Adequacy and Other Characteristics of Consideration Flashcards
What are the four parts when looking at the adequacy of consideration?
- Mere inadequacy of consideration will not void a contract.
- There is no requirement that the things being exchanged be of legal value.
- However, gross inadequacy of consideration may be relevant to prove a defense to formation, such as incapacity, duress, fraud, mistake, etc.
- If the purported consideration is nominal, then it is just a pretense of a bargain and will not serve as consideration for a promise.
What is an illusory promise?
A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performance unless, each of the alternative performances would have been consideration if it alone had been bargained for.
What is an option contract?
Options are a type of contract that gives the offeree an opportunity to accept an offer. In return for consideration, the offeror agrees not to revoke an offer for a period of time. Option contracts provide an exception to the nominal consideration rule.
What is an output contract?
Obligates the buyer for the purchase of all the output that the seller produces of a certain good. The seller obligates themselves to sell a particular good only to the buyer, and the buyer is obligated to purchase all that is produced of that good.
What is a requirements contract?
Obligates the seller to have enough of the good to sell in order to meet the buyer’s requirements. The buyer obligates himself to purchase a particular type of good only from one seller.
What is the past consideration rule?
A promise based on consideration in the past is generally unenforceable since it was not bargained for.
What is moral obligation?
Moral obligation will NOT serve as consideration for the enforcement of a promise, however it may be relevant as an independent basis to prevent unfairness or unjust enrichment.
