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Law 122- Chpt 8.docx

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Law and Business
LAW 122
Shavin Malhotra

Law 122 – Chapter 8 Consideration & Privity  Ingredients required to form a contract: intention to create legal relations; offer, acceptance  Consideration – thing that each party provides under a contract; unless consideration exists on both sides of a bargain, courts will usually not enforce parties agreements  Consideration, offer, acceptance, intention to create contractual relations are required to create a contract  Privity of contract – identifies the parties to a contract; determines who can sue/be sued. Consideration  Main goal of contract law is enforce bargains; involves more than an offer & acceptance, mutual exchange of value  Gratuitous promise- promise for which nothing of legal value is given in exchange; promised nothing in return; allowed to change mind  Creation of contract depends on exchange of value  Consideration - must be provided by both parties; exists when a party either gives (promises to give) a benefit to some1 else/suffers (promises to suffer) a loss to itself; must move from each side of a contract but not necessarily to the other side Sufficient and Adequate consideration  Sufficient consideration –may be almost anything of value; intimate matters  Adequate consideration – has essentially same value as consideration for which it is exchanged; peppercorn theory; trading a computer and promise to give up smoking Forbearance to sue  Forbearance to sue – promise to not pursue a lawsuit; P promises not to bring the matter into court & D agrees to pay less $ than it allegedly owed Past Consideration  Mutuality of consideration – 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; no mutuality; past consideration is not given in exchange for the other party’s consideration; so past consideration is not really consideration at all; so no support for contract Pre-existing obligation  Contract can be supported by a promise to fulfill a pre-existing obligation – obligation that existed, but was not performed, b4 contract was contrdplated; 3 types – pre-existing public duty, pre-existing contractual obligation owed to 3 part, pre-existing contractual obligation owed to same party Pre-existing public duty  Person who owes a pre-existing public duty cannot rely upon that obligation as consideration for a new contract; not a good consideration for a new contract Pre-existing contractual obligation owed to 3 party rd  Arose under a contract w. 3 party can be good consideration for new contract; adv. To using the same consideration for 2 diff contractions; may be able to extract valuable promises 4m 2 diff parties Pre-existing contractual obligation owed to the same party  Courts usually hold that the same person cant be required to pay twice for the same benefit; court want to prevent a person from threatening to breach 1 contract in order to get other party to enter into a 2 contract @ higher price  Parties sometimes fail to appreciate the effort & expense that will be involved in the performance of their contract; they may genuinely agree that the terms of their original contract should be revised to ensure that the deal benefits both of them, esp if they want to develop & maintain goodwill  Avoid rule in Gilbert steel; use process of novation to discharge their initial contract & enter into a new agreement that includes a higher price; they can agree that something new is to be done in exchange for extra price Concept summary 8.1 Promise to forgive an existing debt 
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