Chapter 12 - CONSIDERATION Consideration: Value given in...

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CONSIDERATION Consideration : Value given in return for a promise. Consideration must be (1) legally sufficient and (2) bargained for by the party receiving it. Legally sufficient consideration may take the form of: (1) promising to do something that the promisee has no prior legal duty to do ( e.g. , promising to pay money for the promisor’s goods); (2) performing an action that the promisee is not otherwise obligated to undertake ( e.g. , painting the promisor’s house); or (3) refraining from exercising a legal right that the promisee is otherwise entitled to exercise ( e.g. , dismissing a viable lawsuit against the promisor). Consideration is bargained for if the promisor sought it in exchange for the promisor’s promise and the promisee gave it in exchange for the promisor’s promise. Courts will generally not inquire into the adequacy of the consideration, as long as the Ch. 12: Contracts: Consideration - No. 1 Clarkson et al.’s Business Law (11th ed.)
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promisor bargained for it – although some courts will make an exception for grossly inadequate consideration. Ch. 12: Contracts: Consideration - No. 2 Clarkson et al.’s Business Law (11th ed.)
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INSUFFICIENT CONSIDERATION Preexisting Duty: A promise to do (or refrain from doing) what one already has a legal duty to do (or refrain from doing) generally does not constitute legally sufficient consideration. However, under the “unforeseen difficulties” doctrine, an existing contract may be modified to account for unforeseen difficulties that arise during the course of performance. In such a case, the promisee’s obligation under the modified contract is new consideration. Likewise, if the parties agree to replace an existing contract with a new, superseding contract , the promise to perform the new contract is a new promise; and, thus, not a promise to perform a pre-existing legal duty. Past Consideration: Promises made in return for acts or events that have already taken place are unenforceable for lack of sufficient consideration. Ch. 12: Contracts: Consideration - No. 3 Clarkson et al.’s Business Law (11th ed.)
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UNCERTAIN OBLIGATIONS Illusory Promises: If the terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to do (or refrain from doing) anything , the contract is unenforceable for lack of sufficient consideration. Options to Cancel: If the terms of a contract give one party the option to cancel at any time (including before the other party begins to perform), for any reason, without prior notice, the contract is unenforceable for lack of sufficient consideration. Requirements Contract: A contract whereby the buyer agrees to purchase all of the goods of a designated type she needs from the seller. Requirements contracts are not illusory, despite the uncertainty whether the buyer will actually require any of the designated goods (and, if so, how many). Output Contract:
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This note was uploaded on 01/25/2011 for the course BLAW 3361 taught by Professor Bl during the Spring '10 term at Texas Brownsville.

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Chapter 12 - CONSIDERATION Consideration: Value given in...

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