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Flashcards in Chapter 13 Deck (53)
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1
Q

Consideration

A

Something of legally sufficient value must be given in exchange for the promise

2
Q

As long as consideration is present…

A

courts don’t interfere with a contract based on the amount of consideration

3
Q

It is up to the _________ to get a good bargain/deal

A

parties

(The courts don’t care)

4
Q

What are the elements of consideration?

A
  1. Legally sufficient
  2. Bargained for
5
Q

Legally sufficient consideration consists of:

A
  1. a promise to do something that one has no prior legal duty to do;
  2. the performance of an action that one is not otherwise obligated to undertake; or
  3. the refraining from an action that one has a legal right to undertake (called forbearance).
6
Q

Are legally sufficient and adequate the same?

A

No, they are different

7
Q

Hamer v. Sidway

A

1891 – the laws were different. Wealthy uncle 1880s. Goes to 15 year old nephew, tells nephew about his “righteous living code”. He gets the nephew to live “righteously” (no drinking, smoking, gambling, etc.), Uncle promises nephew $5,000 if he doesn’t partake. Nephew abides, he makes it 21 without partaking. (in 1880s there were no laws preventing you from drinking, smoking or gambling). Uncle puts the money in an account, then he proceeds to engage in gambling and drinking. Nephew gets into gambling debt and assigns the money to the creditor (Hamer). Uncle dies. Mr. Sidway is the executor of the estate. Mr. Sidway claims the account belonged to the nephew and now belongs to him.
The original contract/promise between nephew and uncle – what it legally sufficient? If it isn’t, we have a gift and in theory still belongs to the uncle. The court said the nephew had the legal right to drink, smoke, and gamble and gave up all of these things in order to abide by the Uncle’s rules. The court ruled that there was sufficient evidence, the nephew was entitled to the money, and therefore the creditor (Sidway) is the new owner of the account (because it was given to cure the debt).
Legally sufficient consideration – giving up a right you have in exchange for money.

8
Q

Bargained-for Exchange

A

Courts need evidence of a bargain struck between the contracting parties; i.e.. the item of value must be given or promised by the promisor (offeror) in return for the promissee’s promise, performance, forebearance, or promise of performance or forbearance.

9
Q

Consideration is…

A

both parties giving and receiving something of legally sufficient value

10
Q

What distinguishes contracts from gifts?

A

Bargained-for Exchange

11
Q

Rachel Thomas was admitted to an ER with a pregnancy related emergency. Dr. Archer who was the attending physician recommended she be transported via helicopter to another facility. Both the patient and her husband said they needed their insurance company’s preauthorization for the medevac. Dr. Archer allegedly promised to call the insurer and if it wasn’t approved, allegedly said the hospital would bear the cost of the medevac.

But Dr. Archer didn’t make the call to the insurance company until much later and the insurer denied coverage (so, the couple was liable for the costs of the medevac).

Mr. and Mrs. Thomas sued the hospital claiming breach of contract.

Is there a contract?

A

The court said the doctor’s alleged promise about insurance and payment didn’t give rise to an enforceable contract be cause there was no evidence the hospital sought any consideration from Mr. and Mrs. Thomas for the doctor’s alleged promise.

So…no “bargained for” exchange…no consideration.

12
Q

In general, the determination of whether consideration is present is…

A

NOT based on a comparison of the values of what is exchanged.

13
Q

Is the relative value of the consideration given by contracting parties examined by the courts?

A

No

14
Q

Exception to Adequacy of Consideration

A

Voluntary consent is allegedly missing, such as when a party argues:
1. fraud, duress, undue influence, or lack of bargained-for exchange or The court can look at the relative value
2. lack of competency or (Capacity issue)
3. unconscionability

15
Q

Pre-existing Duty Rule

A

Doing something that one already has a legal duty to do or promising to do what one already has a legal duty to do is not legally sufficient consideration for another person’s promise.

16
Q

$10k reward for catching a criminal. If the Sheriff catches the criminal he is not entitled to the reward – why?

A

Because it is his job (he has a duty).

