What You

1
Section 8.2
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What Youll Learn

• How to identify agreements that are enforceable
  without consideration (p. 173)
• How to explain the legal concept of promissory
  estoppel (p. 175)

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What Youll Learn

• How to identify agreements that are not
  enforceable without consideration (p. 176)
• How to distinguish between past consideration and
  preexisting duties
• (p. 177)

4
Why Its Important
Understanding the difference between contracts
that require consideration and those that do not,
will enable you to avoid common problems
associated with consideration or the lack thereof.
5
Legal Terms

• seal (p. 173)
• promissory estoppel (p. 175)
• option (p. 176)
• firm offer (p. 176)
• illusory promise (p. 177)
• past consideration (p. 177)
• preexisting duty (p. 177)

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Section Outline
Enforceable Agreements without Consideration
Promises under Seal Promises after Discharge in
Bankruptcy Debts Barred by Statutes of
Limitations Promises Enforced by Promissory
Estoppel Option
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Section Outline
Unenforceable Agreements without Consideration
Illusory Promises Future Gifts Past
Consideration Preexisting Duties Promise to
Attend a Social Engagement
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Pre-Learning Question
Do you think any agreements would be enforceable
without consideration? Why or why not?
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Enforceable Agreements without Consideration
Some courts have eliminated the requirement of
consideration in certain agreements.
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Enforceable Agreements without Consideration
These exceptions are allowed by state statute or
because the courts, in the interest in fairness
or justice, find it inappropriate to require
consideration.
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Enforceable Agreements without Consideration
Some common agreements in this category include

• Promises under seal
• Promises after discharge in bankruptcy

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Enforceable Agreements without Consideration

• Debts barred by the statute of limitations
• Promises enforced by promissory estoppel
• Options

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Promises under Seal
A seal is a mark or impression placed on a
written contract indicating that the instrument
was executed and accepted in a formal manner.
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Promises under Seal
Today most states that require a seal will permit
the seal to be indicated by the addition of seal
or L.S. (locus sigilli, which translates to
place of the seal).
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Promises after Discharge in Bankruptcy
A person who has had his or her debts discharged
in bankruptcy can reaffirm the debt, which means
he or she has decided to pay the debt voluntarily.
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Promises after Discharge in Bankruptcy
Under most state laws, no new consideration needs
to be provided in support of this reaffirmation.
Instead, the reaffirmation must be supported by
contractual intent.
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Debts Barred by Statutes of Limitations
A statute of limitations establishes the time
frame within which a party is allowed to bring
suit. Different states set different time limits
for the collection of a debt.
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Debts Barred by Statutes of Limitations
No new consideration is needed for a debtor to
reaffirm a debt barred by the statute of
limitations.
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Promises Enforced by Promissory Estoppel
Under promissory estoppel, a promise may be
enforceable without consideration.
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Promises Enforced by Promissory Estoppel

• Promissorycontaining or consisting of a promise.
• Estoppelrestraint on a person to prevent him or
  her from contradicting a previous act.

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Promises Enforced by Promissory Estoppel
The doctrine is used to prevent injustice when a
person changes his or her position significantly
in reliance on another persons promise and the
promise is not fulfilled.
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The Elements of Promissory Estoppel
Three conditions must be met before the courts
will apply this principle.

1. The promise must be made to bring about action or
   forbearance by another person who gave no
   consideration.

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The Elements of Promissory Estoppel

1. The one who gave no consideration must have
   relied on the promise and changed his or her
   position in a significant way.
2. Injustice can be avoided only by enforcing the
   agreement.

