BLRB12 - Business Law and the Regulation of Business...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Business Law and the Regulation of Business Regulation Chapter 12: Consideration Chapter By Richard A. Mann & Barry S. Roberts Topics Covered in this Chapter Topics A. Legal Sufficiency B. Bargained-For-Exchange C. Contracts Without Consideration Consideration Definition – the inducement to enter into a contract into s Elements – legal sufficiency and bargained-for exchange bargained-for s Legal Sufficiency s s s Definition – consists of either a benefit to the promisor or a detriment to the promisee. the Legal Benefit – obtaining something to which one had no prior legal right. which Legal Detriment – doing an act one is not legally obligated to do or not doing an act that one has a legal right to do. that s Adequacy – not required where the parties have freely agreed to the exchange. have Illusory Promise Illusory s Definition – promise that imposes no obligation on the promisor; the following promises are not illusory: not – Output Contract – agreement to sell all of one's production to a single buyer. production – Requirements Contract – agreement to buy all of one's needs from a single producer. of – Exclusive Dealing Contract – grant to a franchisee or licensee by a manufacturer of the sole right to sell goods in a defined market. sole – Conditional Promise –the obligations are the contingent upon the occurrence of a stated event. contingent Preexisting Obligations Preexisting s s s Preexisting Public Obligations – public duties such as those imposed by tort or criminal law are neither a legal detriment nor a legal benefit. are Preexisting Contractual Obligation – performance of a preexisting contractual duty is not consideration. not Modification of a Preexisting Contract – under the common law a modification must be supported by mutual consideration; under the Code a contract can be modified without new consideration. consideration. Modification of a Preexisting Contract Modification Original Contract Common Law Consideration is required + Modifying Contract Consideration is required = Modified Contract Replaces original contract Restatement Consideration is required Consideration is required unless modification is fair and equitable in light of facts not anticipated when contract was made No consideration is required if modification is made in good faith Replaces original contract UCC Consideration is required Replaces original contract Preexisting Obligations Preexisting s s s Substituted Contracts – the parties agree to rescind their original contract and to enter into a new one; rescission and new contract are supported by consideration. are Settlement of an Undisputed Debt – payment of a lesser sum of money to discharge an undisputed debt does not constitute legally sufficient consideration. constitute Settlement of a Disputed Debt – payment of a lesser sum of money to discharge a disputed debt is legally sufficient consideration. consideration. Bargained-For Exchange Definition – a mutually agreed-upon Definition exchange. exchange. s Past Consideration – an act done before the contract is made is not consideration. consideration. s Contracts without Consideration Contracts s Promise to Perform Unenforceable Promise Obligation Obligation – Promise to Pay Debt Barred by the Statute of Promise Limitations – a new promise by the debtor to pay Limitations the debt renews the running of the statute for a second statutory period. second – Promise to Pay Debt Discharged in Bankruptcy – may be enforceable without consideration. may – Voidable Promises – a new promise to perform a voidable obligation that has not been previously avoided is enforceable. avoided – Moral Obligation – a promise made to satisfy a preexisting moral obligation is generally unenforceable for lack of consideration. unenforceable Contracts without Consideration Contracts s s s Promissory Estoppel – doctrine that prohibits a party from denying her promise when the promisee takes action or forbearance to his detriment reasonably based upon the promise. based Promises under Seal – where still recognized, the seal acts as a substitute for consideration. consideration. Promises Made Enforceable by Statute – some gratuitous promises have been made enforceable by statute; the Code makes enforceable (1) contract modifications, (2) renunciations, and (3) firm offers. renunciations, Consideration Consideration A promises B In exchange for A’s promise B incurs a legally sufficient consideration by x doing an act x forbearing from acting x promising to do an act x promising to forebear Yes A’s promise is binding: it is supported by consideration No A’s promise is to pay obligation x barred by the statue of limitations x discharged in bankruptcy x that is voidable Yes A’s promise is binding without consideration No Continued on the next slide... Consideration (cont.) Consideration No B detrimentally and justifiably relies on A’s promise, and A should reasonably have expected reliance Yes A’s promise is binding to the extent necessary to avoid injustice under the doctrine of promissory estoppel A’s promise is binding in those states that recognize the seal as a substitute for consideration No A’s promise is made under seal and delivered to B Yes No A’s promise is subject to the UCC and is a x modification of a sales contract x renunciation of a claim x firm offer by a merchant Yes A’s promise is binding under the UCC No A’s promise is not binding ...
View Full Document

This note was uploaded on 10/25/2009 for the course LAW 100 taught by Professor Liu during the Spring '09 term at Zhejiang University.

Ask a homework question - tutors are online