Answer to Contract Law Chapter12

Topics: Contract, Contract law, Consideration Pages: 7 (1728 words) Published: August 26, 2013
153

Chapter 12

CONSIDERATION
A. Legal Sufficiency 1. Adequacy 2. Unilateral Contracts 3. Bilateral Contracts 4. Illusory Promises a. Output and Requirement Contracts b. Exclusive Dealing Contracts c. Conditional Promises 5. Pre-existing Obligation a. Modification of a Pre-existing Contract b. Substituted Contracts c. Settlement of a Undisputed Debt d. Settlement of an Disputed Debt B. Bargained-For-Exchange 1. Past Consideration 2. Third Parties C. Contracts without Consideration 1. Promises to Perform Prior Unenforceable Obligations a. Promise to Pay Debt Barred by the Statute of Limitations b. Promise to Pay Debt Discharged in Bankruptcy c. Voidable Promises d. Moral Obligation 2. Promissory Estoppel 3. Contracts under Seal 4. Promises Made Enforceable by Statute a. Contract Modifications b. Renunciations c. Firm Offers

Cases in This Chapter
Pearsall v. Alexander Denney v. Reppert New England Rock Services, Inc. v. Empire Paving, Co. DiLorenzo v. Valve and Primer Corporation

*** Chapter Objective ***
Define consideration and explain what is meant by legal sufficiency.

A. LEGAL SUFFICIENCY
Consideration is the legal value which supports a promise in a contract relationship; it is the inducement to make a contract enforceable. To be legally sufficient, the consideration for the promise must be either a legal detriment to the promisee or a legal benefit to the promisor. In other words, the promisor must receive something of legal value or the promisee must give up something of legal value in return for the promise. Legal detriment does not mean harm, but rather something which the promisee was previously under no legal obligation to do or refrain from doing. Legal benefit means the obtaining by the promisor of that which he had no prior legal right to obtain.

CASE
Pearsall v. Alexander
Case Questions 1. Would the results be the same if the Lottery ticket was worth $20.00? $2,000,000? 2. How can the "course of conduct" test be applied to this situation? Ethical Question: Did the parties act in an ethical manner? Explain.

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CONSIDERATION

CHAPTER 12

Critical Thinking Question: Would it have been preferable to have this continuing agreement put in writing? Explain.

Adequacy
Legal sufficiency has nothing to do with adequacy of consideration. The requirement of legally sufficient consideration is not at all concerned with whether the bargain was “fair” or either good or bad for either party. The requirement is simply: (1) that the parties have freely agreed to an exchange and (2) that the subject matter exchanged, or promised in exchange, either imposed a legal detriment on the promisee or conferred a legal benefit on the promisor.

Unilateral Contracts
In a unilateral contract, one party (the promisor) exchanges a promise for an action (or restraint from acting) from another party (the promisee). The promisee does not make a promise in return, but simply fulfills the action or the restraint to complete the contract.

Bilateral Contracts
In a bilateral contract there is an exchange of promises. Thus, each party is both a promisor and a promisee.

Describe illusory promises, output contracts, requirements contracts, exclusive dealing contracts, and conditional contracts.

*** Chapter Objective ***

Illusory Promises
A statement that appears to be a promise but that, upon close examination of the words, promises nothing real or legally binding; it may contain words such as “desire” or “want” or “wish to buy,” making performance entirely optional. The following types of contracts are NOT illusory because the promisor has actually become obligated to do something. Output and Requirements Contracts — The agreement of a seller to sell her entire production to a particular purchaser is called an output contract. An agreement to purchase all the materials of a particular kind that the purchaser needs from a seller is called a requirements contract. These are not illusory contracts...
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