17
Q

If a party is already bound by a contract to perform a certain duty…

A

that duty cannot serve as consideration for a second contract.

18
Q

At the end of the semester Hailey refuses to turn in her grades unless she’s paid an additional $1,000. So, I say to my department head, I won’t turn in my grades, unless you pay me the additional money. The department head agrees to pay her the additional money. So, she turns in the grades.
Is the department legally required to pay her the extra money?

A

No… (agreement alone is NOT enough)
Turning in grades is an implied part of the job. Therefore, she’s required by an implied duty in her employment contract to turn in grades each semester. Asking for more money is extortion and she’s not giving anything to her employer she was not already required to give, therefore bargained for exchange is missing.

19
Q

Consideration is present if…

A

in addition to performing a preexisting duty, the promisee does something or promises to do something that the promisee otherwise is not required to do.

20
Q

When does the Preexisting Duty Rule does NOT apply?

A
  1. Unforeseen difficulties
  2. Rescission and new contract
21
Q

Unforeseen Difficulties

A

Sometimes, a promise to pay additional consideration or compensation is enforceable if unknown, unanticipated, unforeseen difficulties arise causing the burden of performance to increase greatly.

22
Q

In states in which the unforeseen difficulties exception is recognized…

A

the exception is usually applied in limited situations, such as construction contracts. Texas recognizes unforeseen difficulties.

23
Q

10 acre piece of land. I want to build a pool in the back of the land. The land has never been excavated. Hire the pool guys who start excavating. They find that the soil won’t allow you to build a proper pool without reinforcement which will cost more.

A

You have to pay more for the “same thing”.

24
Q

Rescission and new contract.

A

1) If a contract is completely executory because neither party has performed, the parties may mutually agree to rescind the contract. 2 parties walk away. You are free to enter into a new contract.
2) Thereafter, the parties are free to enter into a new contract, which may have the same or different terms.

25
Q

Neighbor – getting a divorce. She asked about an RV. Would you be interested in selling your RV? I know it has a messed up refrigerator and a missed up AC. We’ll sell it to you for $500. Neighbor walks away from the deal.

A

The law allows you – when neighbor comes back with enough money to buy the RV, Hailey can change the terms to charge $5,000 now, there is no pre-existing duty.

26
Q

Daniel, a recent college graduate, is on his way home from the Christmas holidays from his new job (adult). He is caught in a snowstorm and is taken in by an elderly couple, who provide him with food and shelter. After the snowplows have cleared the road, Daniel proceeds home. Daniel’s father, Fred, is most appreciative of the elderly couple’s action and promises to pay them $500. The elderly couple, in need of funds, accept Fred’s offer….

A

2 problems: services rendered to Daniel not Fred. Services rendered happened BEFORE the $500 was promised. (That’s just a gift, the elderly couple did not give anything now for the $500).

27
Q

Illusory promise

A

illusions (look good and sound good, but not legally sufficient)
A promise that solely depends upon the discretion, whim, or wish of the promisor..

28
Q

Hailey is my employer “All of you have worked so hard this year, if profits stay high, and management thinks it’s warranted, you can have $10,000 bonus.”

A

(this is a gift – Hailey gets to determine the level of profits and if warranted).

29
Q

Requirements and outputs contracts, which are used in dealing with uncertainty as to future market conditions, are…

A

not treated as illusory contracts.

30
Q

Requirements contract are uncertain from the…

A

seller’s perspective

31
Q

Outputs contract are uncertain from the…

A

buyer’s perspective

32
Q

Settlement of Claims

A

a promise to pay or actual payment of part of a mature, liquidated, undisputed debt is not consideration to pay the remaining balance.

33
Q

Accord

A

provides that the debtor promises to give something, other than that which was originally agreed upon, in exchange for the creditor’s acceptance of the debtor’s performance in full satisfaction of the original debt.

34
Q

Satisfaction

A

occurs when the accord is executed.

35
Q

A debtor and creditor may settle an outstanding obligation by…

A

entering into an accord and satisfaction if the original debt is unliquidated and the obligation to pay or the amount of the debt is disputed.

