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HAPTER12 CONSIDERATION 1 ANSWERS C TO PROBLEMS CHAPTER 12 1. In consideration of $1800 paid to him by Joyce, Hill gave Joyce a written option to purchase his house for $180,000 on or before April 1. Prior to April 1, Hill verbally agreed to extend the option until July 1. On May 18, Hill, known to Joyce, sold the house to Gray, who was ignorant of the unrecorded option. Is there a contract between Joyce & Hill? Explain. Answer: Bargained-for Exchange. No. Consideration was paid to Hill for holding the property for the specified time subject to the right of Joyce to exercise the option whether to buy or not. When the time limit expired, the contract was at an end and the right under the option was extinguished. Of course, if that right were extended by some valid binding agreement, then it could be enforced. Joyce did not attempt to exercise the option and complete a contract of purchase within the time limited by the written agreement. It is true that before the expiration of the time stated, Hill verbally agreed or promised to extend the time for the exercise of the option from April 1 to July 1, and that it was within this latter or extended period and after the property had been sold and conveyed to Gray that Joyce presented himself ready to accept the property and pay the price. However, such acceptance came too late. There was no consideration for the verbal promise or agreement to extend the time, and such promise was therefore not enforceable. After April 1 the verbal agreement operated simply as a mere offer continuing until withdrawn or otherwise ended by some act of the offeror, Hill. The sale to Gray was known to Joyce and resulted in a revocation of the offer. ( NOTE: In addition, the Statute of Frauds would require an extension of the option to be in writing because such an option deals with an interest in or concerns land.) 2. (a) Ann owed $500 to Barry for services Barry rendered to Ann. The debt was due June 30, 2007. In March 2008, the debt was still unpaid. Barry was in urgent need of ready cash and told Ann that if she would pay $150 of the debt at once, Barry would release her from the balance. Ann paid $150 and stated to Barry that all claims had been paid in full. In August 2008, Barry demanded the unpaid balance and subsequently sued Ann for $350. Result? (b) Modify the facts in (a) by assuming that Barry gave Ann a written receipt stating that all claims had been paid in full. Result? (c) Modify the facts in (a) by assuming that Ann owed Barry the $500 on Ann's purchase of a motorcycle from Barry. Result? Answer: Settlement of an Undisputed Debt. (a) Decision for Barry. As this debt arose out of a contract for services, the common law of contracts would apply. At common law the payment of a lesser sum of money in full satisfaction of a liquidated, undisputed debt in a greater amount is legally insufficient consideration for a promise of the creditor to discharge the entire debt. There is no legal detriment to the promisee or legal benefit to the promisor. UCC: Renunciation. (b) Decision for Barry unless UCC Section 1-107 applies. It is unclear whether Section 1-107 applies to transactions outside of the Code. If it does not, then the written receipt would not change the result in question 2a. If Section 1-107 applies, then the written receipt would constitute a written waiver or renunciation signed and delivered by the aggrieved party and would discharge the debt. Modification of a Pre-existing Contract. (c) This transaction would be subject to the Uniform Commercial Code. Under Section 2-209 (1) a contract for the sale of goods can be validly modified by the parties without new consideration provided they so intend and act in good faith. This problem presents a question of intent and good faith. Since payment was already due and Barry was acting under economic urgency, the modification is probably not binding. However, if Barry gave Ann a written release as was done in (2) (b), the result would most likely differ. UCC Section 1-107 expressly provides that any claim or right arising out of any breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party. Consequently, under the Code, consideration is no longer required to discharge a debt. The only requirement is that the creditor sign and deliver a sufficient writing, which Barry did. Barrys only defense would be that of economic duress, which should be found to exist under the facts as stated. 