Contracts consideration business law

1. 1
Contracts Consideration

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
§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
§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
§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
§4: Problem Areas
Concerning Consideration
 Uncertain Performance.
 Settlement of Claims.
 Promises enforceable without consideration.

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
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
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
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.