Consideration

Question 1

Valid Contract

Requirements

Answer 1

1. Voluntary exchange
   
   • [at least one promise of value; legally binding]
2. Consideration
   
   • [both have legal detriment; promise induce each other’s performance]
   • Limitations: [no consideration]
     
     • Sham/Nominal Consideration
       
       • Not equal
     • Unfair Bargaining (fraud/duress/unconscionability)
     • Illusory Promise [Unless implied terms cure problem/Exclusivity K]
       
       • Can break at will
       • Impossible to occur
       • Does one person control performance?
     • Modifying a Pre-existing Duty
       
       • Unless:
         
         • Unforeseen Circumstances
         • Goods
         • Altered duty for both parties
     • Past Consideration
       
       • Unless:
         
         • Output Contract

Question 2

Define

consideration

Answer 2

1. Detriment to promisee (promisee forgoes something of value); or
2. Bargained-for exchange (must not be nominal)

Question 3

What qualifies as a legal detriment?

Answer 3

1. Doing something you are not legally obligated to do; or
2. Refraining from doing something you are legally entitled to do

Question 4

Do gifts qualify as consideration?

Answer 4

Generally no, unless:

1. Giver knows gift will induce substantial reliance; and
2. Failure to uphold promise will cause injustice

Question 5

illusory promise

Answer 5

Promise that doesn’t obligate the promisee to anything, and therefore doesn’t qualify for consideration [so unlikely to occur/happen/not of any real benefit]

Question 6

What is the pre-existing duty rule?

Answer 6

Promises to satisfy a pre-existing duty (e.g. pay a past debt or perform a prior duty) does not constitute consideration

Question 7

What are exceptions to the pre-existing duty rule?

Answer 7

1. Mutual modification
2. Unforeseen circumstances that render performance substantially more burdensome than was reasonably anticipated

Question 8

Does the UCC follow the pre-existing duty rule?

Answer 8

No, modifications do not require new consideration as long as they were made in good faith

UCC § 2-209(1)

Question 9

What types of agreements are enforceable without consideration?

Answer 9

1. Promissory Estoppel

Question 10

Is consideration required to modify a contract under common law?

Answer 10

Yes, unless:

1. New obligations on both sides; or
2. Existence of circumstances unforeseen by either party

Question 11

True or False:

When modifying a contract, assuming even the smallest additional or different duties counts as consideration

Answer 11

True

Question 12

Does the UCC require consideration for modification?

Answer 12

No, as long as both parties are acting in good faith

Question 13

Under the UCC, what is a bad-faith modification?

Answer 13

One that attempts to extort another party

Question 14

Entire contract is void and non-existent

Question 15

voidable contract

Answer 15

Valid contract unless one party seeks to void it

Question 16

unenforceable contract

Answer 16

A valid contract that cannot be enforced if one party halts performance

[because of circumstances surrounding its signing, the terms of the contract, and events that happen after the signing of the contract.]