consideration business law notes us

8/12/2019 Consideration Business law notes US

1/16

1

Consideration

Chapter 12


2/16

Quote of the Day

Promises are the uniquely human

way of ordering the future.Hannah Arendt,

German-American Political Scientist

2


3/16

A Bargain and an Exchange

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 thepromise, and promisee, the person to whom

the promise is made.

3


4/16

A Bargain and an Exchange

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 refrainfrom doing something.

Bargaining is obligating yourself in orderto induce the other side to agree.

4


5/16

Kelsoe v. International

Wood Products, Inc

CarolKelsoe was promised 5 percent of the

company's stock.

It was never given to her.

Her supervisor made the promise.

Is the promise binding?

5


6/16

BargainA B

There is consideration to support a contract

between A and B, when they bargain...

and their bargaining causes BOTH parties ...

to either give a benefit to the other or to

suffer a detriment themselves.

Which

causes...

A to give B

a benefitOR

A to suffer a

detriment AND

AND

AND

AND

B to give A

a benefitOR

B to suffer a

detriment

Consideration supports a contract!

6


7/16

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 aneconomic benefit, given with the expectation of

later payment.

7


8/16

Mutuality of Obligations

Illusory Promise

If one partys promise is conditional, the other

party is not bound to the agreement.

Sales Law: Requirements and OutputContracts

Section 2-306 of the UCC expressly allows

output and requirements contracts in the sale of

goods.

8


9/16

Preexisting Duty

A promise to do something the promisor is

already obligated to do is not consideration.

Exception: Additional work. When a promisor

agrees to do something above and beyondwhat he is obligated to do, the promise is

generally valid consideration.

Exception: Modification. If both parties agree to

a modification, the best solution is to rescind thecontract and draft a new one.

9


10/16

Value

Value is not limited to economic benefit given

from one party to another.

Consider Hamer v. Sidway.

10


11/16

Liquidated

Debt

A liquidated debt is one in which there is no

dispute about the amount owed.

In cases of liquidated debt, if the creditoragrees 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, theagreement is binding.

11

Settlement of Debts --


12/16

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.

Settlement of Debts Unliquidated Debt

12


13/16

Accord and Satisfaction by Check

Common Law ruling:

If a debtor writes Full Settlement on a check,and the creditor cashes it, the payment is in fullwhether or not it was the right amount.

UCC 3-311

Affirms the Common Law ruling, but adds twoexceptions:

Organizations may notify debtors that any offers to

settle debt for less than the whole amount must bedirected to a certain person.

The creditor can refund the paid amount within 90days and then demand the full amount.

13


14/16

Jones v. Allstate Insurance

Company

Did the parties enter into an accord and

satisfaction?

What is an accord and satisfaction?

What is an unliquidated debt?

What is a release?

14


15/16

The law does not hold us

accountable for every promise we

make. The doctrine of considerationdetermines which promises a court

must enforce.

15


16/16

THE END

16

consideration business law notes us

Documents