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LAW 122 (616)
Chapter 8

Chapter 8 Notes

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Ryerson University
Law and Business
LAW 122
Kernaghan Webb

Chapter 8: Consideration and Privity C ONSIDERATION The main goal of contract law is to enforce bargains. And as business ppl know, a bargain involves more than an offer and an acceptance; it also involves a mutual exchange of value. o Gratuitous Promise: is a promise for which nothing of legal value is given in exchange. E.g. I offer to give you a laptop and you simply agree to receive it. Consequently, while you will be entitled to keep the laptop if I actually give it to you, you cannot force me to hand it over to you in the first place. Bc we did not have a bargain, we did not have a contract, and thus I am entitled to change my mind. The creation of a contract therefore generally depends on an exchange of value. Consideration must be provided by both parties. o Consideration: exists when a party either gives (or promise to give) a benefit to someone else of suffers (or promises to suffer) a detriment of itself. Consideration must move from each side of a contract but not necessarily to the other side. E.g. you and I will have a contract if I promise to give $5000 to your brother, and you promise to give a car to my sister. In that situation it is enough that we promised to provide a benefit to someone; we do not have to promise to provide benefit to each other. Sufficient and Adequate Consideration A contract must be supported by sufficient consideration. o Sufficient Consideration: may be almost anything of value. E.g. It is sufficient if a person promises to give up smoking, drinking or swearing. There are nevertheless exceptions: love and affection is not enough to support an enforceable agreement. Although a contract must be sufficient, it does not have to be adequate. o Adequate Consideration: has essentially the same value as the consideration for which it is exchanged. E.g. If I promise to give you my computer worth $5000, and you promise to give up smoking, drinking and swearing for a year, it would seem I made a very bad bargain. In economic terms, I will be giving up far more than you will be providing in return. The law presumes that ppl are able to look after their own interests, and it generally allows them to decide what price they will demand under a contract. Forbearance to Sue For business ppl, the diff bt sufficient consideration & adequate consideration is particularly important in the context of forbearance to sue. o Forbearance to Sue: is a promise to not pursue a lawsuit. In the vast majority of cases, the parties settle their dispute out of court. They often enter into a contract for that purpose. The plaintiff promises not to bring the matter into court, and the defendant agrees to pay less money than it allegedly owed. 1 of 8 www.notesolution.com
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