Chapter 8: Consideration and Privity
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
oGratuitous 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.
B/c 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.
oConsideration: 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.
oSufficient 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
Although a contract must be sufficient, it does not have to be adequate.
oAdequate Consideration: has essentially the same value as the consideration for which it is
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 b/t sufficient consideration & adequate consideration is particularly
important in the context of forbearance to sue.
oForbearance 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.
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