Consideration

Question 1

Bargained-For Exchange

Answer 1

Rule: The bargained-for exchange requires that the promise induce teh detriment and the detriment induce the promis.

• No bargain when one party gives a gift to another.

Question 2

Elements of Consideration

Answer 2

Rule: Two elements are necesarry to constitute consideration:

• There must be a bargained-for exchange between the parties; and
• That which is bargained for must constitute a benefit to the promisor or a detriment to the promisee.

Question 3

Legal Value Element

Answer 3

Adequecy of Consideration:

• Courts generally do not inquire about the adequacy or fariness of consideration unless if something devoid of value.

Legal Benefit or Detriment:

• Majority of courts require a party incur detriment (doing something he not legally obligated to do, or by refraining to do something he has a legal right to do) to satisfy the legal value element.
• Minority rule is that conferring a benefit on the other party is also suffecient.

Question 4

“Past” or “Moral” Consideration

Answer 4

Rule: A promise given for something already done does not satisfy the bargain requirement.

• Exception: Where a past obligation is unenforceeable because of a technical defense (e.g. statute of limitations), that obligation will be enforceable if a new promise is made in writing or is partially performed.
• Modern trend is to enforce a subsequent promise if a past act benefited the promisor and was performed by the promisee at the promisor’s request or in response to an emergency.

Question 5

Preexisting Legal Duty

Answer 5

Rule: Traditionally, performing or promising to perform an existing legal duty is insuffecient consideration.

Exceptions: There is consideration if:

• New or different consideration is promised;
• Promise is to ratify a voidable obligation;
• The preexisting duty is owed to a third person rather than to the promisor;
• There is an honest dispute as to the duty; or
• There are unforeseen circumstances suffecient to discharge the party.

UCC: A good faith agreement modifying a contract subject to the UCC needs no consideration to be binding.

Question 6

Promissory Estoppel

Answer 6

Rule: Consideration is not necessary if the facts indicate that the promisor should be estopped from not performing. A promise is enforceable if necessary to prevent injustice if:

• Promisor should reasonably expect to induce action or forbearance;
• of a definite and substantial character;
• and such action or forbearance is in fact induced.

Damages: Always check first to see whether there is a valid contract because some states provide that the remedy “may be limited as justice requires.”

Question 7

Right to Choose Alternative Courses

Answer 7

Rule: A promise to choose one of several alternative means of performance is illusory unless every alternative involves a legal detriment.

The promise will not be found illusory if:

• At least on alternative involves a legal detriment and the power to choose rests with the promisee or a third party; or
• A valuable alternative is actually selected.