money that the debtor owes the creditor, a problem has arisen over the consideration involved.

37. Disputed Amounts
If the parties to a contract cannot agree as to the actual amount owed, the amount is said to be in dispute.

38. Disputed Amounts A dispute can be settled by
accord and satisfaction if the creditor accepts a payment that is less than the amount due as full payment.

39. Disputed Amounts
The acceptance by the creditor of less than what has been billed to the debtor is accord.
The agreed-to settlement as contained in the accord is the satisfaction.

40. Disputed Amounts
The dispute must be real, must occur in good faith, and must not be trivial.

41. Undisputed Amounts
If the parties have mutually agreed to a set amount of money in the contract, then the amount cannot be disputed.

42. Pre-Learning Question
How does contractual consideration affect your everyday life?

43. Consideration in Your Everyday Life
Consideration distinguishes a legally binding agreement from all other types of agreements.
Consideration must be legal.

44. Consideration in Your Everyday Life
Paying a debt in advance is consideration for settling the debt for a lesser amount.
To be consideration, the act or promise must be bargained for.

45. Consideration in Your Everyday Life
Because charities depend on contributions, pledges are enforced like contracts.
A promise by one party not to sue another party is generally proven by evidence of a release.

46. Consideration in Your Everyday Life
Usually, a party will offer money in exchange for another party’s promise or performance.
Some people prefer to barter goods and services.

47. Consideration in Your Everyday Life
Generally, courts do not get involved in determining how much consideration is enough.

48. Consideration in Your Everyday Life
Forbearance involves promising not to do something that you are legally entitled to do.

49. Reviewing What You Learned What is consideration?
Section 8.1 Assessment
Reviewing What You Learned
What is consideration?

50. Reviewing What You Learned Answer
Section 8.1 Assessment
Reviewing What You Learned
Answer
Exchange or the promise to exchange things of value in a contract; binds parties to each other in the contractual relationship.

51. Reviewing What You Learned What are the types of consideration?
Section 8.1 Assessment
Reviewing What You Learned
What are the types of consideration?

52. Reviewing What You Learned Answer
Section 8.1 Assessment
Reviewing What You Learned
Answer
Money, property, services, promises not to sue, and charitable pledges.

53. Reviewing What You Learned
Section 8.1 Assessment
Reviewing What You Learned
What problems can arise regarding consideration?

54. Reviewing What You Learned Answer
Section 8.1 Assessment
Reviewing What You Learned
Answer
Disagreement as to the amount of money that the debtor owes the creditor.

55. Reviewing What You Learned
Section 8.1 Assessment
Reviewing What You Learned
What are the principles that apply to consideration in everyday life?

56. Reviewing What You Learned Answer
Section 8.1 Assessment
Reviewing What You Learned
Answer
Answers will vary, but may include: consideration binds the agreement; it must be bargained for; charitable pledges are enforced as if they were contracts;

57. Reviewing What You Learned Answer
Section 8.1 Assessment
Reviewing What You Learned
Answer
promises not to sue are usually evidenced by a release; money or services are offered as consideration for another party’s promise or performance.

58. Critical Thinking Activity Is Enough Really Enough?
Section 8.1 Assessment
Critical Thinking Activity
Is Enough Really Enough?
Why do the courts usually refuse to get involved in disputes over the adequacy of consideration?

59. Critical Thinking Activity Answer Is Enough Really Enough?
Section 8.1 Assessment
Critical Thinking Activity Answer
Is Enough Really Enough?
The law usually refuses to get into disputes over the adequacy of consideration because the value of consideration is a matter of opinion.

60. Legal Skills in Action Accord and Satisfaction
Section 8.1 Assessment
Legal Skills in Action
Accord and Satisfaction
Your older sister is about to be married. She purchased her wedding dress at the Duquesne Department Store. Later, she had the dress altered and added a special lace trim.

61. Legal Skills in Action Accord and Satisfaction
Section 8.1 Assessment
Legal Skills in Action
Accord and Satisfaction
Today she saw the same dress at another store for $245 less than the price she paid. When she pays Duquesne’s, she intends to subtract $245 from the bill.

62. Legal Skills in Action Accord and Satisfaction
Section 8.1 Assessment
Legal Skills in Action
Accord and Satisfaction
In a small team setting, discuss whether your sister is entitled to use accord and satisfaction in this case.

63. Legal Skills in Action Answer
Section 8.1 Assessment
Legal Skills in Action Answer
Accord and Satisfaction
Duquesne’s is not likely to agree to accept a lesser payment because the parties had mutually agreed to a set amount of money. Also, the alteration changed the value of the dress.

64. End of Section 8.1