Consideration

Question 1

3 Requirements to Consideration

Answer 1

1. The promisee(s) must suffer a legal detriment (or a 3rd party suffers a legal detriment on the promisee’s behalf.)
2. The detriment must induce the promise, and (I am making this offer because because of the acceptance/what I am getting in return for the offer)
3. The promise must induce the detriment (I am suffering this legal detriment because of the offer)

• Detriment must be bargained for in exchange for the promise

Question 2

What is consideration?

Answer 2

A detriment suffered by each of the parties which was induced by their promise to contract

A party must do something they would otherwise not have done

Question 3

Consideration can take the form of:

Answer 3

i. A return promise to do something
ii. A return promise to refrain from doing something legally permitted
iii. The performance of some act; or
iv. Refraining from doing some act

Question 4

What is not consideration?

Answer 4

i. Gift promises
ii. Conditional gifts
iii. Pre-Exisiting legal duties
iv. Past consideration
v. Nominal consideration
vi. Illusory promises

Question 5

Gift promises

Answer 5

Might have mutual assent, but no consideration (No detriment experienced)

Question 6

Conditional gifts

Answer 6

Where the promisor is not actually being induced by promisee’s detriment

• i.e. Promisor offers promisee to give away marker for free, but promisee has to drive over to pick it up
  (1) Element 1 (Yes) => promisee incurs detriment from having to spend gas to drive over
  (2) Element 2 (No) => promise induces promisee’s detriment, but does NOT induce the promise b/c the spending of gas money is irrelevant to promisor
  (a) for all he knows, promisee could live next door; promisor is giving away the marker out of kindness

Question 7

Pre-Exisiting Duty Rule

Answer 7

Performance of an act by which a party is already contractually bound to perform does not constitute valid consideration for a new promise.

A promise to perform a pre-exisiting legal duty does not count as consideration because the promisor is already bound to perform (there is no legal detriment)

Question 8

Illusory promises

Answer 8

A promise that is non committal; indefinite promise; promisor/promise is not bound to anything and therefore not suffering any legal detriment

Hypo: A promises, “I will give B $100, if I want to.” A’s promise is illusory.

Question 9

Pre-Exisiting Duty Rule: Modifying an Existing Agreement

Answer 9

When parties to a contract modify an exisiting agreement, the modification may be enforced if:

i. The parties voluntarily agree
ii. And the promise modifying the original contract was made before the contract was fully performed on either side
iii. And the underlying circumstances which prompted the modification was unanticipated (not expected) by the parties
iv. And the modification is fair and equitable

Question 10

Pre-Exisiting Duty Rule: Modifying an Existing Agreement

Answer 10

When parties to a contract modify an exisiting agreement, the modification may be enforced if:

i. The parties voluntarily agree
ii. And the promise modifying the original contract was made before the contract was fully performed on either side
iii. And the underlying circumstances which prompted the modification was unanticipated (not expected) by the parties
iv. And the modification is fair and equitable

Question 11

Mutuality of Obligation

Answer 11

2nd Element of Consideration => “bargained for” Exchange creates a mutuality of obligation from both parties

Mutuality of Obligation

i) Each party must owe the other a duty to perform
ii) If K offers one party unilateral discretion to perform or not => Mutuality of obligation fails

No Mutuality of Obligation => No Consideration => No

Question 12

Past Consideration

Answer 12

Does not count as consideration because you can’t make an exchange for something that has already occurred