© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

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© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. “Promises are the uniquely human way of ordering the future.” Hannah Arendt, German-American Political Scientist

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Consideration means that there must be bargaining that leads to an exchange between the parties.  Consideration can be anything that someone might want to bargain for.  A promisor is the person who makes the promise, and promisee, the person to whom the promise is made.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The thing bargained for can be: another promise or action. a benefit to the promisor or a detriment to the promisee. a promise to do something or a promise to refrain from doing something. “Bargaining is obligating yourself in order to induce the other side to agree.”

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. There is consideration to support a contract between A and B, when they bargain... Bargain AB and their bargaining causes BOTH parties... …to either give a benefit to the other or to suffer a detriment themselves. Which causes... A to give B a benefit OR A to suffer a detriment AND B to give A a benefit OR B to suffer a detriment Consideration supports a contract!

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Courts seldom inquire into the adequacy of consideration.  A previously paid benefit is generally not consideration because it was not meant to induce the other side to agree. Exception: Economic Benefit -- in some cases, courts will enforce consideration that is an economic benefit, given with the expectation of later payment.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Illusory Promise If one party’s promise is conditional, the other party is not bound to the agreement.  Sales Law: Requirements and Output Contracts In a requirements contract, the buyer agrees to purchase 100% of her goods from one seller. In an output contract, the seller guarantees to sell 100% of its output to one buyer, and the buyer agrees to accept the entire quantity. Section of the UCC expressly allows output and requirements contracts in the sale of goods.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  A promise to which the promisor is already obligated is not consideration. Exceptions: –If the scope of the promisor’s task increases, that increase is consideration. –When unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is valid consideration. –If both parties agree to cancel a contract, then form another one in its place, the new contract is valid. –Modification of a sale of goods is allowable without consideration, unless there is a written agreement forbidding such modifications.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  A liquidated debt is one in which there is no dispute about the amount owed. In cases of liquidated debt, if the creditor agrees to take less than the full amount as full payment, her agreement is not binding. If the debtor offers a different performance to settle the debt and the creditor agrees, the agreement is binding.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  A debt is unliquidated if: (1) the parties dispute whether any money is owed, or (2) the parties agree that some money is owed but dispute how much.  The parties may agree to settle for less than what is owed; this “accord and satisfaction” will be enforced if the debtor pays the agreed amount.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Common Law ruling: If a debtor writes “Paid in Full” on a check, and the creditor cashes it, the payment is in full whether or not it was the right amount.  UCC §3-311 Affirms the Common Law ruling, but adds two exceptions: –Organizations may notify debtors that any offers to settle debt for less than the whole amount must be directed to a certain person. –The creditor can refund the paid amount within 90 days and then demand the full amount.

© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.