Name Date Class
Lesson 8-1 Types of Consideration
Lesson 8-1 Outline
I. Consideration
A. Act, Forbearance, or Promise
B. Trading
C. Legal Value
D. Adequacy of Consideration
E. Nominal Consideration
Lesson 8-1 Review
Vocabulary Review
Define the following vocabulary terms.
1. consideration That which is given or received in a contract.
2. gift The transfer of ownership without receiving anything in return.
3. donor The person giving a gift.
4. donee The person receiving a gift.
5. forbearance A promise to not do something.
6. promisor The person who promises an action or forbearance.
7. promisee The person to whom a promise is made.
Concept Review
8. Define consideration.
Consideration is what a person demands and generally must receive in order to make his or her promise legally binding.
Lesson 8-1 Review (continued)
9. How can legal value be found in the exchange of benefit for a detriment?
With legal value, the detriment is the giving up of a legal right. A detriment arises when a person promise forbearance.
10. Under what conditions is there no consideration?
There is no consideration if one of the parties does not give an act, forbearance, or promise to the other, if one of the parties does not trade her or his contribution to the transaction, or if what is traded has no legal value.
11. What is adequacy of consideration?
The values that different people place on similar property could vary widely. What one person will pay for an item or service, another person may feel is unreasonable and never consider paying.
Goals Review
12. What are the three requirements of consideration?
The three requirements of consideration are: (1) each party must give an act, forbearance, or promise to the other; (2) each party must trade what he or she contributes to the transaction for the other party’s contribution; and (3) what is traded must have value in the eyes of the law.
13. Define the various types of consideration.
The various types of consideration are (1) a promise, (2) an act other than a promise, (3) forbearance, (4) a change in a legal relation of the parties, (5) money, or (6) other property.
Name Date Class
Lesson 8-2 Questionable Consideration
Lesson 8-2 Outline
I. Circumstantial Consideration
A. Illusory Promises
1. Termination Clauses
2. Output and Requirements Contracts
B. Existing Duty
1. Existing Public Duty
2. Existing Private Duty
3. Settlement of Liquidated Debts
4. Settlement of Unliquidated Debts
5. Release
6. Composition of Creditors
II. False Consideration
A. Mutual Gifts
B. Past Performance
Lesson 8-2 Review
Vocabulary Review
Define each of the following vocabulary terms.
1. output contract A contract in which a buyer agrees to purchase all of a particular producer’s production.
2. requirements contract A contract in which a seller agrees to supply all of the needs of a particular buyer.
3. liquidated debt A debt which both parties agree exists and both parties agree on the amount of the debt.
4. accord and satisfaction Parties’ agreement to change the obligation required by their original contract and the performance of the new obligation.
5. release Settling a claim at the time the tort occurs, while the liability is unliquidated because the extent of damages is uncertain.
6. composition of creditors A settlement in which the creditors mutually agree to accept less than they are entitled to in full satisfaction of their claims while the debtor agrees not to file for bankruptcy.
Concept Review
7. Explain why courts recognize output and requirement contracts as supported by consideration
Courts recognize output and requirement contracts as supported by consideration because they imply a duty of fair dealing meaning production cannot be stopped and any actions terminating the obligation of an output or requirement contract must be taken in a way that constitutes fair dealing. By finding an implied duty of fair dealing the courts have maintained the basis for the presence of consideration.
8. Give an example of existing duty.
Your father may offer to purchase you a car when you reach the age of 18 if you promise never to smoke. This is an unenforceable contract since you are already required by law not to smoke, and your father’s promise to reward you for refraining from smoking, something that you are already required to refrain from by law, is unenforceable.
Goals Review
9. Under what situations is consideration not binding?
Consideration is not binding if the promise does not create a duty or impose an obligation such as with illusory promises. Illusory promises include termination clauses in contracts and output and requirements contracts.
10. When is what appears to be binding consideration not truly binding?
Existing public duty, mutual gifts, and past performances may appear to be binding but are not.
Name Date Class
Lesson 8-3 When Consideration is Not Required
Lesson 8-3 Outline
I. Exceptions to the Requirements of Consideration
A. Promises to Charitable Organizations
B. Promises Covered by the UCC
1. Firm Offers
2. Modifications
C. Promises Barred From Collection By Statute
1. Statute of Limitations
2. Debts Discharged in Bankruptcy
D. Promissory Estoppel
Lesson 8-3 Review
Vocabulary Review
Define each of the following vocabulary terms.
1. statute of limitations Specifies a time limit for bringing a lawsuit.
2. promissory estoppel A doctrine that allows an exception to the rule of mutual consideration under certain circumstances.
Concept Review
3. Why would a pledge to a charitable organization be enforced when the promisor receives no consideration?
Courts generally enforce such promises provided the charity states a specific use for the money and acts in reliance on the pledge. There might even be financial hardship based on actions already taken, thus, meeting the conditions of promissory estoppel.
Lesson 8-3 Review (continued)
4. Explain why the law recognizes the doctrine of promissory estoppel even when consideration is not present.
While certain kinds of promises do not always involve consideration, if a party acts in reliance on the promise and would suffer a substantial economic loss if the promise were not honored, injustice would result.
Goals Review
5. Describe situations in which consideration is not required.
Consideration is not required when promissory estoppel occurs, when pledges are made to charitable organizations, or when there is a firm offer.
6. Identify when promissory estoppel applies.
Promissory estoppel applies to enforce a contract without mutual consideration if: (1) The promisor should reasonably foresee that the promisee will rely on the promise; (2) The promisee does act in reliance on the promise; (3) The promisee would suffer substantial economic loss if the promise is not enforce; (4) Injustice can be avoided only by enforcement of the promise.
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Chapter 8 Consideration