CHAPTER 8: CONSIDERATION By: Mike Francini, Tasia Gorski, Caitlin McNamara, & Sam Zangara Chapter 8: Consideration

Vocabulary  Consideration- what a person demands and generally must receive in order to make his/her promise legally binding.  Gift- a transfer of ownership without receiving anything in return.  Donor- a person giving gift.  Donee- a person receiving the gift.  Forbearance- refraining from doing what one has a right to do

More Vocabulary…  Promisor- a person promising an action or forbearance  Promisee- a person to whom the promise is made  Legal Value- a change in a party’s legal position as a result of the contract  Nominal Consideration- the token amount identified in a written contract when parties either cannot or do not wish to state the amount precisely

Key Concepts  Requirements  Each party must promise, perform an act, or forbear.  Each promise, action, or forbearance must be in exchange for a return promise, action, or forbearance.  Must have legal value (worth something in eye’s of the law).  Circumstantial Consideration: certain forms of consideration only legally binding in the proper circumstances.  Ex: Illusory promises (anything that allows you to escape legal obligation, ie termination clauses), existing legal and/or contractual duty (public and private).

False Consideration  Certain acts or promises are falsely identified as consideration but never can be.  Mutual Gifts  When something of value is given by one party to another without demanding anything in return.  When this occurs, that something of value is not consideration for anything later promised/provided.  Past Performance (act already performed)  Since contractual bargaining (for immediate or future performance by both parties) takes place in the present, past performance (also known as past consideration) cannot serve as consideration.

Exceptions  Promises made to charitable organizations  Churches, schools, non-profit hospitals  Pledges or completed gifts  Promises covered by UCC  Firm offers  Modification  Promises to renew debt barred from collection by certain statutes.  Statute of limitations, debts discharged in bankruptcy.  Promises enforceable under doctrine of promissory estoppel (prevents promisors from stating in court that they didn’t receive consideration for their promises).

Conditions for Promissory Estoppel  Promisor should reasonably forsee that promisee will rely on promise.  Promisee does act in reliance on promise.  Promisee would suffer substantial economic loss if promise not enforced.  Injustice can be avoided only by enforcement of promise.