Chapter 12 Consideration promise o Elements of consideration Legal Value o Consideration is legal value that is bargained for and given in exchange for an act or a Payment of money or property A person refraining doing something according to contract that they are legally allowed to do Doing something that person had no prior legal duty to do Not a gift Legal value adequacy of consideration Courts do not concern themselves with whether or not the promise was worth what the contractual terms agree upon o For example a contract that holds one party responsible for the exchange of twenty business law textbooks for forty identical books is still legally binding Bargained For Exchange A contract must have been bargained for and the exchange must be for the price that the promisor asked for in exchange for making his promise Exchanges that fail to meet consideration requirements o Illusory Promises A promise that does not bind a party to do or refrain from doing anything I ll paint your house if I feel like it or a promise to buy all the sugar I want Effect of cancellation or termination clause o The fact that a contract includes a termination clause does not mean the contract is an illusory promise Effect of output and requirements contracts o Preexisting duties Already have to do what your promising to do I promise not to commit a crime o Stating that you will buy all of the other party s production output or that you will supply all of the other party s needs requirement such agreements because they fail to specify amount of goods and allow for exploitation The Code addresses these concerns by saying parties are obligated to honor all demands in good faith Effect of exclusive dealing contracts o An agreement giving the exclusive right to sell a manufacturers products in a particular territory UCC states that unless the parties agree on the contrary an exclusive dealing contract imposes a duty on the distributor to use her best efforts to sell the goods and imposes a reciprocal duty on the manufacturer to use his best efforts to supply the goods Preexisting contractual duties and modifications of contracts under the Common Law o A construction company can t halt construction and demand more money to complete the job This is because they have already entered into a contract to finish the job and they have preexisting contractual duties Preexisting contractual duties and modifications of contracts under the UCC o Under the UCC a modification to an agreement needs no new consideration If a company has contracts to pay 150 then agrees to pay 200 then refuses to pay the extra 50 it is not liable under common law because there was no new consideration still under preexisting contractual duties The UCC rules that the company is liable Preexisting duty and agreement to settle debts o Liquidated debts a debt that is both due and certain Paying less than the full amount is unenforceable for lack of consideration o Unliquidated Debts debts that have disputes surrounding either the existence or the amount Paying less than the full amount is enforceable o Past Consideration Acts that a party have already committed before a bargain was agreed upon by both parties Christmas bonus based on past performance or a father telling his son on his 21st birthday that he will pay him for graduating high school Exceptions to the consideration requirement o Promissory Estoppel o Promises to pay debts barred by statues of limitations A debt that has failed to be collected in the time limit expressed o Promises to pay debts barred by bankruptcy discharge Once a bankrupt debtor is granted a discharge creditors no longer have the legal right to collet discharged debts o Charitable Subscriptions Promises to make gifts for charitable purposes are often enforced despite the absence of consideration Overview of Consideration Consideration Not Consideration Doing something you had no preexisting duty to do doing something you had a preexsisting duty to do paying part of a liquidated debt prior to the date that the debt is due promisng to do something you had a preexisting duty to do Promising to do something you had no preexisting duty to do nominal consideration unless actually bargained for paying a liquidated debt in a different medium of exchange than originally agreed to paying part of a liquidated debt at or after the date the debt is due agreeing to settle an unliquidated debt making an illusory promise agreeing not to file suit when you have good faith belief in your claims validity past consideration preexisting moral obligation
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