Contracts consideration business law

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Contracts consideration business law

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Contracts consideration business law

  1. 1. 1 Contracts Consideration
  2. 2. 2 Introduction  Consideration is legal value given in return for a promise or performance.  Must have something of legal value or sufficiency.  Must be a bargained-for exchange.
  3. 3. 3 §1: Elements of Consideration  Consideration for a promise must be either:  Legally detrimental to the promisee, or Legally beneficial to the promisor.  “Legal Value”:  Promise,  Performance, or  Forbearance.  Case 11.1: Hamer v. Sidway (1891).
  4. 4. 4 §2: Adequacy of Consideration  A Court will not question the fairness of the bargain if legally sufficient.  Law does not protect a person from entering into an unwise contract.  In extreme cases, a court may find that a party lacks legal capacity or that contract was unconscionable.  Case 11.2: Powell v. MVE Holdings (2001).
  5. 5. 5 §3: Agreements That Lack Consideration  Preexisting Duty.  A promise to do what one already has a legal duty to do does not constitute legally sufficient consideration.  Exceptions:  Unforeseen Difficulties.  Recession and New Contract.  Past Consideration is no consideration because the bargained-for exchange element is missing.
  6. 6. 6 §4: Problem Areas Concerning Consideration  Uncertain Performance.  Settlement of Claims.  Promises enforceable without consideration.
  7. 7. 7 Uncertain Performance  Illusory Promises.  Promisor has not definitely promised to do anything (no promise at all).  Option-to-Cancel Clauses.  Requirements and Output Contracts.
  8. 8. 8 Settlement of Claims  Debtor offers to pay a lesser amount than the creditor purports to be owed.  Accord and Satisfaction.  Liquidated Debt.  Amount has been ascertained, fixed, agreed on, settled, or exactly determined.  Unliquidated Debt.  Parties give up legal right to contest the amount in dispute, and thus consideration is given.
  9. 9. 9 Settlement of Claims [2]  Release bars any further recovery beyond the terms stated in the release.  Case 11.3: Mills v. Berlex Laboratories (1999).  Convenant not to Sue is an agreement to substitute contractual obligation for some other type of legal action based on a valid claim.
  10. 10. 10 Promises Enforceable Without Consideration  Promises to Pay Debt Barred by a Statute of Limitations.  Detrimental Reliance and Promissory Estoppel:  Must be definite promise.  Promisee must justifiably rely on the promise.  Reliance is substantial.  Justice will be served by enforcing promise.

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