Chapter 13

Question 1

Consideration

Answer 1

defined as the value given in return for a promise (in a bilateral contract) or in return for a performance (in a unilateral contract). It is the inducement, price, or motive that causes a party to enter into an agreement.

Question 2

Legally Sufficient Value

Answer 2

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

Question 3

Bargained For Exchange

Answer 3

second element of consideration is that it must provide the basis for the bargain struck between the contracting parties. That is, the item of value must be given or promised by the promisor (offeror) in return for the promisee’s promise, performance, or promise of performance

Question 4

Agreements that Lacks Consideration

Answer 4

1. Preexisting Duty
2. Past Consideration
3. Illusory Promises

Question 5

Preexisting Duty

Answer 5

if a party is already bound by contract to perform a certain duty, that duty cannot serve as consideration for a second contract.

Question 6

Past Consideration

Answer 6

Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain.

Question 7

Illusory Promises

Answer 7

If the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything, the promise is said to be illusory—without consideration and unenforceable. A promise is illusory when it fails to bind the promisor.

Question 8

Option To Cancel

Answer 8

clauses in contracts present problems in regard to consideration. When the promisor has the option to cancel the contract before performance has begun, the promise is illusory

Question 9

Accord and Satisfaction

Answer 9

a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed. The accord is the agreement.

A basic rule is that there can be no satisfaction unless there is first an accord. In addition, for accord and satisfaction to occur, the amount of the debt must be in dispute.

Question 10

Settlement of Claim

Answer 10

1. Accord and Satisfaction
2. Release
3. Covenant Not to Sue

Question 11

Liquidated Debt

Answer 11

a debt that is due and certain in amount.

Question 12

Unliquidated Debt

Answer 12

a debt that is uncertain in amount

Question 13

Covenant Not to Sue

Answer 13

an agreement to substitute a contractual obligation for some other type of legal action based on a valid claim

Question 14

Promissory Estoppel

Answer 14

(also called detrimental reliance), a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery

Question 15

Requirements for Promissory Estoppel

Answer 15

1. Must be a clear and definite purpose
2. Promisor should have expected that the promise would rely on promise
3. Promisee reasonably relied on promise by acting/refraining from act
4. Promisee’s reliance was definite and resulted in substantial detriment
5. Enforcement of promise is necessary to avoid injustice

Question 16

Rescission

Answer 16

a remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct, or by court decree.

Question 17

Charitable Subscriptions

Answer 17

promise to make a donation to a religious, educational, or charitable institution.