Term
| What are the two elements of legal consideration? |
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Definition
(1) something of legally sufficient value must be given in exchange for the promise; and
(2) usually, there must be a bargained-for exchange |
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Term
What is meant by "Legally sufficient value?"
Define forbearance? |
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Definition
(1) a promise to do something that one has no prior legal duty to do,
(2) the performance of an action that one is otherwise not obligated to undertake, OR
(3) the refraining from an action that one has a legal right to undertake; this is called forbearance |
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Term
| What is meant by "Adequacy of Consideration?" How do the courts treat this concept? |
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Definition
how much consideration is given; essentially concerning the fairness of the bargain.
Usually, courts do not question the adequacy of consideration based solely on the comparative value of the things exchanged. However, when there is a large difference in the value of consideration exchanged, the courts may look more closely at the bargain because this can indicate that fraud, duress, or undue influence was involved or that the element of bargained-for exchange was lacking. |
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Term
| What is preexisiting duty? |
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Definition
| a promise to do what one already has a legal duty to do does not constitute legally sufficient consideration. |
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Term
| How are unforeseen difficulties affected by preexisting duty rule? |
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Definition
| In the interests of fairness and equity, the courts sometimes allow exceptions to the preexisting duty rule when parties modify a contract due to unforeseen difficulties that may not be considered risks ordinarily assumed in the business. |
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Term
| What is rescission? New contract? |
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Definition
| the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made. Sometimes, parties will make a new contract at the same time. This often makes it difficult to determine whether there was consideration for the new contract. |
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Term
| What is Past Consideration? |
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Definition
| past consideration is "no consideration"; promises made in return for actions or events that have already taken place. These promises are considered unenforceable. |
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Term
| What is an illusory contract? |
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Definition
| a contract in which the terms express such uncertainty of performance that the promisor has not definitely promised to do anything. These are promises without consideration and are unenforceable. |
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Term
| How does an Option-to-cancel clause affect a promise/contract? |
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Definition
| when the promisor has the options to cancel the contract before performance has begun, the promise is illusory, or without consideration. |
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Term
What is a requirements contract?
What is an output contract? |
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Definition
requirements: a buyer and seller agree that the buyer will purchase from the seller all goods of a designated type that the buyer needs, or requires.
Output: the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the seller's output. |
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Term
| What is an Accord and Satisfaction? |
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Definition
a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed.
For accord and satisfaction to occur, the amount of the debt must be in dispute. |
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Term
| Liquidated vs. un-liquidated debt |
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Definition
if debt is liquidated, accord and satisfaction cannot take place. A liquidated debt is one whose amount has been ascertained, fixed, agreed upon, settled, or exactly determined.
(ex) an installment loan.
an un-liquidated debt is any debt not considered liquidated. |
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Term
| What is a release? Under what terms will a release be binding? |
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Definition
a contract in which one part forfeits the right to pursue a legal claim against the other party.
(1) given in good faith,
(2) stated in a signed writing, and
(3) accompanied by consideration |
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Term
| What is a covenant not to sue? |
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Definition
does not always bar further recovery; a party will not be released from lawsuit until the party performs (pays claim, etc)
(ex) Lucy agrees with Donovan not to sue for damages in a tort actions if he will pay for the damage to her car. If he doesn't pay, Lucy can sue. |
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Term
| What types of promises may be enforced despite the lack of consideration? |
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Definition
(1) promises that induce detrimental reliance, under the doctrine of promissory estoppel.
(2) promises to pay debts that are barred by a statute of limitations.
(3) promises to make charitable donations. |
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Term
| What does the doctrine of promissory estoppel enforce? |
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Definition
| a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery. |
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Term
| What are the requirements to state a claim under the promissory estoppel doctrine? |
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Definition
(1) there must be a clear and definite promise
(2) the promisor should have expected that the promisee would rely on the promise
(3) the promisee reasonably relied on the promise by acting or refraining from some act.
(4) the promise's reliance was definite and resulted in substantial detriment
(5) enforcement of the promise is necessary to avoid injustice |
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