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Chapter 11 Consideration and Promissory Estoppel. Consideration. Consideration : something of legal value given in exchange for a promise Necessary for the existence of a contract Elements: Something of legal value must be given There must be a bargained-for exchange. 11-2. Consideration. - PowerPoint PPT Presentation
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Chapter 11Consideration and Promissory Estoppel
Consideration
Consideration: something of legal value given in exchange for a promise
Necessary for the existence of a contract Elements:
Something of legal value must be given There must be a bargained-for exchange
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Consideration
Legal value A contract is considered supported by legal value
if: The promisee suffers a legal detriment The promisor receives a legal benefit
Most commonly involves tangible payment or performance of an act
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Consideration
Bargained-for exchange Process of bargaining or inducement that leads to
an enforceable contract Naturally present in most commercial transactions
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Case 11.1: Consideration
Case In The Matter of Wirth 14 A.D.3d 572, 789 N.Y.S.2d 69, Web 2005 N.Y. App. Div.
Lexis 424 (2005) Supreme Court of New York, Appellate Division
Issue Is the pledge agreement supported by
consideration and therefore enforceable against the estate of Wirth?
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Gift Promise
Gratuitous promises Unenforceable due to lack of consideration Promise freely given and not induced by promise
of some benefit Completed gift promises are not revocable
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Case 11.2: Gifts and Gift Promises
Case Cooper v. Smith 800 N.E.2d 372, Web 2003 Ohio App. Lexis 5446
(2003) Court of Appeals of Ohio
Issue
Can Cooper recover the gifts or the value of the gifts he gave to Julie and Janet Smith?
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Promises that Lack Consideration
Illegal consideration Illusory promise Preexisting duty Past consideration
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Promises that Lack Consideration
Illegal consideration A promise to refrain from doing an illegal act
Illusory promise A contract that both parties enter, but one or both
of the parties can choose not to perform their contractual obligations
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Promises that Lack Consideration
Preexisting duty A promise to do something the party is already
under an obligation to do arises when one party to an existing contract seeks
to change the terms of the contract during the course of its performance
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Promises that Lack Consideration
Past consideration A prior act or performance that does not support a
new contract Problems of past consideration often arise when a
party to a contract promises to pay additional compensation for work done in the past
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Special Business Contracts
Output contract: a contract in which the seller agrees to sell all of its production to a single buyer
Purposes Assuring the seller of a purchaser for all its output Assuring the buyer of a source of supply for the
goods it needs
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Special Business Contracts
Requirements contract: a contract in which a buyer agrees to purchase all of its requirements for an item from one seller
Purposes Assuring the buyer of a uniform source of supply Providing the seller with reduced selling costs
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Special Business Contracts
Best-efforts contract: A contract which contains a clause that requires one or both of the parties to use their best efforts to achieve the objective of the contract
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Settlement of Claims
Law promotes voluntary settlement of disputed claims Saves judicial resources Serves the interests of the parties entering into the
settlement
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Settlement of Claims
Accord: an agreement whereby the parties agree to accept something different in satisfaction of the original contract
Satisfaction: the performance of an accord If the accord is not satisfied, the other party can sue to
enforce either the accord or the original contract
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Equity: Promissory Estoppel
Promissory estoppel: An equitable doctrine that prevents the withdrawal of a promise by a promisor if it will adversely affect a promisee who has adjusted his or her position in justifiable reliance on the promise
Also known as detrimental reliance
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Equity: Promissory Estoppel
Elements to be proven The promisor made a promise The promisor should have reasonably expected
that promisee would rely on the promise The promisee actually relied on the promise and
engaged in an action or forbearance of a right of a definite and substantial nature
Injustice would result if the promise were not enforced
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