3. (a) Judy orally promises her daughter, Liza, that she will give her a tract of land for her home. Liza, as intended by Judy, 2 CONSIDERATION CHAPTER12 gives up her homestead and takes possession of the land. Liza lives there for six months and starts construction of a home. Is Judy bound to convey the real estate? (b) Ralph, knowing that his son, Ed, desires to purchase a tract of land, promises to give him the $25,000 he needs for the purchase. Ed, relying on this promise, buys an option on the tract of land. Can Ralph rescind his promise? Answer: Promissory Estoppel. (a) Yes, decision for Liza. Usually, gift promises are ruled as lacking consideration and are not binding agreements. In this case, Liza justifiably relied on the promise and acted to her detriment by selling her home, moving onto the property, and starting construction of a new house. The doctrine of promissory estoppel applies to such promises that induce action by the promisee that would be reasonably expected by the promisor. Judy becomes liable for having induced the change in position by Liza. (b) Yes, judgment for Ralph. The doctrine of promissory estoppel does not make every gift promise binding just because the promisee has changed positions. There must be a justifiable reliance on the promise to the extent that the promisee takes definite and substantial action. Since Ed purchased only an option to buy the property, this probably would not be construed as a substantial action on his part. 4. George owed Keith $800 on a personal loan. Neither the amount of the debt nor George's liability to pay the $800 was disputed. Keith had also rendered services as a carpenter to George without any agreement as to the price to be paid. When the work was completed, an honest and reasonable difference of opinion developed between George and Keith with respect to the value of Keith's services. Upon receiving from Keith a bill of $600 for the carpentry services, George mailed in a properly stamped and addressed envelope his check for $800 to Keith. In an accompanying letter, George stated that the enclosed check was in full settlement of both claims. Keith indorsed and cashed the check. Thereafter, Keith unsuccessfully sought to collect from George an alleged unpaid balance of $600. May Keith recover the $600 from George? Answer: Settlement of Disputed/Undisputed Debts. Decision, in part, in favor of Keith. This common law problem presents questions attending the payment or settlement of (1) a past due, undisputed or liquidated debt and (2) a disputed debt. In Pinnels Case, 5 Coke 117, and Cumber v. Wayne , 1 Strange, 426, the question presented and decided was that payment of a lesser sum on the day in satisfaction of a greater, cannot be in satisfaction for the whole, although the parties agreed that such payment should satisfy the whole. An accord and satisfaction is a contract and like any other contract must be supported by a valid consideration. Consideration consists of a benefit to the promisor or a detriment to the promisee. Because of the past due undisputed debt, George was under legal obligation to pay $800. By paying $800 in full settlement of both obligations, George did not suffer a legal detriment as to the second (carpentry) contract. George merely did something which he was already legally bound to do. The payment of the $800 discharged the undisputed obligation but, since it did not constitute consideration for the disputed debt, that debt remains. In short, Keith still had a claim for $600 which George could, of course, contest, as to the amount. Had George paid an amount greater than $800, he would have a better argument as to settlement of both debts. 5. The Snyder Mfg. Co., being a large user of coal, entered into separate contracts with several coal companies. In each contract it was agreed that the coal company would supply coal during the entire year in such amounts as the manufacturing company might desire to order, at a price of $35 per ton. In February, the Snyder Company ordered 1,000 tons of coal from Union Coal Company, one of the contracting parties. Union Coal Company delivered 500 tons of the order and then notified Snyder Company that no more deliveries would be made and that it denied any obligation under the contract. In an action by Union Coal to collect $35 per ton for the 500 tons of coal delivered, Snyder files a counterclaim, claiming damages of $1,500 for failure to deliver the additional 500 tons of the order and damages of $4,000 for breach of agreement to deliver coal during the balance of the year. What contract, if any, exists between Snyder and Union? Answer: Illusory Promises. Snyder Mfg. Co. owes Union the rate of $35 per ton for 500 tons of coal already delivered. Moreover, the alleged contracts, to the extent executory, are probably not binding on either party. These agreements to supply Snyder with such amounts of coal as it might desire to order contain illusory promises. Snyder did not agree to order or to buy any coal. It was therefore not contractually bound to do so. Where one party to an agreement is not bound, neither party is bound. Even though the contracts come within the UCC, its good faith provisions could, but probably would not validate these illusory promises. Furthermore, these alleged contracts would not constitute requirements contracts. 