BUS311_chapter_04

Note that if the goods or services contracted for are

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Unformatted text preview: force it. In the above examples, ABC is likely to need some heating oil next winter, and Carl will need hardware supplies to practice his trade. The promises are specific enough to be the basis of a contract because needs can be objectively determined at the time of breach. If ABC buys its oil from another supplier, XYZ can sue for breach. XYZ’s damages will be determined from the sales they lost when ABC used another supplier. If Jan’s Hardware refuses to sell Carl his supplies at the 25 percent discount, Carl’s damages will be the amount he had to pay to buy the goods (either from Jan or from another supplier). Note that if the goods or services contracted for are not likely to be needed by the promisor, the promise would be illusory and unenforceable. If, for example, the ABC Company in the above example uses gas heat and obligates itself to purchase all the heating oil it needs, the promise is illusory and the agreement unenforceable, since ABC will not need any oil. Exceptions to the Consideration Requirement Promises to give money to charities are binding without return consideration in most states, since charities serve an important role in society. If you pledge $100 to the Cancer Fund Drive, you will probably be held to it! Another exception is promissory estoppel. ABC Inc. promises Karen the job of vice president of the California office for the next five years at a salary of $100,000 per year. The company requires a formal acceptance by appearing at the next Board of Directors meeting. Karen says she will be there, quits her present job and moves to Los Angeles. Can ABC renege on their job offer? Because they made a promise, and Karen has reasonably relied on it to her detriment, ABC may be bound. rog80328_04_c04_062-088.indd 83 10/26/12 5:42 PM CHAPTER 4 Section 4.5 Chapter Summary 4.5 Chapter Summary C ontracts are the basic building blocks of business relationships. A business makes contracts with its suppliers, its customers, and its employees. Understanding when a contract comes into being is invaluable...
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