Notesale: Turn your study into money

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13-1 What is Consideration?

12/5/17 10:46 PM

Consideration is the inducement, price, or promise that causes a person to
enter into a contract and forms the basis for the parties’ exchange
Contracts are two way street
...

Two elements of consideration:
• Value-requires legal benefit to the promisor or legal detriment to
the promisee
...
You make a cake and deliver it to your neighbor
...

o Ex 2
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Sally is
the promiser, and Baker is the promisee
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Act
•
•

Do a job, deliver an item, or pay money
Does not count if the party was complying with the law or fulfilling
obligations under a contract

Forebearance
• If a person agrees not to do something he has the legal right to do
• An entrepreneur might promise a competitor not to open a
competing business
...
Sidway

•

•
•
•

Story wanted his nephew to grow up healthy
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The nephew agreed and kept his word
The uncle died within the time frame of the deal, and the estate
refused to pay the boy his money
The boy won because he restricted his lawful freedom of action with
his uncle’s agreement

Kim v
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HE could not
•
•
•
•
•
•

be held liable for debts because they were corporations
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Both failed and Kim lost
his investment
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Son pricked his finger with a safety pin and wrote the following in
his blood: I will repay you to the best of my ability
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A promise not to file a meritless
lawsuit has no value
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Something is bargained for if it is sought by the promisor and given by the
promise in exchange for their respective promises
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• It must provide some benefit to promisor or detriment to promise
13-2 What consideration is not?
Courts have three exceptions to the basic rule of consideration:

•
•
•

Illusory promises
Preexisting duties
Past consideration

13-2a Illusory Promises
• not consideration
• Ex
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Jim says he’ll look at it tonight and if he likes what he sees
he will pay her tomorrow
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This is an illusory promise because he is not
committing himself to do anything
Exception: Requirements and Output Contracts under the UCC
• Requirement contract- buyer agrees to purchase 100 percent of
goods from one seller
o Quantity is not stated in contract but is based on previous
years’ calculations
• Output Contracts-seller agrees to sell 100 percent of its output to
one buyer
Section 2-306: allows output and requirement contracts in the sale of
goods
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• Ex
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• The men stopped working and demanded an additional $50 or else
they would leave

•
•

THE AP yielded their demands, but the seamen later demanded
their $100, and AP refused to pay regarding lack of consideration
AP won because their can be no consideration if it violates the
original contract

Exception: Additional Work
When party agrees to do work above and beyond what he is obligated to do,
his promise is valid consideration
...


UCC 2-209:
• An agreement which excludes modification or rescission except by a
signed writing cannot be otherwise modified or rescinded
• An agreement modifying a contract within this article needs no
consideration to be binding
If both parties agree that a modification is necessary, the surest way to
accomplish that is to rescind the original contract and draft a new one
...
It
lacks consideration because it has been based on something he has
already done
...
Feinburg had been an employee for 37 years
...

She retired, and new management decided to revoke her money
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Unliquidated Debt: Accord and Satisfaction
A debt can be unliquidated for two reasons:
• Parties dispute whether any money is owed
• Parties agree that some money is owed but dispute how much

Parties may enter into a binding agreement to settle for less that what the
creditor demands if it is unliquidated for either reason
...
Taylor
• Henches treated Taylor after he was injured in a car accident
...

• Taylor’s insurance claimed the bill was exorbitant and paid only
$2625 for 24 treatments
• Taylor sent him a check stating, by my calculations, I owe you
$5,000
...

• Henches filed a suit, wrote attourney fee on the check over the
word final, and deposited the check
...

UCC Exceptions
• First exception concerns organizations which typically are
businesses

•

o If organization notifies debtor of any offers to settle for less
than the debt claimed must be made to a particular official,
and if the check is sent to anyone else, depositing the check
does not create an accord and satisfaction
...

o If within 90 days of cashing a full payment check, the creditor
offers repayment of the same amount to the debtor, there is
no accord and satisfaction
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Snider Bolt & Screw v Quality Screw & Nut (2009)
• Scott signed a covenant not to compete when he went to work for
Snider for one year after leaving
...

• Snider obtained a temporary restraining order that banned Scott
from working at his new job
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• The Judge ruled that when Scott signed his covenant not to
compete, he did so based upon an implied promise that Snider
would continue his employment
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Scott
lost
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If Dave promises to give $25,000 to a charity then fails to make
the donation, there is no consideration because he received nothing

in return
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It can prove reliance
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Wyman is the majority rule
Webb v

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