6. On February 5, Devon entered into a written agreement with Gordon whereby Gordon agreed to drill a well on Devon's C HAPTER12 CONSIDERATION 3 property for the sum of $5,000 and to complete the well on or before April 15. Before entering into the contract, Gordon made test borings and had satisfied himself as to the character of the subsurface. After two days of drilling, Gordon struck hard rock. On February 17, Gordon removed his equipment and advised Devon that the project had proved unprofitable and that he would not continue. On March 17, Devon went to Gordon and told Gordon that he would assume the risk of the enterprise and would pay Gordon $100 for each day required to drill the well, as compensation for labor, the use of Gordon's equipment, and Gordon's services in supervising the work, provided Gordon would furnish certain special equipment designed to cut through hard rock. Gordon said that the proposal was satisfactory. The work was continued by Gordon and completed in an additional fifty-eight days. Upon completion of the work, Devon failed to pay, and Gordon brought an action to recover $5,800. Devon answered that he had never become obligated to pay $100 a day and filed a counterclaim for damages in the amount of $500 for the month's delay based on an alleged breach of contract by Gordon. Decision? Answer: Pre-existing Contractual Obligation. Decision in favor of Gordon. As a general rule, a promise to do what one is already bound to do by a valid contract will not be sufficient consideration for a new agreement. However, Section 89 of the Restatement, Second, Contracts provides that a promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of the circumstances not anticipated by the parties when the contract was made . . . Alternatively, although of dubious validity in this problem, the same result may be reached on the ground of a substituted contract: that the original contract was rescinded by mutual agreement and that new promises were then made which furnished consideration for each other. 7. Discuss and explain whether there is valid consideration for each of the following promises: (a) A and B entered into a contract for the purchase and sale of goods. A subsequently promised to pay a higher price for the goods when B refused to deliver at the contract price. (b) A promised in writing to pay a debt, which was due from B to C, on C's agreement to extend the time of payment for one year. (c) A orally promised to pay $150 to her son, B, solely in consideration of past services rendered to A by B, for which there had been no agreement or request to pay. Answer: Pre-existing Contractual Obligation. (a) At common law there would be no legally sufficient consideration. As promise to pay a higher price is not supported by anything other than what B had already agreed to do. The consideration on the part of the promisee does not involve any legal detriment to him. However, under Section 2-209 (1) of the Code, the new agreement would be binding without consideration if it was entered into voluntarily and in good faith. (b) Valid consideration. Agreement to extend the time of payment is a legal detriment. (c) No valid consideration. In general, past consideration is no consideration. 8. Alan purchased shoes from Barbara on open account. Barbara sent Alan a bill for $10,000. Alan wrote back that 200 pairs of the shoes were defective and offered to pay $6,000 and give Barbara his promissory note for $1,000. Barbara accepted the offer, and Alan sent his check for $6,000 and his note, in accordance with the agreement. Barbara cashed the check, collected on the note, and one month later sued Alan for $3,000. Is Barbara bound by her acceptance of the offer? Answer: Settlement of a Disputed Debt. Yes, decision in favor of Alan and against Barbara. The problem indicates that a genuine dispute occurred between Alan and Barbara. Where a check is tendered by the debtor to the creditor in full payment or settlement, the cashing of the check constitutes an accord and satisfaction. Revised 3-311. The fact that Alan gave Barbara his promissory note for $1,000 and that Barbara collected on the note strengthens the conclusion stated. Moreover, under UCC Section 2-209(1), consideration is not needed. 9. Nancy owed Sharon $1,500, but Sharon did not initiate a lawsuit to collect the debt within the time prescribed by the statute of limitations. Nevertheless, Nancy promises Sharon that she will pay the barred debt. Thereafter, Nancy refuses to pay. Sharon brings suit to collect on this new promise. Is Nancys new promise binding? Explain. Answer: Promise to Pay Debt Barred by the Statute of Limitations. Decision in favor of Sharon. Section 82 of the Restatement, Second, Contract provides: (1) A promise to pay all or part of an antecedent contractual or quasi-contractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be except for the effect of the statute of limitations. It should be noted that a number of states require by statute that such a promise be in writing to be binding. 10. Anthony lends money to Frank. Frank dies without having paid the loan. Frank's widow, Carol, promises Anthony to repay 4 CONSIDERATION CHAPTER12 the loan. Upon Carol's refusal to pay the loan, Anthony brings suit against Carol for payment of the loan. Is Carol bound by her promise to pay the loan? Answer: Moral obligation. No. The general rule is that where a promise is made to satisfy a preexisting moral obligation, it is unenforceable due to a lack of consideration. Anthony should instead bring suit against Frank's estate. 