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Option
When an offeree gives consideration to an offeror
in exchange for a promise from the offeror to
keep an offer open for a specified period of
time, this is known as an option.
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Option
When a merchant makes a written offer stating a
period of time during which an offer will remain
open, consideration is not needed. The offer is
called a firm offer, or an irrevocable offer.
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Pre-Learning Question
What do you think an illusory promise is?
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Unenforceable Agreements without Consideration
There are certain promises that the courts will
not enforce because they lack even the most basic
qualities of valid consideration.
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Unenforceable Agreements without Consideration
Included in this category are

• Illusory promises
• Promises of future gifts
• Promises of legacies

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Unenforceable Agreements without Consideration

• Promises based on past consideration
• Promises based on preexisting duties
• Agreements to attend social engagements

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Illusory Promises
For a binding contract to be formed, both parties
must be under an obligation to do something. If
this is not the case, then neither party is bound
to do anything.
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Illusory Promises
Some contracts appear to be contracts but on
further scrutiny are revealed to be hollow.
Such an agreement is said to involve illusory
promises.
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Future Gifts
If a person promises to bestow a gift at some
future time or in a will, that promise is not
enforceable if no consideration is given for the
promise.
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Past Consideration
The act of giving or exchanging benefits and
detriments must occur when a contract is made.
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Past Consideration
Past consideration, or consideration that took
place in the past or that is given for something
that has already been done, is not regarded as
legal by the courts.
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George Whitehead had an agreement with Main
Street Pharmacy to perform for 10 per hour any
maintenance that the pharmacy might need for the
next two years.
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What type of agreement does Whitehead and Main
Street Pharmacy have?
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ANSWER
An illusory promise
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Preexisting Duties
If a person is already under a legal obligation
to do something, a promise to do that same thing
is not consideration. These obligations are
called preexisting duties.
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Promise to Attend a Social Engagement
An agreement to meet a friend for lunch or
another social engagement would not be a legally
binding agreement because the friend has given
nothing in exchange for the promise.
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Section 8.2 Assessment
Reviewing What You Learned

1. What agreements are enforceable without
   consideration?

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Section 8.2 Assessment
Reviewing What You Learned
Answer
Promises under seal, promises after discharge in
bankruptcy, debts barred by the statute of
limitations, promises enforced by promissory
estoppel, and options.
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Section 8.2 Assessment
Reviewing What You Learned

1. What is the legal doctrine of promissory estoppel?

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Section 8.2 Assessment
Reviewing What You Learned
Answer
A promise may be enforceable without
consideration used to prevent injustice when a
person changes his or her position significantly
in reliance on anothers promise, and the promise
is not fulfilled.
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Section 8.2 Assessment
Reviewing What You Learned

1. What agreements are not enforceable without
   consideration?

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Section 8.2 Assessment
Reviewing What You Learned
Answer
Illusory promises, promises of future gifts,
promises of legacies, promises based on past
consideration, promises based on preexisting
duties, and agreements to attend social
engagements.
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Section 8.2 Assessment
Reviewing What You Learned

1. What is the difference between past consideration
   and preexisting duties?

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Section 8.2 Assessment
Reviewing What You Learned
Answer
Past consideration is consideration given in the
past or given for something already done. A
preexisting duty is an obligation a person
already has and cannot serve as consideration.
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Section 8.2 Assessment
Critical Thinking Activity Public Policy
Why does the law support the doctrine of
promissory estoppel?
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Section 8.2 Assessment
Critical Thinking Activity Answer Public Policy
Answers should recognize that the doctrine of
promissory estoppel is used to prevent injustice
when a person changes his or her position
significantly in reliance on another persons
promise, and the promise is not fulfilled.
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Section 8.2 Assessment
Legal Skills in Action Promissory Estoppel
Your cousin, Geri, has just called you from
California.
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Section 8.2 Assessment
Legal Skills in Action Promissory Estoppel
She recently quit her job, broke the lease on her
apartment, emptied her bank account to buy a used
car, and moved to California because a movie
producer promised her a job.
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Section 8.2 Assessment
Legal Skills in Action Promissory Estoppel
Now in California, she realizes that the job
offer was an empty promise. Write a letter to the
producer in which you explain how the doctrine of
promissory estoppel applies in this situation.
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Section 8.2 Assessment
Legal Skills in Action Answer Promissory Estoppel
Answers will vary, but should relate the elements
of promissory estoppel to these circumstances.
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End of Section 8.2