Download Chapter 011 - Consideration

Chapter 11
Consideration and
Promissory Estoppel
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Consideration
 Consideration: something of legal value given in
exchange for a promise
 Necessary for the existence of a contract
 Elements:
 Something of legal value must be given
 There must be a bargained-for exchange
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Consideration
 Legal value
 A contract is considered supported by legal value
if:
 The promisee suffers a legal detriment
 The promisor receives a legal benefit
 Most commonly involves tangible payment or
performance of an act
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Consideration
 Bargained-for exchange
 Process of bargaining or inducement that leads to
an enforceable contract
 Naturally present in most commercial transactions
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Case 11.1: Consideration
 Case
 In The Matter of Wirth
 14 A.D.3d 572, 789 N.Y.S.2d 69, Web 2005 N.Y. App. Div. Lexis
424 (2005)
 Supreme Court of New York, Appellate Division
 Issue
 Is the pledge agreement supported by consideration
and therefore enforceable against the estate of
Wirth?
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Gift Promise
 Gratuitous promises
 Unenforceable due to lack of consideration
 Promise freely given and not induced by promise
of some benefit
 Completed gift promises are not revocable
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Case 11.2: Gifts and Gift Promises
 Case
 Cooper v. Smith
 800 N.E.2d 372, Web 2003 Ohio App. Lexis 5446
(2003)
 Court of Appeals of Ohio
 Issue
 Can Cooper recover the gifts or the value of the
gifts he gave to Julie and Janet Smith?
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Promises that Lack Consideration
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Illegal consideration
Illusory promise
Preexisting duty
Past consideration
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Promises that Lack Consideration
 Illegal consideration
 A promise to refrain from doing an illegal act
 Illusory promise
 A contract that both parties enter, but one or both
of the parties can choose not to perform their
contractual obligations
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Promises that Lack Consideration
 Preexisting duty
 A promise to do something the party is already
under an obligation to do
 arises when one party to an existing contract seeks
to change the terms of the contract during the
course of its performance
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Promises that Lack Consideration
 Past consideration
 A prior act or performance that does not support a
new contract
 Problems of past consideration often arise when a
party to a contract promises to pay additional
compensation for work done in the past
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Special Business Contracts
 Output contract: a contract in which the seller
agrees to sell all of its production to a single buyer
 Purposes
 Assuring the seller of a purchaser for all its output
 Assuring the buyer of a source of supply for the
goods it needs
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Special Business Contracts
 Requirements contract: a contract in which a buyer
agrees to purchase all of its requirements for an item
from one seller
 Purposes
 Assuring the buyer of a uniform source of supply
 Providing the seller with reduced selling costs
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Special Business Contracts
 Best-efforts contract: A contract which contains a
clause that requires one or both of the parties to use
their best efforts to achieve the objective of the
contract
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Settlement of Claims
 Law promotes voluntary settlement of disputed
claims
 Saves judicial resources
 Serves the interests of the parties entering into the
settlement
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Settlement of Claims
 Accord: an agreement whereby the parties agree to
accept something different in satisfaction of the
original contract
 Satisfaction: the performance of an accord
 If the accord is not satisfied, the other party can sue to
enforce either the accord or the original contract
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Equity: Promissory Estoppel
 Promissory estoppel: An equitable doctrine that
prevents the withdrawal of a promise by a promisor if
it will adversely affect a promisee who has adjusted
his or her position in justifiable reliance on the
promise
 Also known as detrimental reliance
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Equity: Promissory Estoppel
 Elements to be proven
 The promisor made a promise
 The promisor should have reasonably expected
that promisee would rely on the promise
 The promisee actually relied on the promise and
engaged in an action or forbearance of a right of a
definite and substantial nature
 Injustice would result if the promise were not
enforced
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