11. The parties entered into an oral contract in June, under which plaintiff agreed to construct a building for defendant on a time and materials basis, at a maximum cost of $56,146, plus sales tax and extras ordered by defendant. When the building was 90 percent completed, defendant told he plaintiff was unhappy with the whole job as the thing just wasn't being run right. The parties then on October 17 signed a written agreement lowering the maximum cost to $52,000 plus sales tax. Plaintiff thereafter completed the building at a cost of $64,155. The maximum under the June oral agreement, plus extras and sales tax, totaled $61,040. Defendant contended that he was obligated to pay only the lower maximum fixed by the October 17 agreement. Decision? Answer: Modification. The Supreme Court of Washington held that the October 17th modification agreement was not binding for lack of consideration and plaintiff was entitled to recover under the original agreement, stating: Applying our holding to the facts in this case, we must conclude that no consideration existed to support the October 17th agreement. Under the oral contract plaintiff had an antecedent duty to complete the building; defendant had an antecedent duty to pay a maximum of $56,146 plus extras, plus sales tax. Under the October 17th agreement plaintiff had the same duty while defendant had a lesser duty, unsupported by consideration. This is not a case of the mutual surrender of rights constituting consideration. Rosellini v. Banchero , 83 Wash.2d 268, 272, 517 P.2d 955, 958 (1974). 12. Taylor assaulted his wife, who then took refuge in Ms. Harrington's house. The next day, Mr. Taylor entered the house and began another assault on his wife, who knocked him down and, while he was lying on the floor, attempted to cut his head open or decapitate him with an axe. Harrington intervened to stop the bloodshed, and the axe, as it was descending, fell upon her hand, mutilating it badly, but sparing Taylor his life. Afterwards, Taylor orally promised to compensate Harrington for her injury. Is Taylors promise enforceable? Explain. Answer: Moral Obligation. No. Taylor may have a moral obligation to honor his promise but not a binding contractual one. Harrington's humanitarian act "voluntarily performed, is not such consideration as would entitle her to recover at law." The Restatement takes a contrary position regarding such situations and provides that a promise after the rendering of emergency services is binding even if not supported by consideration. Section 86, comment d. Harrington v. Taylor, 225 N.C. 690, 36 S.E.2d 227 (1945). 13. Jonnel Enterprises, Inc., contracted to construct a student dormitory at Clarion State College. On May 6, Jonnel entered into a written agreement with Graham and Long as electrical contractors to perform the electrical work and to supply materials for the dormitory. The contract price was $70,544.66. Graham and Long claim that they believed the May 6 agreement obligated them to perform the electrical work on only one wing of the building, but that three or four days after work was started, a second wing of the building was found to be in need of wiring. At that time Graham and Long informed Jonnel that they would not wire both wings of the building under the present contract, so a new contract was orally agreed upon by the parties. Under the new contract Graham and Long were obligated to wire both wings and were to be paid only $65,000, but they were relieved of the obligations to supply entrances and a heating system. Graham and Long resumed their work, and Jonnel made seven of the eight progress payments called for. When Jonnel did not pay the final payment, Graham and Long brought this action. Jonnel claims that the May 6 contract is controlling. Is Jonnel correct in its assertion? Why? Answer: Substituted Contracts. No. The substituted contract was enforceable. It was entered into to settle a disputed claim. Graham v. Jonnel Enterprises, Inc. 435 Pa. 396, 257 A.2d 256 (1969). 14. Baker entered into an oral agreement with Healey, the State distributor of Ballantine & Sons liquor products, that Ballantine would supply Baker with its products on demand and that Baker would have the exclusive agency for Ballantine within a certain area of Connecticut. Shortly thereafter the agreement was modified to give Baker the right to terminate at will. Eight months later, Ballantine & Sons revoked its agency, May Baker enforce the oral agreement? Answer: Illusory Promises. No. To agree to do something and reserve the right to cancel the agreement at will is no agreement at all. By the valid addition to their oral agreement, Baker had an unconditional right to terminate the contract at will. His promise under the agreement, then, was merely illusory. As such, it was insufficient consideration to support Ballantine's promise of an exclusive agency to Baker. R.F. Baker & Co., Inc. v. P. Ballantine & Sons. Supreme Court of Errors of Connecticut. 