Chapter 12 - (consideration)

Question 1

What is a contract?

Answer 1

A promise that is enforceable by courts.

Question 2

What are the four elements required to form a contract?

Answer 2

1. Mutual assent
   
   2. Consideration
   3. Legal purpose
   4. Capacity

Question 3

What is consideration?

Answer 3

An exchange of things with legal value on each side.

Question 3

What is mutual assent?

Answer 3

A “meeting of the minds” — agreement on material terms.

Question 4

What does “legal purpose” mean in contract law?

Answer 4

The contract cannot be for illegal activity (crime, tort, etc.).

Question 5

What does capacity mean?

Answer 5

Each party must be legally capable of forming a contract.

Question 6

Why does the law like contracts?

Answer 6

The law prefers to enforce contracts when parties intend to be bound.

Question 7

What does “knowingly and voluntarily given” refer to?

Answer 7

Assent must be given without conduct invalidating agreement

Question 8

What is an illusory promise?

Answer 8

A statement that appears to be a promise but leaves performance completely up to the promisor.

Question 9

Why is an illusory promise not valid consideration?

Answer 9

Because there is no real commitment — performance is discretionary.

Question 10

What is past consideration?

Answer 10

A promise made after something has already been done

Question 11

Why is past consideration not valid consideration?

Answer 11

Because there is no bargained-for exchange at the time of the promise

Question 12

Example: A paramedic saves someone and later the patient promises $2,000. Is this enforceable? Why or why not?

Answer 12

No. It is past consideration — no bargained-for exchange

Question 13

What is a pre-existing contractual duty?

Answer 13

Promising to do something you are already legally obligated to do.

Question 14

Example: A paramedic saves someone and later the patient promises $2,000. Is this enforceable? Why or why not?

Answer 14

No. It is past consideration — no bargained-for exchange

Question 15

Why is a pre-existing duty not valid consideration?

Answer 15

Because you are not giving up anything new of legal value.

Question 16

Police officers claim a reward for arresting criminals. Can they recover?

Answer 16

No. They already have a legal duty to arrest criminals.

Question 17

What is a bargained-for exchange?

Answer 17

Each party’s promise induces the other’s promise.

Question 18

What question helps determine valid consideration?

Answer 18

Would you bind yourself to your promise if you weren’t getting something in return?

Question 19

What is an output contract?

Answer 19

A seller agrees to sell all of its production to one buyer.

Question 20

What is a requirements contract?

Answer 20

A buyer agrees to purchase all of its needed goods from one seller

Question 21

Are output and requirements contracts valid?

Answer 21

Yes, as long as they are made in good faith.

Question 22

Why aren’t output/requirements contracts considered illusory?

Answer 22

Because they require good faith and are based on actual production or needs.

Question 23

What must exist for a contract modification under common law?

Answer 23

New consideration.

Question 24

If a contract price changes from $1/unit to $0.75/unit for the same 600 units, is it enforceable?

Answer 24

No — unless new consideration is given. The seller can voluntarily accept but cannot be forced.

Question 25

If quantity changes from 600 units to 800 units at a new price, is that valid consideration?

Answer 25

Yes — because both sides are giving up something new.