1. Consideration is legal value bargained for and given in exchange for an act or a promise Elements of Consideration 12 - 1 Purely gratuitous promises are not enforceable because not supported by consideration

2. Consideration in the form of an act or promise may have legal value if the person –Refrains from doing something the person has the legal right to do Example: Hamer v. Sidway –Does something the person had no prior legal duty to do Generally, courts will not examine the adequacy of consideration Legal Value of Consideration 12 - 2

3. A promisee’s act or promise must have been bargained for and given in exchange for the promisor’s promise –Example: Gottlieb v. Tropicana Hotel and Casino in which participating in a promotion that benefited the company was adequate consideration to form a contract Bargained-for Exchange 12 - 3

4. Illusory promises Preexisting duties Past consideration Exchanges That Are Not Consideration 12 - 4

5. If the promisee’s promise really does not bind the promisee to do or refrain from doing anything, the promise is illusory and cannot serve as consideration Example: Heye v. American Golf Corporation, Inc. in which an employee successfully claimed lack of consideration for an arbitration clause in a contract because mutual obligation did not exist –AGC’s promise to arbitrate was illusory since they could amend the contract at any time Illusory Promises 12 - 5

6. As a general rule, performing or agreeing to perform a preexisting duty is not consideration –Promisor in such a case has effectively made a gratuitous promise Includes public duties (obey the law) and preexisting contractual duties Preexisting Duties 12 - 6

7. General rule is an agreement to modify an existing contract requires new consideration Exceptions to general rule: –Modification due to unforeseen circumstances that a party could not reasonably foresee –CISG and UCC 2–209(1): agreement to modify a contract for the sale of goods Preexisting Duties & Contract Modification 12 - 7

8. Liquidated debts are debts in which parties have no dispute about the existence or amount of the debt –A creditor’s promise to discharge a liquidated debt for part payment of the debt at or after its due date is unenforceable for lack of consideration If there is a dispute about the existence or amount of the debt, the debt is unliquidated –Settlement agreements are enforceable Preexisting Duties & Settlement Agreements 12 - 8

9. Past consideration is an act or benefit given in the past that was not given in exchange for the promise in question, thus it cannot be consideration Past Consideration 12 - 9

10. Review 12 - 10