127 Conn. 680, 20 A.2d 82. (1941). C HAPTER12 CONSIDERATION 5 15. PLM, Inc. entered into an oral agreement with Quaintance Associates, an executive headhunter service, for the recruitment of qualified candidates to be employed by PLM. As agreed, PLM's obligation to pay Quaintance did not depend on PLM's actually hiring a qualified candidate presented by Quaintance. After several months Quaintance sent a letter to PLM, admitting that it had so far failed to produce a suitable candidate, but included a bill for $9,806.61, covering fees and expenses. PLM responded that Quaintance's services were only worth $6,060.48, and that payment of the lesser amount was the only fair way to handle the dispute. Accordingly, PLM enclosed a check for $6,060.48, writing on the back of the check IN FULL PAYMENT OF ANY CLAIMS QUAINTANCE HAS AGAINST PLM, INC. Quaintance cashed the check and then sued PLM for the remaining $3,746.13. Decision? Answer: Settlement of a Disputed Debt. Judgment for PLM, Inc. When there is a good faith dispute as to the amount due, it makes no difference that the creditor protests or states that he does not accept the amount offered in full satisfaction of the debt. The creditor either must accept what is offered with the condition upon which it is offered, or refuse the payment entirely. Quaintance Associates, Inc. v. PLM, Inc., 95 Ill.App. 818, 420 N.E.2d 567 (1981). 16. Red Owl Stores told the Hoffman family that, upon the payment of approximately $118,000, a grocery store franchise would be built for them in a new location. Upon the advice of Red Owl, the Hoffmans bought a small grocery store in their hometown in order to get management experience. After the Hoffmans operated at a profit for three months, Red Owl advised them to sell the small grocery, assuring them that Red Owl would find them a larger store elsewhere. Although selling at that point would cost them much profit, the Hoffmans followed Red Owl's directions. Additionally, to raise the money required for the deal, the Hoffmans sold their bakery business in their hometown. The Hoffmans also sold their house, and moved to a new home in the city where their new store was to be located. Red Owl then informed the Hoffmans that it would take $124,100, not $118,000, to complete the deal. The family scrambled to find the additional funds. However, when told by Red Owl that it would now cost them $134,000 to get their new franchise, the Hoffmans decided to sue instead. Should Red Owl be held to its promises? Explain. Answer: Promissory Estoppel. Yes. All the requirements of promissory estoppel are present in these facts. 1) Was the promise one which the promisor should reasonably expect to induce action or forbearance of a substantial character by the promisee; 2) Did the promise in fact induce such action or forbearance; and 3) Can injustice be avoided only by enforcement of the promise? Note that the promise need not be so definite as to translate into an offer were consideration exchanged. Hoffman v. Red Owl Stores, Inc., 26 Wis.2d 683, 133 N.W.2d 267 (1965). 17. Plaintiff, Brenner, entered into a contract with the defendant, Little Red School House, Ltd., which stated that in return for a nonrefundable tuition of $1,080 Brenner's son could attend defendant's school for a year. When Brenner's ex-wife refused to enroll their son, plaintiff sought and received a verbal promise of a refund. Defendant now refuses to refund plaintiff's money for lack of consideration. Did mutual consideration exist between the parties? Explain. Answer: Contractual Modification. Yes, judgment for Brenner. A contract modification must be supported by consideration to be binding. Such consideration can be found in the promisee refraining from doing anything he has a legal right to do in exchange for the modification. Here, Brenner relinquished the right to have his son attend the Little Red School House. This detriment constituted sufficient consideration to support the school's promise to refund his money. 18. Ben Collins was a full professor with tenure at Wisconsin State University in 2002. In March of 2002 Parsons College, in order to lure Dr. Collins from Wisconsin State, offered him a written contract promising him the rank of full professor with tenure and a salary of $55,000 for the 2002-03 academic year. The contract further provided that the College would increase his salary by $2,000 each year for the next five years. In return, Collins was to teach two trimesters of the academic year beginning in October 2002. In addition, the contract stipulated, by reference to the College's faculty bylaws, that tenured professors could only be dismissed for just cause and after written charges were filed with the Professional Problems Committee. The two parties signed the contract, and Collins resigned his position at Wisconsin State. In February of 2004, the College tendered a different contract to Collins to cover the following year. This contract reduced his salary to $45,000 with no provision for annual increments, but left his rank of full professor intact. It also required that Collins waive any and all rights or claims existing under any previous employment contracts with the College. Collins refused to sign this new contract and Parsons College soon notified him that he would not be employed the following year. The College did not give any grounds for his dismissal; nor did it file charges with the Problems Committee. As a result, Collins was forced to take a teaching position at the University of North Dakota at a substantially reduced salary. He sued to recover the difference between the salary Parsons College promised him until 2007 and the amount he earned. Will Collins prevail? Answer: Legal Sufficiency . Yes, judgment for Collins. The Colleges promise to employ Collins permanently (with tenure), at a specified salary with increments to 2001, must be supported by consideration from Collins to be enforceable. Collins did not promise to serve permanently or even until 2001 in exchange for the Colleges promise. Consideration, however, may consist of a detriment to the promisee (Collins) and benefit need not move to the promisor (the College). 