Chapter 13 Flashcards
Consideration
Something of legally sufficient value must be given in exchange for the promise
As long as consideration is present…
courts don’t interfere with a contract based on the amount of consideration
It is up to the _________ to get a good bargain/deal
parties
(The courts don’t care)
What are the elements of consideration?
- Legally sufficient
- Bargained for
Legally sufficient consideration consists of:
- a promise to do something that one has no prior legal duty to do;
- the performance of an action that one is not otherwise obligated to undertake; or
- the refraining from an action that one has a legal right to undertake (called forbearance).
Are legally sufficient and adequate the same?
No, they are different
Hamer v. Sidway
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.
Bargained-for Exchange
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.
Consideration is…
both parties giving and receiving something of legally sufficient value
What distinguishes contracts from gifts?
Bargained-for Exchange
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?
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.
In general, the determination of whether consideration is present is…
NOT based on a comparison of the values of what is exchanged.
Is the relative value of the consideration given by contracting parties examined by the courts?
No
Exception to Adequacy of Consideration
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
Pre-existing Duty Rule
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.
$10k reward for catching a criminal. If the Sheriff catches the criminal he is not entitled to the reward – why?
Because it is his job (he has a duty).
If a party is already bound by a contract to perform a certain duty…
that duty cannot serve as consideration for a second contract.
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?
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.
Consideration is present if…
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.
When does the Preexisting Duty Rule does NOT apply?
- Unforeseen difficulties
- Rescission and new contract
Unforeseen Difficulties
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.
