1. Consideration Agreement Law www.assignmentpoint.com

2. Consideration An agreement is not enforceable unless each party to the agreement gets something. This some thing is called consideration Consideration is defined as a bargained for exchange of legal value. Some right interest, profit or benefit acquiring to one party or some forbearance, detriment, loss,responsibility given, suffered or undertaken by other When at the desire of the promisor, the promisee or any other person has done or abstain from doing or does or abstain from doing or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise www.assignmentpoint.com

3. Promisee and promisor In a bilateral contract, each party to the contract will be both a promisor and a promisee because each party will both make and receive a promise. In most instances, a promise will not be enforced unless the promisee (person receiving the promise) gave "consideration", as it is legally defined, to the promisor (person making the promise). A person can seek a court remedy for the breach of a promise only if that person not gave consideration for the promise www.assignmentpoint.com

4. Case 1 First State Bank offered a reward for the arrest and conviction of three men who robbed the bank. Acting on information supplied by four bank employees, two state policemen and a deputy sheriff from a neighboring county apprehended the robbers. All seven individuals claimed the reward. The issue in court was who of the seven had a contractual right to payment of the award. www.assignmentpoint.com

5. Bargained for exchange of legal value Legal value is the "price" one must pay to get the right to enforce another person's promise. –Doing or promising to do things that you are already legally obligated to do.(public duty) –Similarly, refraining or promising to refrain from doing things that you have no legal right to do has no legal value either. www.assignmentpoint.com

6. Bargained for Exchange This component requires that the parties have as their reason for giving legal value the return of some legal value. A thing 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.“ an act done without request is volunteer act So When a person makes a promise out of gratitude for something previously done, the promise is not bargained for and is not enforceable. www.assignmentpoint.com

7. Rules of consideration Desire of the promisor is essential The consideration must be real (not impossible, illusory and non existing goods) Public duty is not consideration Promise made to stranger to perform existing duty is enforceable Consideration need not to be adequate (highly disparate values) The consideration must not be illegal, immoral or opposed to public policy The consideration may be past, present or future Consideration may move from the promisee or from any other person www.assignmentpoint.com

8. Illusory promise an illusory promise is made when a person agrees to buy as many widgets as she may want. The person has not given legal value to the vendor promising to sell because she has not actually committed to buying any widgets at all. if an agreement gives one party an unrestricted right to cancel the agreement, then the contractual promise is illusory -- the party has not actually promised or committed to do anything. Conditional promises may appear to be illusory, but such promises are enforceable as long as the occurrence of the condition is not totally within the control of the promisor. www.assignmentpoint.com

9. Case Coal Co. agreed to sell all the coal Farmers' Lumber wanted to purchase from them for a certain price. When Coal Co. later refused to sell, Farmers' sued for breach of contract. Coal Co. argued there was no contract because Farmers' had given no consideration for the promise to sell. The issue was whether Farmers' had given consideration to Coal Co. for its promise to sell www.assignmentpoint.com

10. Adequacy of the exchange. Another issue arises where the proposed exchange involves disparate values. Although the law requires an exchange of legal value, courts generally do not inquire into the adequacy of the exchange. In other words, the exchange need not be one of comparable monetary values. The consideration doctrine will not be used to protect a party from a bad bargain. www.assignmentpoint.com

11. A promise without consideration is a gift. A promise without consideration is a gratuitous consideration Consideration is essential for the validity of contract www.assignmentpoint.com

12. PROMISES ENFORCED WITHOUT CONSIDERATION- These exceptions include Natural love and affection- written, registered, near relation Voluntary compensation, charitable subscriptions. promises to pay debts discharged by the statute of limitations or bankruptcy, Completed gift modifications to contracts for the sale of goods, formal contracts, promissory estoppels Agency www.assignmentpoint.com

13. The gratuitous promise Since a promise of a gift is made without the expectation of something in return, there is no bargained for exchange. Similarly, since the person who is promised the gift does not give legal value for that gift because she promises nothing in return for it. (Elvis Presley) www.assignmentpoint.com

14. Promise of a gift Since a promise of a gift is made without the expectation of something in return, there is no bargained for exchange. Similarly, since the person who is promised the gift does not give legal value for that gift because she promises nothing in return for it. (Elvis Presley) www.assignmentpoint.com

15. Preexisting Duty Preexisting duty – a promise lacks consideration if a person promises to perform an act or do something he or she is already under an obligation to do. The promise is unenforceable because no new consideration has been given. Sometimes a party to a contract runs into substantial unforeseen difficulties while performing his or her contractual duties. The contract can be modified and enforced without new consideration being given. www.assignmentpoint.com

16. case Elvis Presley, the famous wealthy singer was engaged to Ginger Alden. During the engagement, he was very generous to her family, paying for improvements to their home and giving them lavish gifts. When Ginger's mother decided to divorce her husband, Presley promised to pay off the mortgage on Mrs. Alden's home, which she received in the divorce settlement. Presley then died suddenly, leaving the mortgage unpaid. His estate refused to pay, and Alden sued to enforce Presley's promise. www.assignmentpoint.com

17. Contracts Lacking Consideration Illegal Consideration Illusory Promise Moral Obligation Preexisting Duty Past Consideration www.assignmentpoint.com

18. Concept Summary: Promises Lacking Consideration Type of Consideration Description of Promise Illegal considerationPromise to refrain from doing an illegal act. Illusory promisePromise where one or both parties can choose not to perform their obligation. Moral obligationPromise made out of a sense of moral obligation or honor or love or affection. Some states enforce these types of contracts. Preexisting dutyPromise based on the preexisting duty of the promisee to perform. The promise is enforceable if (1) the parties rescind the contract and enter into a new contract, or (2) there are unforeseen difficulties. Past considerationPromise based on the past performance of the promise. www.assignmentpoint.com

19. Certain types of promises are often referred to as "formal" contracts and these promises are enforceable without regard to whether consideration was given. A rather archaic type of formal contract that continues to be recognized by a few states is the promise in a document to which a person affixes a personal seal is enforceable without consideration. www.assignmentpoint.com