6 CONSIDERATION CHAPTER12 Parsons College promised Collins tenure, knowing that he would have to resign his permanent, tenured position at Wisconsin State. Therefore, Collins surrender of his former position to accept the Colleges offer constituted binding consideration. 19. Anna Feinberg began working for the Pfeiffer Company in 1960 at age 17. By 1997 she had attained the position of bookkeeper, office manager, and assistant treasurer. In appreciation for her skill, dedication and long years of service, the Pfeiffer Board of Directors resolved to increase Feinberg's monthly salary to $1,400.00 and to create for her a retirement plan. The plan allowed that Feinberg would be given the privilege of retiring from active duty at any time she chose and that she would receive retirement pay of $700.00 per month, although the Board expressed the hope that Feinberg would continue to serve the company for many years. Feinberg, however, chose to retire two years later, in 1999. The Pfeiffer Company paid Feinberg her retirement pay until 2006. The company discontinued payments alleging that no contract had been made by the Board of Directors since there had been no consideration paid by Feinberg, and that the resolution was merely a promise to make a gift. Feinberg sued. Is the promise supported by consideration? Is the promise enforceable? Explain. Answer: Past Consideration/Promissory Estoppel. Judgment for Feinberg. The law is clear that past services performed do not constitute valid consideration for the formation of a contract. Here, promises made in appreciation of Feinberg's many years of work do not render those promises enforceable against the company. However, 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. This doctrine is called promissory estoppel. Feinberg reasonably relied on the promise of $700 per month retirement pay, and thereby abandoned her opportunity to continue in gainful employment. At the time payments were discontinued, Feinberg was 63 years old. Her chance of finding satisfactory employment, much less a position comparable to the one she gave up when she retired, is virtually nonexistent. Feinberg's reasonable and detrimental reliance upon the company's promise has created an enforceable contract. 20. Rodney and Donna Mathis (Mathis) filed a wrongful death action against St. Alexis Hospital and several physicians, arising out of the death of their mother, Mary Mathis. Several weeks before trial, an expert consulted by Mathis notified the trial court and Mathiss counsel that, in his opinion, Mary Mathiss death was not proximately caused by the negligence of the physicians. Shortly thereafter, Mathis voluntarily dismissed the wrongful death action. Mathis and St. Alexis entered into a covenant-not-to-sue in which Mathis agreed not to pursue any claims against St. Alexis or its employees in terms of the medical care of Mary Mathis. St. Alexis, in return, agreed not to seek sanctions, including attorney fees and costs incurred in defense of the previously dismissed wrongful death action. Subsequently, Mathis filed a second wrongful death action against St. Alexis Hospital, among others. Mathis asked the court to rescind the covenant-not-to-sue, arguing that because St. Alexis was not entitled to sanctions in connection with the first wrongful death action, there was no consideration for the covenant-not-to-sue. Are they correct in this contention? Explain. Answer: Unilateral Contracts: Consideration. No, they are wrong, and so the trial court granted summary judgment for St. Alexis. A promise to forbear pursuit of a legal claim can be sufficient consideration to support a contract when the promisor has a good faith belief in the validity of the claim. Mathis argues that any sanctions award should have been against Mathis attorney. However, under the rules of civil procedure an award of reasonable attorneys fees may be made against a party, his attorney or both. Therefore, sanctions could have been awarded against Mathis. Mathis also argues that St. Alexis has not shown that Mathis engaged in any frivolous conduct. However, the standard for evaluating the validity of a foreborne claim is a subjective one. St. Alexis sufficiently asserted a good faith belief in the validity of its sanctions claims. St. Alexis asserted that its belief in the validity of its sanctions claim was based on Mathis complete failure to produce any expert testimony on the issue of proximate cause. Since the only expert testimony presented on the issue indicated that St. Alexis actions did not proximately cause Mary Mathis death, St. Alexis belief in the validity of its sanctions claim was reasonable. Thus, foregoing the claim would constitute sufficient consideration for the covenant-not-to-sue. ... View Full Document

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