LEGL 215 Lecture Notes - Lecture 13: Contract, Estoppel

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Ch. 13
CONSIDERATION
Consideration: Value given in return for a promise. Consideration must be
1. legally sufficient
2. bargained for by the party receiving it
Legally sufficient consideration may take the form of:
1. promising to do something that the promisee has no prior legal duty to do
- Ex.) promising to pay money for the promisor’s goods
2. performing an action that the promisee is not otherwise obligated to undertake
- Ex.) painting the promisor’s house
3. refraining from exercising a legal right that the promisee is otherwise entitled to
exercise
- Ex.) dismissing a viable lawsuit against the promisor
Consideration is bargained for if the promisor sought it in exchange for the promisor’s
promise and the promisee gave it in exchange for the promisor’s promise.
Courts will generally not inquire into the adequacy of the consideration, as long as the
promisor bargained for it. However, some courts will make an exception for grossly
inadequate
consideration.
INSUFFICIENT CONSIDERATION
Preexisting Duty: A promise to do (or refrain from doing) what one already has a legal duty
to do (or refrain from doing) generally does not constitute legally sufficient consideration.
Under the “unforeseen difficulties” doctrine, an existing contract may be modified to
account for unforeseen difficulties that arise during the course of performance. The
promisee’s obligation under the modified contract is new consideration.
If the parties agree to replace an existing contract with a new, superseding contract, the
promise to perform the new contract is a new promise and not a promise to perform a
pre-existing legal duty.
Past Consideration: Promises made in return for acts or events that have already taken
place are unenforceable due to lack of sufficient consideration.
UNCERTAIN OBLIGATIONS
Illusory Promises: If the terms of a contract call for performance in such uncertain terms
that the promisor has not definitely promised to do (or refrain from doing) anything, the
contract is unenforceable for lack of sufficient consideration.
Options to Cancel: If the terms of a contract give one party the option to cancel at any time,
for any reason, without prior notice, the contract is unenforceable for lack of sufficient
consideration.
Requirements Contract: A contract whereby the buyer agrees to purchase all of the goods
of a designated type that they need from the seller. Requirements contracts are not illusory,
despite the uncertainty whether the buyer will actually require any of the designated goods.
Output Contract: A contract whereby the seller agrees to sell all of the goods of a
designated type it produces to the buyer. Output contracts are not illusory, despite the
uncertainty whether the seller will actually produce any of the designated goods.
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