BMGT 380 Lecture Notes - Lecture 9: Estoppel
18 Oct 2018
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Consideration (3rd contract requirement) – something of legal value, bargained for & given in
exchange for an act or promise
- Each party has to give st up
- Distinguishes contract from a gift
- A promise can be consideration
- Does not have to have monetary value, just st you have the legal right to do
- Ex. You agree not to have a drink all year in college when you’re 21, Mom agrees to pay
you $5,000
o This is a contract. You have the legal right to drink, but you are giving up your
legal right (consideration) in exchange for money (also consideration)
What constitutes adequate consideration?
- Different things carry different value to people
- Courts don’t really like to qualify the equality of an exchange; simply look at if there is
such gross inadequacy of consideration that it’s really a disguised gift
o Ex. Giving something up for $1 (nominal consideration) is probably a disguised
gift
o Courts will refuse to enforce disguised gifts bc they’re not really contracts
o Gross inadequacy of consideration – never enough to prove coercion / duress /
fraud, but can help show that a contract was entered into improperly
Consideration is NOT:
- Illusory promises
o A promise that’s not a real obligation
o Ex. “I promise to do whatever I want to”
▪ You are making no commitments
o Ex. “If you pay me $1m, I promise to paint your house if I want to”
▪ There’s no real obligation for you to do anything; you gave yourself an
out; only one party is giving something up
o Not sufficient for consideration bc it doesn’t represent an actual obligation
- Preexisting duties
o If you’re already obligated to do st, that isn’t enough for consideration
o “If you pay me, I won’t commit murder”
▪ You were already obligated to not commit murder → contract not valid
o CL: General rule – require new consideration for modifications to contract
▪ If a builder asks for more money to build your house (from $500k to
$600k), he must give you new consideration to bind you to that
• Could agree to build the home sooner
▪ Court may waive requirement if modification results from unforeseen
circumstances
o UCC: modifying a contract does not need new consideration to be binding, as
long as parties agree
o Liquidated vs. Unliquidated debt
▪ Liquidated debt: both parties agree on what is owed
Document Summary
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