Consideration

Question 1

What is consideration?

Answer 1

• Something of value (either a promise, an act, or an object) that a promisor receives from a promisee in return for his promise.
• Promise is generally unenforceable unless it is supported by consideration.

Question 2

What are two tests for finding consideration?

Answer 2

• Bargain theory
• Benefit/detriment test

Question 3

When is a promise supported by consideration?

Answer 3

• Promise is supported by consideration if based on a bargained-for exchange, meaning that there was something (goods or services) that was promised, and the promise must have been made in order to obtain something else of value (quid pro quo for making the promise - usually a return promise or performance).

Question 4

What is the benefit/detriment test for consideration?

Answer 4

• Whether there is a benefit to the promisor and/or a detriment to the promisee.

Question 5

When would the promisee face a legal detriment sufficient to show consideration?

Answer 5

• Whether promisee is:
  o doing something he had a legal right NOT to do; or
  o forgoing some activity he HAD a legal right to do.
• EXAMPLE: Promoter promised musician $5,000 to play a concert at Carnegie Hall. Promoter then tried to back out of the promise, claiming that “you would have done it for free.”
• EXAMPLE: Uncle promised nephew $5,000 if nephew would give up smoking and drinking. The uncle’s estate, hoping to avoid this obligation, argued that the nephew didn’t incur a detriment because giving up smoking and drinking was good for his health

Question 6

When would consideration be inadequate?

Answer 6

• Courts don’t police the equivalence or fairness of the exchange. As long as there was some consideration, the contract is enforceable

Question 7

What is an illusory promise?

Answer 7

• Promise of performance that leaves performance to the unlimited discretion of the promising party. This would not constitute consideration
  o EXAMPLE: You agree to paint my portrait, and I agree to pay you $1,000 if I decide I want it.

Question 8

What is a gratuitous promise?

Answer 8

• Promise to make a gift, generally unenforceable due to insufficient consideration.

Question 9

Are gratuitous promises different from gratuitous transfers?

Answer 9

• Gratuitous transfers are legally binding.
  o EXAMPLE: If I promise you a new car for your birthday, that would constitute a gratuitous promise and would be unenforceable if I decline to follow through. However, if I give you a new car for your birthday, then the transfer is legally binding, and I cannot later change my mind and take back the car.

Question 10

Would past or moral consideration create an enforceable contract?

Answer 10

• General Rule: A promise in exchange for something already given or performed is NOT supported by consideration.
  o EXAMPLE: In Mills v. Wyman, the court refused to enforce the father’s after-the-fact promise to compensate a Good Samaritan for nursing his dying son, and the case would likely come out the same way today.

Question 11

Under what exceptions would past or moral consideration be valid and create an enforceable contract?

Answer 11

• A written promise to pay a debt barred by limitations.
• A written promise to pay a debt discharged by bankruptcy.

Question 12

What is the minority rule for past consideration?

Answer 12

• Under the material benefit test, a promise made in recognition of a past benefit conferred is enforceable IF:
  o promisee conferred the benefit on the promisor (not a third party); and
  o the benefit is material.
• EXAMPLE: A sees that B is in grave danger and heroically intervenes to save the latter, injuring himself in the process. B gratefully promises to compensate A for his efforts. These are the facts of Webb v. McGowin, where the court enforced the promise because A’s efforts bestowed a material benefit (the saving of a life) on B.
• EXAMPLE: Because the Good Samaritan in Mills v. Wyman bestowed the benefit of nursing services on the promisor’s son rather than on the promisor, the promise would not be enforceable.

Question 13

What is the doctrine of promissory estoppel?

Answer 13

• Promisee that reasonably relies to his detriment on gratuitous promise may be able to enforce that promise even without consideration.

Question 14

What are the four requirements for a contract to be enforceable under promissory estoppel?

Answer 14

• A promise
• Foreseeable reliance
• Actual reliance
• Injustice without enforcement

Question 15

When would a promise be too vague to be reasonably relied upon under the doctrine of promissory estoppel?

Answer 15

• EXAMPLE: Statements like “I’d like to give you some money to help you with college” would be considered too vague to be an actual promise. Alternately, “I’ll give $25,000 toward your tuition this fall” would be specific enough to qualify as a promise.

Question 16

What is an example of foreseeable reliance sufficient to justify promissory estoppel?

Answer 16

• EXAMPLE: The widow’s move to her brother-in-law’s farm on the faith of his promise would have been reasonably foreseeable to the brother-in-law at the time he made her the promise. However, if the widow had purchased a high-end SUV to facilitate the move, this would likely not have been foreseeable.

Question 17

What is the requirement of actual reliance?

Answer 17

• The reliance must actually be induced by the promise
• EXAMPLE: If the widow had already decided to make the 60-mile move before her brother made her the promise, then this would not be actual reliance.

Question 18

What are some factors to determine whether there would be injustice without enforcement through promissory estoppel?

Answer 18

• Strength of proof of the other three requirements;
• Blameworthiness or willfulness of the breach;
• Relative position or equities of the parties;
• Extent to which the reliance was detrimental; and
• Availability of alternatives short of enforcing the promise.