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Chapter 8

Chapter 8 CONSIDERATION AND PRIVITY.doc

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Department
Law and Business
Course
LAW 122
Professor
Theresa Miedema
Semester
Fall

Description
Chapter 8 CONSIDERATION AND PRIVITY CONSIDERATION  Main reason for contract law is to enforce bargains, (involves a mutual exchange of value)  Gratuitous promise: is a promise for which nothing of legal value is given in exchange Creation of contract generally depends on an exchange of value. Consideration must be provided by both parties Consideration: exists when a party either gives (or promises to give) a benefit to someone else or suffers (or promises to suffer) a determinant to itself. Sufficient and Adequate consideration  Sufficient consideration: may be almost anything of value  Judges generally wanted to avoid becoming involved in intimate matters  Although consideration must be sufficient it does not have to be adequate  Adequate consideration: has essentially the same value as the consideration for which it is exchanged  Look after own interests known as Peppercorn Theory Forbearance to Sue  Is a promise not to pursue a lawsuit  Also consider the importance of receiving advice from a lawyer before agreeing to forebear on a possible action  In some situations the court will not enforce forbearance agreements, when the party that threatened to sue did not honestly believe that it had a valid claim in the first place. Past consideration  Mutuality of consideration: requires that each party provide consideration in return for the other parties consideration  Past consideration: consists of something that a party did before entering into a contract Pre-Existing Obligation  Pre-Existing Obligation: An obligation that existed, but was not actually performed, before the contract was contemplated o A pre-existing public duty o A pre existing contractual obligation owed to a third party o A pre existing contractual obligation owed to the same party Pre-Existing Public Duty  Person who owes a pre-existing public duty cannot rely upon the obligation as consideration for a new contract  Ex. Firefighters and police officers  By becoming a public servant a person does not promise to protect citizens around the clock Pre-existing contractual obligation owed to third party  A promise to perform a pre existing obligation that previously arose under a contract with a third party can be good consideration for a new contract  Ex quartet getting paid for two separate contracts by doing one task, but if she fails to do the task she can be held liable twice Pre-Existing contractual obligation owed to the same party  If obligation arose under an earlier contract with the same party that is on the other side of the new contract (would be required to pay twice for the benefit)  People can use novation to discharge their initial contract and enter into a new agreement that includes a higher price  Gilbert steel vs university construction  Concept summary 8.1 (pg 183) Promise to Forgive an existing Debt  Suppose lend 100,000 to me which I promise to pay in cash on June 1.  Explain that I do not have enough money and that you will discharge my debt in exchange for 70,000. later on he can ask for 30,000 because the 70,000 is part performance of promise I had earlier  PROMISE to accept a smaller sum is enforceable place under Seal  Promise to accept less money enforceable if the debtor gives something new in exchange for it  Section 16 Mercantile Law Amendment act of Ontario : Part performance of an obligation either before or after breach therof when expressly accepted by creditors or rendered in pursuance of an agreement for that purpose, though without any new consideration, shall be held to extinguish the obligation  The mercantile act cannot be used in an unconscious able manner Several exceptions 1. a promise to accept a smaller sum is enforceable if it is placed under seal 2. a promise to accept less money is enforceable if the debtor gives something new in exchange for it. Ex 70 K plus a car Certain restrictions: 1. requires part performance m part of the debt must have been paid Promises Enforceable Without Consideration Generally speaking a promise is enforceable only if it is contained in a contract that is supported by consideration. That rule is subject to two major exceptions  Seals  Promissory Estoppels Seals  Seals :A mark that is put on a written contract to indicate a party’s intention to be bound by the terms of the document, even though the other party may not have given consideration  Importance is to draw the parties attention to the importance of the occasion and ensure that they appreciate the seriousness of making an enforceable promise outside the usual bargaining process  Can’t put seal on before promise and Have to put seal at the same time as promise Promissory Estoppel  Estoppel: is the rule that precludes a person from disputing or retracting a statement that they made ea
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