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Consideration
Chapter 12
Quote of the Day
Promises are the uniquely human
way of ordering the future.
Hannah Arendt,
German-American Political Scientist
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A Bargain and an Exchange
Consideration means that there must be
bargaining that leads to an exchange between
the parties.
Consideration can be anything that someone
might want to bargain for.
A promisor is the person who makes the
promise, and promisee, the person to whom
the promise is made.
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A Bargain and an Exchange
The thing bargained for can be:
another promise or action.
a benefit to the promisor or a detriment to the
promisee.
a promise to do something or a promise to refrain
from doing something.
Bargaining is obligating yourself in order
to induce the other side to agree.
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Kelsoe v. International
Wood Products, Inc
Carol Kelsoe was promised 5 percent of the
company's stock.
It was never given to her.
Her supervisor made the promise.
Is the promise binding?
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Bargain
A B
There is consideration to support a contract
between A and B, when they bargain...
and their bargaining causes BOTH parties ...
to either give a benefit to the other or to
suffer a detriment themselves.
Which
causes...
A to give B
a benefit
OR
A to suffer a
detriment
AND AND AND AND
B to give A
a benefit
OR
B to suffer a
detriment
Consideration supports a contract!
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Adequacy of Consideration
Courts seldom inquire into the adequacy of
consideration.
A previously paid benefit is generally not
consideration because it was not meant to
induce the other side to agree.
Exception: Economic Benefit -- in some cases,
courts will enforce consideration that is an
economic benefit, given with the expectation of
later payment.

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Mutuality of Obligations
Illusory Promise
If one partys promise is conditional, the other
party is not bound to the agreement.
Sales Law: Requirements and Output
Contracts
Section 2-306 of the UCC expressly allows
output and requirements contracts in the sale of
goods.
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Preexisting Duty
A promise to do something the promisor is
already obligated to do is not consideration.
Exception: Additional work. When a promisor
agrees to do something above and beyond
what he is obligated to do, the promise is
generally valid consideration.
Exception: Modification. If both parties agree to
a modification, the best solution is to rescind the
contract and draft a new one.

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Value
Value is not limited to economic benefit given
from one party to another.
Consider Hamer v. Sidway.
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Liquidated
Debt
A liquidated debt is one in which there is no
dispute about the amount owed.
In cases of liquidated debt, if the creditor
agrees to take less than the full amount as full
payment, her agreement is not binding.
If the debtor offers a different performance to
settle the debt and the creditor agrees, the
agreement is binding.
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Settlement of Debts --
A debt is unliquidated if:
(1) the parties dispute whether any money is
owed, or
(2) the parties agree that some money is owed
but dispute how much.
The parties may agree to settle for less than what
is owed; this accord and satisfaction will be
enforced if the debtor pays the agreed amount.
Settlement of Debts
Unliquidated Debt
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Accord and Satisfaction by Check
Common Law ruling:
If a debtor writes Full Settlement on a check,
and the creditor cashes it, the payment is in full
whether or not it was the right amount.
UCC 3-311
Affirms the Common Law ruling, but adds two
exceptions:
Organizations may notify debtors that any offers to
settle debt for less than the whole amount must be
directed to a certain person.
The creditor can refund the paid amount within 90
days and then demand the full amount.


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Jones v. Allstate Insurance
Company
Did the parties enter into an accord and
satisfaction?
What is an accord and satisfaction?
What is an unliquidated debt?
What is a release?

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The law does not hold us
accountable for every promise we
make. The doctrine of consideration
determines which promises a court
must enforce.
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THE END
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