1. Chapter 8 Consideration

2. Gratuitous: Free Agreements Consideration : The exchange of benefits and detriments by the parties to an agreement. Benefit: Something that a party was not previously entitled to receive. Detriment: Any loss suffered Forbearance: Not doing something that you have the legal right to do

3. Characteristics of Consideration Must involve a bargain for exchange Must involve something of value Benefits and detriments promised must be legal

4. Bargained-for Exchange When a promise is made for another promise, act, or promise not to act

5. Something of Value There are no specific requirements on consideration Unconscionable: When a great inequity in bargaining power exists between parties

6. Types of Consideration Money: Any amount may be negotiated Some transactions may be regulated such as minimum wage and fuel/oil prices. Property and Services: Bartering is exchanging one service for another

7. Types of Consideration Cont. Promise Not to Sue: One party gives up their right to sue in exchange for something of value…they then sign a release Can be negotiated at any time, even during trial Charitable Pledges: These organizations rely on pledges; therefore the courts will enforce them as if they were contracts

8. Problems With Consideration

9. Disputed Amounts If parties cannot agree as to the actual amount… Accord and Satisfaction: When the creditor accepts a payment that is less than the amount as full payment. The dispute must be real, occur in good faith, and must not be trivial. See Example 4 p. 170

10. Undisputed Amount If the parties have mutually agreed to a set amount of money in the contract, then the amount cannot be disputed. Regret is not a valid reason not to pay

11. In Everyday Life…  Must be legal and not involve any violation of the law  You can pay a debt in advance, but are not legally bound to do so  Past performances do not equal consideration for a new promise  To constitute consideration, an act or promise must be bargained for. See p. 172 for full list

12. Agreements Without Consideration

13. Promises Under Seal Seal: A mark or an impression placed on a written contract indicating that the instrument was executed and accepted Not required in Sales of Goods under UCC, but some states require it for real property sales.

14. Promises After Discharge In Bankruptcy It is possible for a person who has had his or her debts discharged in bankruptcy to decide to pay such debts voluntarily.

15. Debts Barred by Statutes of Limitations Establishes a time frame in which debts must be paid Partial payment of debt will result in affirmation (good faith)

16. Promissory Estoppel Promissory = containing/consisting of a promise Estoppel = restraint on a person to prevent him or her from contradicting a previous act A promise may be enforceable without consideration See Figure 8.2 on p. 176 for Elements See Example 6 p. 176

17. Option Giving consideration to keep an offer open for a specific period of time UCC Exception: When a merchant makes a written offer stating the period of time during which an offer will remain open; consideration is not needed. (Must be <3 months)

18. Unenforceable Agreements Without Consideration

19. Illusory Promise (False Appearance) Both parties must be under an obligation to do something, otherwise neither is bound by contract. Some agreements appear to be contracts, but turn out to be hollow. See example 7 p. 177

20. Future Gifts A person promises to give a gift in the future or in a will – not enforceable if there is no consideration

21. Past Consideration Benefits and detriments must be exchanged when a contract is made Consideration that took place in the past is over and not regarded as legal by the courts See example 8 p. 177

22. Preexisting Duties If a person is already under a legal obligation to do something, a promise to do that same thing is not consideration. For example: Police officers cannot receive a reward for doing their job.

23. Promise to Attend a Social Engagement All contracts are agreements but not all agreements are contracts.