Consideration

Question 1

Consideration (Rest.)

Answer 1

Consideration is a bargained for exchange, where each party gives or promises something legal value in return for the other’s promise.

What can count as performance (the thing you give)?
a. an act (you physically do soemthing)
b. a forbearance (you give up a legal right)
c. the creation, modification, or destruction of a legal relation

Exchange does not need to be equal, and there does not necessarily need to be a benefit and detriment.

Question 2

Traditional Rule:

Answer 2

A benefit received by one party OR a detriment received by one party is sufficient to establish consideration.

Question 3

Modern Rule: (Only one Important for Exam)

Answer 3

Simply a bargained for exchange- each party gives or promises something in return for the other’s promise, regardless of the benefit or detriment.

Question 4

Exceptions to Consideration:

Answer 4

Promissory Estoppel
Moral Obligations (Webb)

Consideration distinguishes a gift from a contract.

Question 5

Promise as consideration

Answer 5

A promise counts as consideration only if it actually binds the promisor – optional or “illusory” promises don’t create enforceable contracts.

Question 6

Service Corporation International v. Ruiz (Funeral + arbitration)

Answer 6

Ruiz contracted with SCI for funeral and burial services for her brother. Each contract required Ruiz to arbitrate disputes but did not require SCI to do the same. Ruiz later sued SCI for fraud; SCI moved to compel arbitration. Ruiz argued the arbitration clause lacked consideration since only she was bound to arbitrate.

An arbitration clause must be supported by consideration. If only one party is bound to arbitrate, the clause is illusory unless it’s part of a larger contract that already has valid consideration.

A one-sided arbitration clause is not illusory if it is embedded within a larger, fully supported contract that contains valid consideration on both sides.

Look at the contract as a whole:

*Ruiz agrees to arbitrate + pay
* SCI agrees to grant internment + upkeep of cemetery etc.

Question 7

Hamer v. Sidway (Traditional rule, Under-21 nephew; $5,000 case)

Answer 7

An uncle promised his nephew $5,000 if he refrained from drinking, smoking, swearing, and gambling until age 21. The nephew did so, but after the uncle died, the executor refused to pay, arguing lack of consideration.

Consideration exists if there is either a benefit to the promisor or a detriment to the promisee.

Benefit or detriment must be exchanged.

Focuses on the benefit/detriment. Not bargaining.

Question 8

Angel v. Murray (Trash collector: 400 New Homes)

Answer 8

The city’s trash collector requested an extra $10,000 per year after 400 unexpected new houses were built, significantly increasing his workload. Although his contract required collection of all city refuse, the city council voluntarily approved the increase. A citizen later sued, claiming the payments were invalid for lack of consideration under the preexisting duty rule.

RULE: A contract modification made before full performance is enforceable without new consideration if it is voluntary, fair, and made in response to unanticipated circumstances.

Modern courts enforce fair, voluntary contract modifications made in good faith when unexpected conditions arise—even without new consideration.

Question 9

Rest. : Modification of Executory Contract

Answer 9

A contract modification (before both sides finish performance) is valid without new consideration if it is fair, made due to unexpected events, required by law, or relied on by one party in view of the circumstances.

Question 10

UCC 2-209: Modification

Answer 10

No need for additional consideration under agreed modifications

Question 10

Harrington v. Taylor

Answer 10

A woman saved a man’s life by stopping his wife from striking him with an axe and was severely injured in the process. Afterward, the man promised to pay her for her injuries but later refused.

A voluntary humanitarian or past act is not valid consideration; moral obligation alone cannot make a promise legally enforceable.

A promise made out of gratitude for a past voluntary act (a moral obligation) is not enforceable because there was no bargained-for exchange — the act occurred before any promise was made. (The act wasn’t bargained by the man with woman. The woman voluntarily stepped in to help)

Question 11

Webb v. McGowin (Falling block case)

Answer 11

After Webb saved McGowin’s life at great personal injury to himself, McGowin promised to pay Webb $15 every two weeks for life, which he did until his death; payments stopped thereafter, and Webb sued to recover.

A moral obligation can serve as valid consideration when the promisor received a material benefit from the Promisee’s past act, making the subsequent promise to pay enforceable.

Question 12

Rest.: Promise for Benefit Received

Answer 12

A promise made after receives a material benefit can be enforceable without traditional consideration– but only to the extent needed to prevent injustice. Not enforceable if it was a gift.
Also, not enforceable if it was the value of the promise is disproportionate to the benefit received.

Question 13

Differentiating between Harrington and Webb

Answer 13

Because the act was voluntary and unrequested, Taylor was not unjustly enriched– so his later promise to pay was not binding.

Webb saved McGowin’s life while performing his job, directly preventing harm that would’ve cost McGowin serious injury or death. McGowin acknowledged the material benefit and then promised ongoing payments.

Harrington = voluntary act, no request, only moral obligation → no contract.
Webb = Material, pecuniary benefit + implied request + strong evidence of intent to compensate → contract enforced.