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Final

Chapter 8 Exam Notes

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Department
Law and Business
Course
LAW 122
Professor
Henry Ojambo
Semester
Winter

Description
George Nico Business Law (Exam Notes) Chapter 8: Consideration and Privity The Nature of Consideration ­ Main goal of contract law is to enforce bargains o Promise is (generally) enforceable unless mutual ­ Consideration can be either a benefit or a detriment o Each party must either…  (promise to) provide benefit to someone or  (promise to) suffer detriment to self o Must move from each party – but not to other party  “I’ll pay $5000 to your brother if you transfer a car to my sister” Sufficient & Adequate Consideration ­ Consideration must be sufficient o Sufficient: any value from a legal perspective  Money, goods, land, or services  But not, “love and affection” ­ Consideration need not be adequate o Adequate: exchange of equal value  Courts will not save someone from a “foolish” bargain ­ Peppercorn theory of consideration Sufficient Consideration – Forbearance (restraint or tolerance) to Sue ­ Definition: o Give up right of action ­ Forbearance as consideration o If underlying claim was valid  Valid consideration: sacrifice right to sue for full amount o If underlying claim was invalid  No actual right action to be sacrificed  Valid consideration: loss of right to pursue apparent claim  Invalid consideration if no honest belief in underlying claim Past consideration ­ Recall mutuality of consideration: o Each party must give consideration in exchange for other’s ­ Past consideration o Consideration given before contract contemplated o No mutuality and therefore no consideration  Eg. Promise to pay $100 given after service provided ­ Sometimes confused with implied promise to pay reasonable price, which is valid consideration Past Consideration and Pre­Existing Obligation George Nico Business Law (Exam Notes) ­ Determining whether valid consideration to give new promise to perform existing obligation not  yet fulfilled o Eg. “I’ll perform the contract if you pay me $500 extra” ­ Situations involving pre­existing obligation o Pre­existing public duty o Pre­existing obligation owed to third party o Pre­existing obligation owed to same party Pre­Existing Public Duty ­ Promises to perform pre­existing public duty o Public officer promises to perform for extra pay  Police: “I’ll investigate if you promise to pay $500” ­ No consideration o Public official gives nothing new  Police already obliged to investigate o Against policy to enforce agreement  Avoid incentive for public servant to misbehave Pre­Existing Third Party Obligation ­ Promise to perform duty owed to third party o Old contract promise repeated for new contract  “I’ll perform contract with X if you pay me $500” ­ Sufficient consideration o New benefit for new party under new contract  You acquire right to enforce performance Pre­Existing Same Party Obligation ­ Promise to perform obligation owed to same party o Old contractual promise repeated for new contract  “I’ll perform our contract if you pay me $500 extra” ­ No consideration o No new benefit for same party  You already have right o enforce my performance o Against policy to enforce agreement  Avoid incentive to threaten breach to get extra pay Promise to Forgive Existing Debt ­ Promise to discharge debt upon part payment o “You owe me $500… pay $200 and forget the rest” ­ Unenforceable because no new consideration ­ Exceptions o Promise under seal (below) o Promise exchanged for new benefit (Eg. Early Payment) o Statute (not all jurisdictions) George Nico Business Law (Exam Notes)  Promise enforceable if part payment actually received Promises Enforceable Without Consideration ­ General Rule o Promise unenforceable without consideration ­ Exceptions o Seal: special mark on document • Must be applied when contract signed • Need not take any particular form  Significance of seal • Symbolizes seriousness of promise o Promise enforceable even without consideration o Party agrees to give something for nothing o Commonly used in connection with guarantees o Promissory estoppel: prevents disputing or retraction a statement • A person may be estopped from unfairly denying truth of prior  statement made to someone who relied on it  Promissory estoppel: prevents retraction of promise that another party has relied  upon o Eg. “You only have to pay me at half 
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