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Essentials of Business Law -- 4th 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 -- 4th 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
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Essentials of Business Law -- 4th 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.
 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.
Essentials of Business Law -- 4th 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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“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 -- 4th 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
Bargain
B
Which
There is consideration
to support a contract
causes...
between A and B, when
they bargain...
A to give B
a benefit
B to give A
a benefit
and their bargaining causes BOTH parties ...
OR
OR
A to suffer a
detriment
AND
B to suffer a
detriment
…to either give a benefit to the other or to
Consideration
suffer a detriment supports
themselves.a contract!
Essentials of Business Law -- 4th 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.
Essentials of Business Law -- 4th 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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 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.
Essentials of Business Law -- 4th 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.
11
 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.
Essentials of Business Law -- 4th 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.
11
 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.
Essentials of Business Law -- 4th 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.
11
 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 -- 4th 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.
11
 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 -- 4th 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.
11
11
Essentials of Business Law -- 4th 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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