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Lecture 9

ACCT 324 Lecture 9: 9/7 Chapter 15


Department
Accounting
Course Code
ACCT 324
Professor
David Johnson
Lecture
9

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Consideration- something of value, given in exchange for something else of value, that is the
product of a mutually bargained for exchange
RULES OF CONSIDERATION
For a promise to be enforced legally, there must be consideration
Exception: promissory estoppel
One party makes promise knowing the other party will rely on it
Other party relies on promise (“actual reliance”)
Justice dictates enforcement of promise, even though it is not supported by
consideration
Reliance damages given if you’re offered a job and not have it for you, etc.
Court rarely considers adequacy of consideration
Illusory promise does not constitute consideration
Past consideration does not constitute consideration for purposes of present contract
Promise to do something you are already legally obligated to do is not valid
consideration (“Pre-existing duty rule”)
Partial Payment of Debt
Liquidated debt- no dispute as to amount of money owed
Unliquidated debt- parties either (in good faith) dispute fact money owed, or dispute
amount of money owed
“Accord and Satisfaction” Requirements (“Accord” represents agreement, “satisfaction”
represents payment; accord and satisfaction means partial payment of disputed debt
discharges remaining balance allegedly owed
Unliquidated debt
Creditor agrees to accept, as full payment, less than creditor claims owed
Debtor pays agree-upon amount
Contractual Capacity- mental ability to understand rights and obligations established by
contract, with presumptive ………..
General rule of law: natural people 18+ are presumed to have….
MINORS:
Disaffirmance (Power of Avoidance): Minors right, until reasonable time after reaching
age of majority, to disaffirm/avoid their contracts
To exercise right, minor only needs to demonstrate w/ words/actions, intent to
rescind contract
Minor must return any consideration received (if still in minors
possession/control), regardless of condition
Even if consideration damaged/destroyed, other party has no recourse against
minor
Rules designed to discourage competent parties from entering into contracts with
minors
Exceptions to Minors right to disaffirm contract
Contract for necessities
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