Consideration

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CHAPTER 12
Consideration
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Quote of the Day

• Promises are the uniquely human way of ordering
  the future.
• Hannah Arendt,
• German-American Political Scientist

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Consideration

• Consideration means that there must be bargaining
  that leads to an exchange between the parties.
• Consideration can be anything that someone might
  want to bargain for.
• A promisor is the person who makes the promise,
  and promisee, the person to whom the promise is
  made.

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A Bargain and an Exchange
Bargaining is obligating yourself in order to
induce the other side to agree.

• The thing bargained for can be
• another promise or action.
• a benefit to the promisor or a detriment to the
  promisee.
• a promise to do something or a promise to refrain
  from doing something.

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Which causes...
There is consideration to support a contract
between A and B, when they bargain...
A to give B a benefit
B to give A a benefit
and their bargaining causes BOTH parties ...
OR
OR
AND
AND
AND
AND
A to suffer a detriment
B to suffer a detriment
to either give a benefit to the other or to
suffer a detriment themselves.
Consideration supports a contract!
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Adequacy of Consideration

• Courts seldom inquire into the adequacy of
  consideration.
• A previously paid benefit is generally not
  consideration because it was not meant to induce
  the other side to agree.
• Exception Economic Benefit -- in some cases,
  courts will enforce consideration that is an
  economic benefit, given with the expectation of
  later payment.

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Mutuality of Obligations

• Illusory Promise
• If one partys promise is conditional, the other
  party is not bound to the agreement.
• Sales Law Requirements and Output Contracts
• See Ch. 11 for definitions of these contracts.
• Section 2-306 of the UCC expressly allows output
  and requirements contracts in the sale of goods.

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Preexisting Duty

• A promise to which the promisor is already
  obligated is not consideration.
• Exceptions
• If the scope of the promisors task increases,
  that increase is consideration.
• When unforeseen circumstances cause a party to
  make a promise regarding an unfinished project,
  that promise is valid consideration.
• Modification of a sale of goods is allowable
  without consideration, unless there is a written
  agreement forbidding such modifications.

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Liquidated Debt
Settlement of Debts --

• A liquidated debt is one in which there is no
  dispute about the amount owed.
• In cases of liquidated debt, if the creditor
  agrees to take less than the full amount as full
  payment, her agreement is not binding.
• If the debtor offers a different performance to
  settle the debt and the creditor agrees, the
  agreement is binding.

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Settlement of Debts --
Unliquidated Debt

• A debt is unliquidated if
• (1) the parties dispute whether any money is
  owed, or
• (2) the parties agree that some money is owed but
  dispute how much.
• The parties may agree to settle for less than
  what is owed this accord and satisfaction
  will be enforced if the debtor pays the agreed
  amount.

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Payment by Check

• Common Law ruling
• If a debtor writes Paid in Full on a check, and
  the creditor cashes it, the payment is in full
  whether or not it was the right amount.
• UCC 3-311
• Affirms the Common Law ruling, but adds two
  exceptions
• Organizations may notify debtors that any offers
  to settle debt for less than the whole amount
  must be directed to a certain person.
• The creditor can refund the paid amount within 90
  days and then demand the full amount.

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The law does not hold us accountable for every
promise we make. The doctrine of consideration
determines which promises a court must enforce.