Consideration is legal value given in return for a promise or performance.
§ Must have something of legal value or sufficiency.
§ Must be a bargained-for exchange.
Elements of Consideration
Consideration for a promise must be either:
§ Legally detrimental to the promisee, or legally beneficial to the promisor.
§ Performance, or
Case 11.1: Hamer v. Sidway (1891).
A Court will not question the fairness of the bargain if legally sufficient.
§ Law does not protect a person for entering into an unwise contract.
§ In extreme cases, a court may find that a party lacks legal capacity or that contract was unconscionable.
Case 11.2: Powell v. MVE Holdings (2001).
Agreements That Lack Consideration
§ Promise to to what one already has a legal duty to do does not constitute legally sufficient consideration.
• Unforeseen Difficulties.
• Recession and New Contract.
Past Consideration is no consideration because the bargained-for exchange element is missing.
Problem Areas Concerning Consideration
ü Uncertain Performance.
ü Settlement of Claims.
ü Promises enforceable without consideration.
ü Uncertain Performance
ü Illusory Promises.
§ Promisor has not definitely promised to do anything (no promise at all).
ü Option-to-Cancel Clauses.
ü Requirements and Output Contracts.
Settlement of Claims
Debtor offers to pay a lesser amount than the creditor purports to be owed.
Accord and Satisfaction.
Ø Amount has been ascertained, fixed, agreed on, settled, or exactly determined.
Ø Parties give up legal right to contest the amount in dispute, and thus consideration is given.
Release bars any further recovery beyond the terms stated in the release.
Case 11.3: Mills v. Berlex Laboratories (1999).
Convenant not to Sue is an agreement to substitute contractual obligation for some other type of legal action based on a valid claim.
Promises Enforceable Without Consideration
Promises to Pay Debt Barred by a Statue of Limitations.
Detrimental Reliance and Promissory Estoppel:
§ Must be definite promise.
§ Promisee must justifiably rely on the promise.
§ Reliance is substantial.
§ Justice will be served by enforcing promise.