Chapters 15,16,17.docx - Chapter 15 Consideration...

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Chapter 15 Consideration Consideration – is required in every contract. It is what a person will receive in return for performing a contract obligation. - Legally sufficient value that an offeror bargains for and an offeree gives in exchange for the offeor’s offer. - Example – If Dan agrees to purchase Marty’s car for $1,000.00. Dan’s payment of the $1,000.00 is the consideration Marty will receive for the car. Title to and possession of the car are the consideration Dan will receive in exchange. - Can be anything, as long as it is the product of a bargained-for exchange. Rules of Consideration – - Lack of Consideration – A court will enforce one party’s promise only if the other party promised some consideration in exchange. o In a bilateral contract, (promise for a promise), the consideration for each promise is a return promise. o A promise to perform has value. o Example – US lent AIG 80 Billion for 80% of stock, consideration is the 80 Billion & 80% of stock. o In a unilateral contract (a promise for an act), one party’s consideration is the promise and the other party’s consideration is the act. - Legal Value – Could Include o Promise to pay money o Promise to transfer ownership to goods o Legal Detriment *EXAM – consideration to give up something you have the legal right to do. Like Tom will be given $100 if he quit smoking. 1. Must be something you have the legal right to do. Couldn’t tell someone if they stopped smoking crack, I’ll give you a $100, crack isn’t legal. Case 15.1 Hamer V. Sidway (1891) – Case from text for consideration. Type of Consideration *EXAM - A benefit to the promise - A detriment to the promisor – legal detriment “someone has the legal right to do”. - A promise to do something - A promise to refrain from doing something - -
Bargained for Exchange – Second Element of Consideration - Must be bargained for. o Offeror sought it in exchange for his promise or commitment. o Offeree gave it in exchange for the offeror’s commitment. Legal Principle – For a promise to be enforced by the courts, there must be consideration. Promissory Estoppel - One exception to the rule requiring consideration, occurs when 3 actions are met:*EXAM 1. One party makes a promise and either knows or should know that the other party will reasonably rely on it. Clear and definite. 2. The other party does reasonably rely on the promise 3. Promisee in fact relied on the promise. 4. The only way to avoid injustice is to enforce the promise. a. Example is leaving one’s state of residence for a job offer across the country, upon arrival you are told there is no job. One party relied on the others promise and each party knew of the promise. - Example – general contract gets bids from sub-contractors; the sub-contract does not honor his bid and now the general contractor still has to submit the bid to the project owner. Promissory Estoppel could be used here.

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