• The main goal of contract law is to enforce bargains
• Mutual exchange of value must occur
Gratuitous Promise: promise for which nothing of legal value is given in exchange.
• While you are entitled to keep something if I give it to you, you cannot FORCE
me to give it to you because we didn’t have a bargain so we don’t have a contract.
Consideration: exists when a party either gives (or promises to give) a benefit to
someone or suffers (or promises to suffer) a detriment to itself.
• MUST be provided by both parties.
• We do not have to promise to provide a benefit to each other we can promise to
provide a benefit to someone else.
Sufficient and Adequate Consideration
• It may be anything of value
• Love and affection are not enough
• Consideration must be SUFFICIENT but doesn’t have to be ADEQUATE
• There only has to be SOME value (peppercorn theory)
Forbearance to Sue
• A promise to not pursue a lawsuit if something happens.
Mutuality of Consideration: requires that each party provide consideration IN RETURN
for the other parties.
Past Consideration: Consists of something that a party did prior to the completion on a
• This is not given in EXCHANGE so there is no mutuality.
• If you make an initial request and the promise to pay after it is done, the courts
will say that a reasonable person would have viewed your initial offer as
o They would say that there was sufficient meeting of the minds and would
require you to pay a reasonable price.
• An obligation that existed, but was not actually performed, before the contract
o PRE EXISTING PUBLIC DUTY
Not good consideration.
They cannot use their preexisting duty as consideration for a new
contract. If it’s after hours they can do whatever they want.
o PRE EXISTING CONTRACTUAL OBLIGATIONS OWED TO A
Good consideration for a new party
o PRE EXISTING CONTRACTUAL OBLIGATION OWED TO SAME
Not good consideration
The same person cannot be required to pay twice for the same
They can use novation to discharge their initial contract and enter
into a new agreement
They can agree to do something new.
Third they can place it under a seal.
Promise to Forgive an Existing Debt
• RENT EXAMPLE: your promise to accept the lesser amount can only be
enforceable if it was supported by fresh consideration.
• This means that I must give you something new. They fact that I am paying a new
amount is merely PART PERFORMANCE., but a different type of payment
• A promise to accept a smaller amount is enforceable is placed under a seal.
• Enforceable if the debtor gives something in exchange for it. For example the
different payment type of giving you something else of value along with my
• MERCANTILE LAW AMENDMENT ACT OF ONTARIO (PAGE 184
o IT requires part performance I must at least pay that lesser sum
o Will not allow it to be used in an uncounsiacable manner (if I have the full
amount and I know you are desperate but I only pay you the lesser
Promises Enforceable WITHOUT Consideration
a. A mark that is put on a written contract to indicate a party’s intention to be
bound by the terms of that document, even though the other party may not
have given consideration.
b. This may be agreeing to do something for nothing!!
c. Banks use this when they give you loans etc.
d. Usually it is just enough to write “seal” on the paper and the courts can
insist that the party sign the contract when it is written.
e. It is NOT sufficient to use a form that already has the word SEAL written
f. It is NOT sufficient to add the word “seal” after the party has signed and
2. PROMISSORY ESTOPPEL a. ESTOPPEL: A rule that precludes a person from disputing or retracting a
statement that they made earlier.
b. “Estopped” from unfairly denying the truth of a prior statement if the
person to whom it was told relied on