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ADMS 2610 Lecture Notes - Bargaining, Estoppel, Efficiency Ratio

Administrative Studies
Course Code
ADMS 2610
Robert Levine

of 3
Session 2
Chapter 8 (pg. 141-150)
Requirement of Consideration
Nature of Consideration
- A form of the bargaining theory
- The “something” that the promsior receives in return for the promisor’s
- Consideration (something that has value in the eyes of the law, and which a
promisor receives in return for a promise)
- Takes many forms (payment of money, performance of a particular service,
delivery of property)
- Consideration for a promise must exist for the contract to be legally binding
- Gratuitous promise
o A promise not accompanied by consideration
o The promisor must get something in return for the promise or the
promise is merely gratuitous
o Not enforceable under law
o Exceptions:
Gratuitous services must be performed with care and skill
(negligence still appliessue in tort not contract)
Negotiable Instruments (promissory notes) where one is still
liable on a check or note, and to subsequent endorsers even
though no consideration exits
Charitable donations as most donations are gratuitous
If charity can show a specific project undertaken on
strength of a donor’s pledge may be a enforceable
o Needs to be substantial portion
o Not enforceable if it is not a significant donation
o Difficult to enforce without strong consideration
Seal as Consideration
- Seal (a formal mode of expressing the intention to be bound by a written
promise or agreement)
o Usually takes the form of signing or affixing a wax or gummed paper
wafer beside the signature, or making an engraved impression on the
document itself
o A major exception to the requirement for consideration in a contract
o The deliberate act of placing a seal on a document is intention to be
bound by the agreement
o Contract under seal requires no consideration
- Different than the ordinary offer
- An invitation to submit offers
- Firm asking for tender can reject or accept such tenders
- If tender is an offer, rules of revocation say it can be revoked anytime before
- Tender uses seal to render offer irrevocable;
- Tender uses payment as money (deposit) as consideration
Adequacy of Consideration
- Court is not concerned about the adequacy of consideration
- Courts main concern is whether consideration is present or not
- Price or value is up to the parties to decide not the courts
- Exception: if the promise was made under unusual circumstances
o One cannot snap up an offer
o Inadvertent typos (rule of rectification)
Past Consideration
- Consideration must be given before contract entered into and not after
- Cannot be something the person received before the promise is made
- Cannot be something a person is already entitled to receive at law or under a
present contract
- Past consideration is no consideration
- New contract requires new consideration
Legality of Consideration
- Consideration must be legal
o The promises cannot be illegal or a violation of public policy
o Asking for additional funds to complete a construction project
Promise to provide extra funds is gratuitous
New promise requires new consideration
- Cannot violate Statutes
o Contracts with clauses that buyer must resell at fixed or minimum
price are unlawful under Competition Act
Quantum Meruit (“as much as he has earned”)
- A quasi-contractual remedy that permits a person to recover a reasonable
price for services and/or materials requested where no price is established
when the request is made
o Courts decides on price based on price of similar goods or services in
the area
Debtor-Creditor Relationship
- Gratuitous reduction of a debt
o Creditors agreeing to accept less than what is owed is a gratuitous
o New promise requires new consideration
o Exceptions to the rules exist for business efficiency
Sign under seal
Acceptance of something other than money
Pay before the due date
Third party makes the payment
Equitable or Promissory Estoppel
- Estoppel (a rule whereby a person may not deny the truth of a statement of
fact made by him or her when another person has relied and acted upon the
- Promise is enforceable without consideration
- Only used as a shield (defense) and not a sword (an action)
- Requirements of Estoppel
o Prevent retraction of promise if:
(1) Promise relates to an existing legal relationship
(2) Expression of a fact as being true
(3) Reliance on statement by other party
(4) Reliance is detriment to the other party