Bài giảng Business Law - Chapter 12: Consideration

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin3Introduction to ContractsThe Agreement: OfferThe Agreement: AcceptanceConsiderationReality of ConsentContractsPART3Capacity to ContractIllegalityWritingRights of Third PartiesPerformance and RemediesContractsPARTConsiderationPAETRHC12Make yourself necessary to someone. Ralph Waldo Emerson The Conduct of Life (1860)Learning ObjectivesDefine concept of consideration, list elements, and explain significanceExplain why illusory promises, past consideration, and promises to perform preexisting obligations are not considerationDetermine what is a valid contract modificationConsideration is legal value bargained for and given in exchange for an act or a promiseElements of Consideration Purely gratuitous promises are not enforceable because not supported by considerationThorne v. DeasConsideration in the form of an act or promise may have legal value if the person acting of promisingRefrains from doing something the person has the legal right to do Example: Hamer v. SidwayDoes something the person had no prior legal duty to do Generally, courts will not examine adequacy of considerationLegal Value of Consideration A promisee’s act or promise must have been bargained for and given in exchange for the promisor’s promiseExample: Gottlieb v. Tropicana Hotel and Casino in which participating in a promotion that benefited the company was adequate consideration to form a contractBargained-for Exchange Illusory promisesPreexisting dutiesPast considerationExchanges That Are Not Consideration If promisee’s promise really does not bind promisee to do or refrain from doing a thing, promise is illusory and cannot serve as considerationExample: Heye v. American Golf Corporation, Inc. in which an employee successfully claimed lack of consideration for an arbitration clause in a contract because mutual obligation did not existAGC’s promise to arbitrate was illusory since they could amend the contract at any timeIllusory PromisesAs a general rule, performing or agreeing to perform a preexisting duty is not considerationPromisor in such a case has effectively made a gratuitous promiseIncludes public duties (obey the law) and preexisting contractual dutiesPreexisting DutiesGeneral rule is an agreement to modify an existing contract requires mutual assent and new considerationIn Margeson v. Artis, Iowa Supreme Court held that attempt to modify contract failed since Margesons had a preexisting duty to sell business under terms of original contract and new consideration not provided Preexisting Duties & Contract ModificationLiquidated debts are debts in which parties have no dispute about the existence or amount of the debtA creditor’s promise to discharge a liquidated debt for part payment of the debt at or after its due date is unenforceable for lack of considerationIf there is a dispute about the existence or amount of the debt, the debt is unliquidated Settlement agreements are enforceable Preexisting Duties & Settlement AgreementsPast consideration is an act or benefit given in the past that was not given in exchange for the promise in question, thus it cannot be considerationPast ConsiderationPromissory estoppel, because a donative promise is not a bargained-for exchangeExample: Skebba v. KaschState statutes that extend promises to pay debts that have been barred by statute of limitations or bankruptcy dischargeCharitable subscriptions (like promissory estoppel)Exceptions to Consideration RequirementThought QuestionYour Aunt agrees to buy you a new car when you graduate if you earn straight “A” grades during your senior year. You earn those grades. Have you provided legally sufficient consideration?