Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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“Promises are the uniquely human way of ordering the future
.”
Hannah Arendt,
German-American Political Scientist
Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 Consideration means that there must be bargaining that leads to an exchange between the parties.
 Consideration can be anything that someone might want to bargain for.
 A promisor is the person who makes the promise, and promisee, the person to whom the promise is made.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

“Bargaining is obligating yourself in order to induce the other side to agree.”
 The thing bargained for can be:
• another promise or action.
• a benefit to the promisor or a detriment to the promisee.
• a promise to do something or a promise to refrain from doing something.
Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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A
B between A and B, when they bargain...
A to give B B to give A a benefit a benefit and their bargaining causes BOTH parties ...
OR OR
A to suffer a
AND detriment
B to suffer a detriment
…to either give a benefit to the other or to
Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 Courts seldom inquire into the adequacy of consideration.
 A previously paid benefit is generally not consideration because it was not meant to induce the other side to agree.
• Exception: Economic Benefit -- in some cases, courts will enforce consideration that is an economic benefit, given with the expectation of later payment.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.



Illusory Promise
• If one party’s promise is conditional, the other party is not bound to the agreement.
Sales Law: Requirements and Output
Contracts
• In a requirements contract, the buyer agrees to purchase 100% of her goods from one seller.
• In an output contract, the seller guarantees to sell
100% of its output to one buyer, and the buyer agrees to accept the entire quantity.
• Section 2-306 of the UCC expressly allows output and requirements contracts in the sale of goods.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 A promise to which the promisor is already obligated is not consideration.
• Exceptions:
– If the scope of the promisor’s task increases, that increase is consideration.
– When unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is valid consideration.
– If both parties agree to cancel a contract, then form another one in its place, the new contract is valid.
– Modification of a sale of goods is allowable without consideration, unless there is a written agreement forbidding such modifications.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

 A liquidated debt is one in which there is no dispute about the amount owed.
• In cases of liquidated debt, if the creditor agrees to take less than the full amount as full payment, her agreement is not binding.
• If the debtor offers a different performance to settle the debt and the creditor agrees, the agreement is binding.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.



A debt is unliquidated if:
• (1) the parties dispute whether any money is owed, or
• (2) the parties agree that some money is owed but dispute how much.
The parties may agree to settle for less than what is owed; this “accord and satisfaction” will be enforced if the debtor pays the agreed amount.
Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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

Common Law ruling:
• If a debtor writes “Paid in Full” on a check, and the creditor cashes it, the payment is in full whether or not it was the right amount.
UCC §3-311
• Affirms the Common Law ruling, but adds two exceptions:
– Organizations may notify debtors that any offers to settle debt for less than the whole amount must be directed to a certain person.
– The creditor can refund the paid amount within 90 days and then demand the full amount.
Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Essentials of Business Law -- 4 th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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