36
Q

Liquidated debt

A

the amount of the debt is ascertained, fixed, agreed-on, and settled and is an exact sum of money or a sum that is capable of being made definite by computation.

37
Q

Unliquidated debt

A

the amount of the debt is not ascertained, fixed, agree-on, settled or reasonable persons may differ over the amount owed.

38
Q

Accord and satisfaction

A

Debtor is paying more that they think they should and the creditor is satisfied with that amount even though it is not the full amount.

39
Q

Merrick grows and sells blueberries. Maine Wild Blueberry Co. agreed to buy all of Merrick’s crop under a contract that left the price unliquidated (output contract). Merrick delivered the berries, but a dispute arose over the price. Main Wild sent Merrick a check with a letter stating that the check was the “final settlement.” Merrick cashed the check but filed a suit for breach of contract, claiming that he was owed more. What will the court likely decide in this case? Why?

A

Because Merrick cashed the check, that is viewed as satisfaction and accord. Cashing the check is “accepting” the amount of money he got. DO NOT cash the check – send it back. And say that he does not accept this form of payment.

40
Q

Release

A

A release is a relinquishment of a right or discharge of an obligation or claim that one person has against another person. Giving up the right to any of these claims.

41
Q

A release is binding if:

A

1) The release was obtained and given in good faith.
2) In some states, the release is in a signed writing.
3) Consideration is given for the release.

42
Q

A release bars…

A

any further recovery beyond the terms of the release.

43
Q

Employment contract. Pharmaceutical salesperson who operated out of his home office. He is being let go. He gets some benefits, but you have to sign a release that you won’t sue them for anything else. Signs the release, gets $5,000, and continued medical insurance. Back injury (while packing up boxes in his home office).

A

He is giving up the right to sue for worker’s compensation. The court says he is not entitled to worker’s compensation. The release is valid. Consideration – he got money, he gave up the right to sue.

44
Q

Covenant Not to Sue

A

a. An agreement to substitute a contractual obligation for some other type of legal action.
b. Must be supported by consideration.
c. Does not always bar further recovery.

45
Q

Son is at grad school at SMU. Heavy traffic. He drives F-250 truck. “Mom I kind of need to know if something I did was legal”. I side-swiped a car. They pulled over. Other driver does not have a license or insurance. Son looks up the make and model of the car and writes him a $200 check for the value of the side mirror.

A

Covenant not to sue. Son gave him a check right at the scene of the accident. Driver cashes the check (performance).

46
Q

Exceptions to the Consideration Requirements (Promise Enforceable Without Consideration)

A
  1. Promissory Estoppel/Detrimental Reliance Elements
  2. Promises to pay debts barred by a statute of limitations
  3. Charitable Subscriptions
47
Q

Promissory Estoppel/Detrimental Reliance Elements

A
  1. Clear and definite promise:
  2. Promisor expected promise to rely on the promise;
  3. Promisee reasonably relied;
  4. Promisee’s reliance results in substantial detriment;
    AND
  5. Justice is better served by enforcing the promise
48
Q

Promissory Estoppel/Detrimental Reliance Elements compared to Quasi Contract

A

Quasi Contract is an equitable doctrine too. Both result in a solution to an unfair situation. Difference is when the courts say there is a quasi contract, there is often no promise in promissory estoppel situations there is an unenforceable promise made.

49
Q

Statutes provide that a person who has a cause of action must…

A

commence the action, or sue, within a specified period of time.

50
Q

After the statutory period of time has expired, the aggrieved party is…

A

barred from suing because the contract is unenforceable.

51
Q

A new promise by a debtor to pay a debt…

A

even though technically not supported by new consideration, will extend the period of time provided for in the statute of limitations so that the new promise is enforceable by the creditor.

52
Q

If a debtor makes a partial payment of a debt after the statutory period has run…

A

it is implied that the debtor acknowledges the existence of the debt, and the creditor can thereafter sue for the balance of the debt.

53
Q

charitable subscriptions are enforced in many courts based upon…

A

promissory estoppel theory