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Law 122: Chapter 8 Consideration and Privity.docx

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Law and Business
LAW 122
Avi Weisman

Chapter 8: Consideration and Privity A contract cannot usually exist without an exchange of value. Gratuitous promise: -A promise for which nothing of legal value is given in exchange Sufficient and adequate consideration -For a contract to be legally acceptable it must have consideration Consideration: Exists when a party either gives (or promises to give) a benefit to someone else or suffers (or promises to suffer) a detriment to itself. A contract must be supported by sufficient consideration: Sufficient consideration: May be almost anything of value -Although consideration must be sufficient, it does not have to be adequate Adequate consideration: Has essentially the same value as the consideration for which it is exchanged. Forbearance to sue: A promise to not pursue a lawsuit Past consideration A contract must also have mutuality of consideration Mutuality of consideration: Requires that each party provide consideration in return for the other party’s consideration. -Past consideration: Consists of something that a party did prior to the contemplation of a contract. This cannot support a contract. Pre-existing obligation Pre-existing obligation: An obligation that existed, but was not actually performed, before the contract was contemplated. There are 3 types of pre-existing obligations: 1. A pre-existing public duty 2. A pre-existing contractual obligation owed to a third party 3. A pre-existing contractual obligation owed to the same party 1. Pre-existing public duty A person who owes a pre-existing public duty cannot rely upon that obligation as consideration for a new contract. For example, police officers cannot come to rescue you then sell their services to you under contract. 2. Pre-existing contractual obligation owed to a third party A promise to perform a pre-existing obligation that previously arose under a contract with a third party can be good consideration for a new contract. One event such as a quartet may have two obligations to perform one event, such as one obligation to promoter and one obligation to the publisher. 3. Pre-existing contractual obligation owed to the same party The courts usually hold that the same person cannot be required to pay twice for the same benefit. If a promise is merely repeated, it does not provide anything new. The courts want to prevent a person from threatening to breach one contract for a second contract at a higher price. Promise to forgive an existing debt page 183-184 Promises enforceable without consideration A promise is enforceable only if it is contained in a contract that is supported by consideration. That rule is subject to two major exceptions: 1. Seals 2. Promissory estoppel 1. Seals -A mark that is put on a written contract to indicate a party’s intention to be bound by the terms of that document, even though the other party may not have
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