This document discusses consideration in contracts and cyberpayments. It defines consideration as a bargained-for exchange between parties where each party provides benefits and suffers detriments. Consideration must involve a legal detriment like doing something one is not required to do or refraining from something one can legally do. The document also discusses issues like adequacy of consideration, bargained exchanges, and exceptions to consideration like promissory estoppel. It analyzes cyberpayment options and security issues in light of EU privacy directives.

1. Chapter 9
Consideration and Cyberpayments
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2. Case Study
• Dougherty v. Salt (1919)
– Elderly aunt writes a note to her nephew promising
$3,000 at her death or before
– Aunt dies, estate won’t pay
– Nephew sues
Should the court uphold the agreement?
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3. Case Study
• Hamer v. Sidway (1891)
– Man promises his nephew that he would pay him $5000 if he
refrains from drinking, using tobacco, swearing, and playing
cards or billiards for money until he became 21 years of age
– The nephew agreed and fully performed the conditions.
– Plaintiff tries to enforce agreement, but defendant won’t
comply, citing no contract due to lack of consideration
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4. Requirements of Consideration
• Consideration
– The mutual promise to exchange benefits and
sacrifices between the parties.
Quid pro quo – something for something
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5. The Nature of Consideration
• A gain by the offeree is a loss to the offeror
• Likewise, the gain bargained for by the offeror
will result in a loss or sacrifice by the offeree
• Mutual benefit and detriment
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6. The Nature of Consideration
• Legal detriment
– the legal term used to describe the sacrifice that each
party must experience
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7. The Nature of Consideration
A legal detriment can be:
(1) doing something that one has a legal right not
to do
(2) giving up something that one has a legal right to
keep
(3) refraining from doing something that one has a
legal right to do (forbearance)
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8. The Characteristics of Consideration
1. The agreement must involve a bargained-for
exchange
2. The contract must involve adequate
consideration
3. The benefits and detriments promised must
themselves be legal
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9. Bargained-for Exchange
An agreement involves a bargained-for exchange
when:
1. a promise is made in exchange for another
promise
2. a promise is made in exchange for an act
3. a promise is made for forbearance of an act
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10. Adequacy of Consideration
• In general, the courts do not look to see whether
the value of the consideration was fair to both
parties
• However, a court may refuse to enforce a
contract or any clause of a contract if it considers
the contract or clause unconscionable
– So ridiculously inadequate that it shocks the court’s
conscience
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11. Case Studies
• Tillman v. Commercial Credit Loans, Inc., 655
S.E.2d 362 (N.C. 2008)
– An unfair arbitration clause in a subprime mortgage
contract declared unconscionable
• Ting v. AT&T (2003)
– A binding arbitration clause in AT&T’s phone contracts
declared unconscionable
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12. Types of Consideration
Money
Property
Services
Promises Not to Sue
Charitable Pledges
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13. Problems with Consideration
• Disputed amount
– one on which the parties never reached mutual
agreement.
• If a creditor accepts as full payment an amount
that is less than the amount due, the dispute has
been settled by an accord and satisfaction.
• Undisputed amount
– one on which the parties have mutually agreed
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14. Problems with Consideration
• Accord
– the implied or expressed acceptance of less than what
has been billed the debtor
• Satisfaction
– the agreed-to settlement contained in the accord
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15. Agreements Without Consideration
Enforceable Agreements
•
•
•
•
•
Promises Under Seal
Promises After Discharge in Bankruptcy
Debts Barred by Statutes of Limitations
Promises Enforced by Promissory Estoppel
Option
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16. Promises Under Seal
• Varies according to jurisdiction
• Seal
– a mark or an impression placed on a written contract
indicating that the instrument was executed and
accepted in a formal manner
• Locus sigilli
– “place of the seal”
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17. Debts Barred by Statutes of Limitations
• Statutes of limitations – laws that limit the time
within which a party is allowed to bring suit.
• The time allowed for the collection of a debt
varies from state to state, usually from three to
ten years
http://www.fair-debt-collection.com/SOL-by-State.html#34
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18. Promises Enforced by Promissory Estoppel
• Promissory estoppel
– legal doctrine that restricts a party from denying that
a promise was made under certain conditions, even
though consideration has not been exchanged to bind
an agreement.
Ex: I promise you a job if you move to California. You
move, but I refuse to give you a job.
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19. Case Study
• East Providence Credit Union v. Geremia (1968)
– Credit Union issues car purchase loan to defendants,
required accident insurance, bank warned that they
will get insurance and bill defendants
– Car wrecked, but bank did not buy insurance
– Court ruled that Bank’s warning was a promise on
which D’s reasonably relied and thus Bank was liable
under promissory estoppel.
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20. Option
• Option
– The giving of consideration to support an offeror’s
promise to hold open an offer for a stated or a
reasonable length of time
– Firm offer (irrevocable offer)
• Must be signed by the offeror, and for a period no longer
than three months
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21. Unenforceable Agreements
• Preexisting Duties
– A promise to do something that one is already
obligated to do by law or by some other promise or
agreement cannot be made consideration in a new
contract
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22. Unenforceable Agreements
• Past Consideration
– A promise to give another something of value in
return for goods or services rendered and delivered in
the past, without expectation or reward
• Promises for Future Gifts
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23. Unenforceable Agreements
• Illusory promise
– One that seems genuine but that on close
examination actually fails to obligate the promisor to
do anything
Ex: I promise to give you all A’s, unless I decide not to.
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24. Cyber-Payment Tactics and Concerns
• Cyber-price and competition
• Cyber-payments
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25. Cyber-Price and Competition
• The Internet has helped improve the
transparency of the pricing process.
• Consumers can now use the Internet to seek out
competitive prices, thus improving their ability to
set the consideration at a level with which they
are comfortable.
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26. Cyber-Price Shopping
• Some consumers subscribe to several objective
shopping search engines that provide pricing
comparison information.
• Expedia, Travelocity, Orbitz
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27. Cyber-Payments Options
• Credit card, debit card
• European stored value or smart card
• Alternative payment system - PayPal
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28. Cyber-Payment Security Issues
• EU Data Protection Directive along
• with the EU E-Privacy Directive guarantee the
rights of European citizens while, at the same
time, ensuring the smooth exchange of data
among those nation-states that honor the privacy
and data protection standards themselves.
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29. Cyber-Payment Security Issues
• Safe Harbor Principles
– U.S. corporations that are involved with EU
corporations must demonstrate that the companies
themselves will promise to honor the same degree of
protection to data and to privacy as guaranteed by
the EU.
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