1. Bell Ringer What are the 6 parts of a contract? What does it mean to consider something? Why do parties exchange goods or services in a contract? What do you think a court is most concerned with when enforcing a contract? Why?

2. Bell Ringer What are accord and satisfaction? If someone agrees to pay a specific amount to settle a debt, can they change the ammount later on?

3. CH 8: Consideration

4. Requirements of Consideration Courts and the law don’t necessarily enforce free agreements In a real agreement, each side is required to exchange something of value The promise of the exchange is what binds the parties to one another. – Consideration  Binding element

5. Legal Concept of Consideration Consideration is the exchange of benefits and detriments by the parties in the agreement – Benefit: Something that a party was not previously entitled to – Detriment: any loss suffered – Forbearance: Not doing something that you have the legal right to do.

6. Characteristics of Consideration There are three important characteristics of consideration 1.Promises must involve the concept of a bargained- for exchange 2.Something of value must be involved 3.The benefits and detriments promised must be legal

7. Something of Value… The law has no specific value requirements on consideration For consideration the parties must promise something of value The value of items do not need to be market value, and items do not need to be of equal value, as long as they are exchanged freely and willingly The courts are not overly concerned with the fairness of the exchange, just the legality of it

8. Unconscionable The only time a court will step in to an agreement when the are considered unconscionable An agreement is considered unconscionable when there is a great inequality in the bargaining power of the two parties An inequality would be a situation where one of the parties holds all or most of the power over the other party

9. Types of Consideration Something of value can take different forms: – Money: Money is often promised by one party in exchange for the other party’s performance or promise Unless it is a price fixed item (government controlled) the value does not have to correspond to the promise – Property: before established currency property was used as consideration. This is commonly known as barter (Trading Cards)

10. – Promise not to Sue: A party, who has the right to sue, can waive their right to sue in exchange for something of value (example of forbearance). When a person could sue, but waives their right to sue they are often required to sign a release. This is common when doing certain activities: zip-lining, bungee jumping, white water rafting, college athletics, etc – Charitable Pledges: Since non- profit organizations depend on donations a “pledge” legally becomes a binding contract.

11. Problems with Consideration Problems will occasionally arise where value or amount of money comes into question If the two parties can not agree on an amount the amount is said to be “in dispute” This results in accord and satisfaction – Accord: when a creditor agrees to take an amount less than that of the billing – Satisfaction: the agreement and ultimate payment of the amount in the accord

12. Undisputed Amounts If both parties agree to a specific amount, then it is an undisputed amount – If an amount has been agreed upon the debtor is required to repay it regardless if They later feel remorse over the amount that they agreed to pay They later find out that a different individual made a different (and better) deal than them.

13. Contracts that are enforceable without Consideration In specific situations certain contracts can be considered enforceable without consideration – Promise under Seal: when a contract has a state issued seal promising the contract – Promises after discharge in Bankruptcy: after bankruptcy a person could still pay a debt – Debts barred by statute of limitation: is a debt was previously paid, a creditor can collect as long as the statue of limitation allows – Promissory Estopple: when the court allows for a promise to be enforceable without consideration