Chapter 11

Consideration and
Promissory
Estoppel

25-1

Consideration
Consideration: something of legal value given in
exchange for a promise
Necessary for the existence of a contract
Elements:
Something of legal value must be given
There must be a bargained-for exchange

11-2

Consideration
Legal value
A contract is considered supported by legal value
if:
The promisee suffers a legal detriment
The promisor receives a legal benefit
Most commonly involves tangible payment or
performance of an act

11-3

Consideration
Bargained-for exchange
Process of bargaining or inducement that leads to
an enforceable contract
Naturally present in most commercial transactions

11-4

Gift Promise
Gratuitous promises
Unenforceable due to lack of consideration
Promise freely given and not induced by promise
of some benefit
Completed gift promises are not revocable

11-5

Case 11.2: Gifts and Gift Promises

Case
Cooper v. Smith
800 N.E.2d 372, Web 2003 Ohio App. Lexis 5446
(2003)
Court of Appeals of Ohio
Issue
Can Cooper recover the gifts or the value of the
gifts he gave to Julie and Janet Smith?
11-6

Promises that Lack Consideration

Illegal consideration
Illusory promise
Preexisting duty
Past consideration

11-7

Promises that Lack Consideration

Illegal consideration
A promise to refrain from doing an illegal act
Illusory promise
A contract that both parties enter, but one or both
of the parties can choose not to perform their
contractual obligations

11-8

Promises that Lack Consideration

Preexisting duty
A promise to do something the party is already
under an obligation to do
arises when one party to an existing contract seeks
to change the terms of the contract during the
course of its performance

11-9

Promises that Lack Consideration

Past consideration
A prior act or performance that does not support a
new contract
Problems of past consideration often arise when a
party to a contract promises to pay additional
compensation for work done in the past

11-10

Special Business Contracts

Output contract: a contract in which the seller
agrees to sell all of its production to a single buyer
Purposes
Assuring the seller of a purchaser for all its output
Assuring the buyer of a source of supply for the
goods it needs

11-11

Special Business Contracts

Requirements contract: a contract in which a buyer
agrees to purchase all of its requirements for an item
from one seller
Purposes
Assuring the buyer of a uniform source of supply
Providing the seller with reduced selling costs

11-12

Special Business Contracts

Best-efforts contract: A contract which contains a
clause that requires one or both of the parties to use
their best efforts to achieve the objective of the
contract

11-13

Equity: Promissory Estoppel

Promissory estoppel: An equitable doctrine that
prevents the withdrawal of a promise by a promisor if
it will adversely affect a promisee who has adjusted
his or her position in justifiable reliance on the
promise
Also known as detrimental reliance

11-14

Equity: Promissory Estoppel

Elements to be proven
The promisor made a promise
The promisor should have reasonably expected
that promisee would rely on the promise
The promisee actually relied on the promise and
engaged in an action or forbearance of a right of a
definite and substantial nature
Injustice would result if the promise were not
enforced
11-15

11-16