Consideration

1. Consideration Makayla Davis

2. Requirements of Consideration • The law has refused to enforce most Gratuitous, or free agreements. An agreement must be bargained for if they are to be binding. An agreement is bargained for when each side is compelled to give up something of value in exchange for something else in value. • Many agreements are not legally binding because they lack consideration. For instance, a social agreements that contain an offer and an acceptance. Ex: An agreement to accompany someone to homecoming.

3. Consideration Makayla Davis

4. The legal concept of consideration • Consideration: is the exchange of benefits and detriments by parties to an agreement. • Benefit: is something that a party was not previously entitled to receive. • Detriment: is any loss suffered.

5. Consideration • There are three types of consideration. The first involves giving up or promising to give up something that you have the legal right to keep. • The second type involves doing something or promising to do something that you have the legal right not to do. • The final type of consideration, which is known as Forbearance, is not doing something that you have the legal right to do.

6. The characteristics of Consideration The three key characteristics: • Promises must involve the concept of a bargained-for exchange • Something of value must be involved • The benefits and detriments promised must be legal.

7. Bargained-for exchange • The law supports agreements that have been bargained for. An agreement involves a Bargained-for exchange when a promise is made in return for another promise, an act, or a promise not to act. Both parties gain something when the promises arte kept and the exchange is made.

8. Example of bargained for exchange • A man is selling a car for $3,500, he is known as the promisor and receives the benefit: the right to receive the money. • Another man decides he will buy the car for that price. He is the promiseeand has the Legal detriment: The promise to give up the $3,500.

9. Types of consideration • Money as consideration: Usually, one party will offer money in exchange for another parties promise or performance. • Property and services as consideration: Before money was accepted as a medium of exchange, it was common to use property and services as consideration. Some parties still prefer to engage in barter agreements that involve goods and services rather than money.

10. A promise not to sue • If one party has the right to sue another party but gives up that right in exchange for something in value. The court will generally uphold the exchange as valid consideration. • Ex: If a woman eats a fish platter for lunch at a restaurant and later has horrible stomach pains, and she was rushes to the local hospital. In the hospital she was diagnosed with food poisoning. The type of food poisoning that could have only resulted from improper storage of the fish she had eaten for lunch. The woman elected to sue the restaurant, but the restaurant offered her $5,000 if she dropped her law suit. The woman agreed. The thing of value that the woman transferred to the restaurant was her right to complete her law suit.

11. Charitable pledges • Charitable organizations and nonprofit institutions often depend upon contributions. This dependency has led the court to enforce charitable pledges just as if they were contracts. If a specific project is involved with a pledge, the charity must carry out its side of the deal by completing the project

12. Problems with consideration • When parties disagree with the amount of money that the debtor owes the creditor, a problem has arisen over the consideration involved in the contract. The resolution of the problem depends upon whether the transaction involves a genuine dispute as to the amount of money owed.

13. Disputed amounts • If the parties to a contract cannot agree as to the actual amount owed, the amount is said to be in dispute. • A dispute can be settled by accord and satisfaction if the creditor excepts a payment that is less than the amount due as full payment. • The acceptance of the creditor of less than what has been billed to the debtor is the accord. The agreed-to settlement as contained in the accord is the satisfaction. The dispute must be real, must occur in good faith, and must not be trivial.

14. Undisputed amounts • If the parties have mutually agreed to set an amount of money in the contract, then the amount cannot be disputed. The debtor may have remorse over the amount that he or she has agreed to pay in the contract, but he or she would still owe that amount. This would be true even if the debtor later discovered that another party was offering the same contractual arrangement at a lesser amount.

15. Enforceable agreements without consideration • In most situations, a contract is invalid if it does not include consideration. However, there are some agreements in which the requirement of consideration is eliminated. This is true despite the fact that these agreements may appear to offer the necessary element of consideration.

16. Promises under seal • Seal: is a mark or an impression placed on a written contract indicating that that the instrument was executed and accepted in a formal manner.

17. Promises enforced by promissory estoppel • Under the doctrine of Promissory estoppel, a promise may be enforced without consideration. The word promissory means “ containing or consisting of a promise.” the word estoppel means “ restraint on a person to prevent him or her from contradicting a previous act.” The doctrine is used to prevent injustice when a person changes his or her position significantly in reliance on another persons promise, and the promise is not fulfilled. The court will “estop” the person who made the promise from claiming that there was no consideration.

18. Option • Sometimes an offeree will give consideration to an offeror in exchange for a promise from the offeror to keep an offer open for a specified period of time. This is known as option. Under the UCC, an exception exists to the rule requiring consideration for an option. When a merchant makes a written offer stating the period of time during which an offer will remain open, consideration is not needed. The offer, which is called a Firm offer, or an irrevocable offer, must be signed by the offeror. The time permitted for acceptance cannot exceed three months.

19. Illusory Promises • Some contracts are illusory, meaning they appear at first glance to be contracts but further scrutiny are revealed to be hollow. Such agreements are said to involve illusory promises.

20. Past consideration • The act of giving or exchange of benefits and detriments must occur when a contract is made. Past consideration, or consideration that took place in the past or that is given for something that has already been done, is not regarded as legal by courts.

21. Preexisting duties • If a person is already under a legal obligation to do something, a promise to do that same thing is not consideration. These obligations are called Preexisting duties.