CHAPTER 8: CONSIDERATIONBy: Mike Francini, Tasia Gorski, Caitlin McNamara, & Sam Zangara

Chapter 8:Consideration

Vocabulary

Consideration- what a person demands and generally must receive in order to make his/her promise legally binding.

Gift- a transfer of ownership without receiving anything in return.

Donor- a person giving gift. Donee- a person receiving the gift. Forbearance- refraining from doing what

one has a right to do

More Vocabulary…

Promisor- a person promising an action or forbearance

Promisee- a person to whom the promise is made

Legal Value- a change in a party’s legal position as a result of the contract

Nominal Consideration- the token amount identified in a written contract when parties either cannot or do not wish to state the amount precisely

Key Concepts

Requirements Each party must promise, perform an act, or forbear. Each promise, action, or forbearance must be in

exchange for a return promise, action, or forbearance. Must have legal value (worth something in eye’s of the

law). Circumstantial Consideration: certain forms of

consideration only legally binding in the proper circumstances. Ex: Illusory promises (anything that allows you to

escape legal obligation, ie termination clauses), existing legal and/or contractual duty (public and private).

False Consideration

Certain acts or promises are falsely identified as consideration but never can be.

Mutual Gifts When something of value is given by one party to

another without demanding anything in return. When this occurs, that something of value is not

consideration for anything later promised/provided. Past Performance (act already performed)

Since contractual bargaining (for immediate or future performance by both parties) takes place in the present, past performance (also known as past consideration) cannot serve as consideration.

Exceptions

Promises made to charitable organizations Churches, schools, non-profit hospitals Pledges or completed gifts

Promises covered by UCC Firm offers Modification

Promises to renew debt barred from collection by certain statutes. Statute of limitations, debts discharged in bankruptcy.

Promises enforceable under doctrine of promissory estoppel (prevents promisors from stating in court that they didn’t receive consideration for their promises).

Conditions for Promissory Estoppel Promisor should reasonably forsee that

promisee will rely on promise. Promisee does act in reliance on

promise. Promisee would suffer substantial

economic loss if promise not enforced. Injustice can be avoided only by

enforcement of promise.