Transcript No Slide Title

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 the
promise, and promisee, the person to
whom the promise is made.
A Bargain and an Exchange
“Bargaining is obligating yourself in order
to induce the other side to agree.”
◙ 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
refrain from doing something.
A
Bargain
B
Which
There is consideration
to support a contract
causes...
between A and B, when
they bargain...
A to give B
a benefit
B to give A
a benefit
and their bargaining causes BOTH parties ...
OR
OR
A to suffer a
detriment
AND
B to suffer a
detriment
…to either give a benefit to the other or to
Consideration
suffer a detriment supports
themselves.a contract!
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 an economic benefit, given with the
expectation of later payment.
Mutuality of Obligations
◙ Illusory Promise
• If one party’s promise is conditional, the
other party is not bound to the agreement.
◙ Sales Law: Requirements and Output
Contracts
• See Ch. 11 for definitions of these contracts.
• Section 2-306 of the UCC expressly allows
output and requirements contracts in the
sale of goods.
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
beyond what 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 the contract and draft a new one.
Settlement of Debts
Liquidated
-- Debt
◙ A liquidated debt is one in which there is
no dispute about the amount owed.
• In cases of liquidated debt, if the creditor
agrees 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,
the agreement is binding.
Settlement of Debts --
Unliquidated
Debt
◙ 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.
Accord & Satisfaction by Check
◙ Common Law ruling:
• If a debtor writes “Full Settlement” on a
check, and the creditor cashes it, the
payment is in full whether or not it was the
right amount.
◙ UCC §3-311
• Affirms the Common Law ruling, but adds
two exceptions:
– Organizations may notify debtors that any offers
to settle debt for less than the whole amount
must be directed to a certain person.
– The creditor can refund the paid amount within
90 days and then demand the full amount.