What are the two forms of consideration?
- A specified performance (unilateral contracts)
- A return promise of specified performance (bilateral contracts)
What is promissory estoppel in the context of consideration?
When an agreement lacks consideration, but the offeree relied on the promise to their detriment, the promise may be enforceable under promissory estoppel
What conditions must be met in order to make a promise enforceable under promissory estoppel?
- The promisor should have reasonably foreseen reliance by the promisee, AND
- The promisee did in fact rely on the promise in that foreseeable manner
What is a settlement contract?
When a claimant promises to give up her claim in exchange for the respondent promising to do something – usually to pay money to the claimant.
When is forbearance of a claim or defense valid consideration, when the claim or defense is later found to be invalid?
- The claim or defense was objectively uncertain based on reasonable doubt as to the facts or applicable law
- The claim or defense was subjectively asserted in good faith
What is an illusory promise?
A promise which does not bind the party in some manner, and therefore cannot be breached.
Ex: “I promise that I will either show up, or not show up.” “I promise to buy the house, subject to a satisfactory personal inspection.”
Is consideration required under the common law, UCC, and CISG?
Consideration is ONLY required under the common law. It is NOT required under the UCC or CISG.
What is an output contract?
The seller promises to sell to the buyer all of the seller’s output
What is a requirements contract?
The buyer promises to buy from the seller all of the buyer’s requirements
What is required under UCC 2-306 in regards to output and requirements contracts?
- The quantity must be the actual output / requirements that occur in good faith, and can’t be abnormally disproportionate to estimates or prior quantities
- In an agreement for exclusive dealing, there is an obligation to use best efforts
What consideration is required under the UCC and CISG in regards to contract modification?
None. The UCC and CISG do not require consideration.
What is the pre-existing duty rule under common law?
Mere performance of a pre-existing duty will not serve as consideration to bind the other party to a new or modified promise; the modified promise of one party requires new consideration from the other party
What are the exceptions to the pre-existing duty rule?
- The parties terminate the existing contract before concluding another OR
- (The modification arises from circumstances not reasonably anticipated at the time the contract was concluded AND
- The modification is fair and equitable under the circumstances )
When there is a debate over the amount to be paid to satisfy a contract (usually when payment terms have been modified), what is “accord and satisfaction”?
If a party conspicuously notes that the check is being offered in full satisfaction of a debt or claim, and the debtor accepts it, it amounts to an acceptance of an offer of settlement and extinguishes a debt.
What is accord and satisfaction under UCC 3-311
When a claim is unliquidated or subject to a bonafide dispute, if:
1. The payer, in good faith, provides payment to satisfy the debt
2. The payer states that it was tendered to fully satisfy the debt
3. The receiver accepted the payment
Then the claim is discharged and the payment is satisfactory.
