1L Contracts: Consideration Basic and Promissory Estoppel
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Consideration-A bargained for exchange. An exchange is “bargained for
” if it is what is sought by both parties
as the reason or motivation for their exchange.
- (1) Consists of: (1-act, 2-forbearance of act,
(2) Not applicable to the UCC
What are the two theories for consideration:
- Benefit/Detriment Theory (Traditional View)
- Benefit to the promisor OR detriment to the promisee.
In general, a waiver of any legal right
Bargain for Exchange Theory (Modern View)
-quid pro quo (MSPE)
- Promise induces the detriment and the detriment
- induces the promise
(a) Was there a promise made
by the promisor? (Offer)
(b) Was there a promise or performance sought by promisor
in exchange for the promise made?
(c) Was there a promise or performance by the promisee
(i) Remember: Performance can be in the form of a forbearance.
- (d) Was it in exchange for the promise made
- by the promisor? (quid pro quo)
General rule for mere language and consideration:
Mere language of value does not prove value--Needs to be something in exchange (applies to promissory notes,
Define Nominal v. Sham Consideration:
Mere appearance of Consideration is Insufficient-
actual exchange of something small to appear as consideration (IE $1)
- (i) Exception: nominal
- consideration OK for an option contract
fake exchange; parties "say" there is consideration but not actually exchange anything.
- Giving someone something
- for nothing. The promise is
- unenforceable even if a detriment is incurred b/c promise is not in exchange for anything. Ex
Whats the general rule for consideration and preexisting legal duties?
Preexisting Legal Duties--then no consideration
Whats the general rule for moral obligation and consideration?
Moral Obligation is NOT consideration—unless the moral duty is a legal one.
What's the general rule for past consideration?
- Past Service/Act is
- NOT Consideration- not sufficient;
- must be PRESENT consideration. Something delivered/done before the promise is
- executed is not legal consideration
Define illusory promises:
What the general rule for IP and consideration?
- A promise to do nothing. Appears to be a
- promise but is conditioned upon the promisor and no commitment is made. The
- offer is not definite so not consideration.
- (i) Not enforceable: Will not serve as
- consideration b/c performance entirely optional with the promisor and no
- commitment is made; Do not put any limitation on the freedom of the alleged
What's the general rule for consideration and conditions?
- An act that must be completed before the
- acceptance of a contract.
- (i) *Remember: There can be consideration when
- there is a conditional gift…
What's the general rule for sale of goods and consideration?
- Sale of Goods: No consideration is needed. Covered under the
What's the general rule for amount and fairness of consideration needed for a contract to be enforceable?
- Fairness & Amount is not a question for the court: Courts will not weigh the consideration, or insist on a fair or even exchange. However, gross inadequacy of consideration may be relevant for other causes of action (IE: fraud,
- mistake, lack of capacity, duress or undue influence)
When is promissory estoppel applicable?
Offer + acceptance but lack of consideration
Define PE and what are the elements?
- Promissory Estoppel—Substitute
- for consideration; no consideration but unbargained detrimental reliance
(a) Promise made
- (a) A promise which the
- promisor should reasonably expect to induce action or forbearance of a definite
- and substantial character on the part of the promisee and which does induce
- such action or forbearance is binding if injustice can be avoided only by
- enforcement of the promise.
- (i) Promise (can also be a blunt offer)—an assurance that a thing will or
- will not be done
(ii) Future intent does not form a promise.
(iii) Promise can be implied by conduct or expressed by overt statement
- (b) Foreseeable reliance on the promise to induce
- action or forbearance
and substantial reliance on promise to the detriment of the promisee
- (d) Injustice would result w/ refusal
- to enforce promise; necessary to
- prevent injustice b/c detriment incurred in reliance to promise
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