Chapter 8: Consideration and Privity
A contract cannot usually exist without an exchange of value.
-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
Forbearance to sue: A promise to not pursue a lawsuit
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: An obligation that existed, but was not actually performed, before the contract
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
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:
2. Promissory estoppel
-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