Name ______________________________________Date __________Class _______________
LESSON 8-1 TYPES OF CONSIDERATION
Lesson 8-1 Outline
I.
Consideration
A. Act, Forbearance, or Promise
B. Trading
C. Legal Value
D. Adequacy of Consideration
E. Nominal Consideration
Lesson 8-1 Review
Vocabulary Review
Define the following vocabulary terms.
1. consideration
2. gift
That which is given or received in a contract.
The transfer of ownership without receiving anything in return.
3. donor
The person giving a gift.
4. donee
The person receiving a gift.
5. forbearance
A promise to not do something.
6. promisor
The person who promises an action or forbearance.
7. promisee
The person to whom a promise is made.
Concept Review
8.
Define consideration.
Consideration is what a person demands and generally must receive in order to make his or
her promise legally binding.
Chapter 8 Consideration
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Lesson 8-1 Review (continued)
9.
How can legal value be found in the exchange of benefit for a detriment?
With legal value, the detriment is the giving up of a legal right. A detriment arises when a
person promise forbearance.
10.
Under what conditions is there no consideration?
There is no consideration if one of the parties does not give an act, forbearance, or promise
to the other, if one of the parties does not trade her or his contribution to the transaction, or
if what is traded has no legal value.
11.
What is adequacy of consideration?
The values that different people place on similar property could vary widely. What one
person will pay for an item or service, another person may feel is unreasonable and never
consider paying.
Goals Review
12. What are the three requirements of consideration?
The three requirements of consideration are: (1) each party must give an act, forbearance,
or promise to the other; (2) each party must trade what he or she contributes to the
transaction for the other party’s contribution; and (3) what is traded must have value in the
eyes of the law.
13. Define the various types of consideration.
The various types of consideration are (1) a promise, (2) an act other than a promise, (3)
forbearance, (4) a change in a legal relation of the parties, (5) money, or (6) other property.
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Name ______________________________________Date __________Class _______________
LESSON 8-2 QUESTIONABLE CONSIDERATION
Lesson 8-2 Outline
I.
Circumstantial Consideration
A. Illusory Promises
1. Termination Clauses
2. Output and Requirements Contracts
B. Existing Duty
1. Existing Public Duty
2. Existing Private Duty
3. Settlement of Liquidated Debts
4. Settlement of Unliquidated Debts
5. Release
6. Composition of Creditors
II.
False Consideration
A. Mutual Gifts
B. Past Performance
Chapter 8 Consideration
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Lesson 8-2 Review
Vocabulary Review
Define each of the following vocabulary terms.
1. output contract A contract in which a buyer agrees to purchase all of a particular
producer’s production.
2. requirements contract
particular buyer.
A contract in which a seller agrees to supply all of the needs of a
3. liquidated debt A debt which both parties agree exists and both parties agree on the
amount of the debt.
4. accord and satisfaction Parties’ agreement to change the obligation required by their
original contract and the performance of the new obligation.
5. release Settling a claim at the time the tort occurs, while the liability is unliquidated
because the extent of damages is uncertain.
6. composition of creditors A settlement in which the creditors mutually agree to accept less
than they are entitled to in full satisfaction of their claims while the debtor agrees not to file
for bankruptcy.
Concept Review
7.
Explain why courts recognize output and requirement contracts as supported by consideration
Courts recognize output and requirement contracts as supported by consideration because
they imply a duty of fair dealing meaning production cannot be stopped and any actions
terminating the obligation of an output or requirement contract must be taken in a way that
constitutes fair dealing. By finding an implied duty of fair dealing the courts have
maintained the basis for the presence of consideration.
8.
Give an example of existing duty.
Your father may offer to purchase you a car when you reach the age of 18 if you promise
never to smoke. This is an unenforceable contract since you are already required by law not
to smoke, and your father’s promise to reward you for refraining from smoking, something
that you are already required to refrain from by law, is unenforceable.
Goals Review
9.
Under what situations is consideration not binding?
Consideration is not binding if the promise does not create a duty or impose an obligation
such as with illusory promises. Illusory promises include termination clauses in contracts
and output and requirements contracts.
10.
When is what appears to be binding consideration not truly binding?
Existing public duty, mutual gifts, and past performances may appear to be binding but are
not.
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Name ______________________________________Date __________Class _______________
LESSON 8-3 WHEN CONSIDERATION IS NOT REQUIRED
Lesson 8-3 Outline
I.
Exceptions to the Requirements of Consideration
A. Promises to Charitable Organizations
B. Promises Covered by the UCC
1. Firm Offers
2. Modifications
C. Promises Barred From Collection By Statute
1. Statute of Limitations
2. Debts Discharged in Bankruptcy
D. Promissory Estoppel
Lesson 8-3 Review
Vocabulary Review
Define each of the following vocabulary terms.
1. statute of limitations
Specifies a time limit for bringing a lawsuit.
2. promissory estoppel A doctrine that allows an exception to the rule of mutual consideration
under certain circumstances.
Concept Review
3. Why would a pledge to a charitable organization be enforced when the promisor receives no
consideration?
Courts generally enforce such promises provided the charity states a specific use for the
money and acts in reliance on the pledge. There might even be financial hardship based on
actions already taken, thus, meeting the conditions of promissory estoppel.
Chapter 8 Consideration
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Lesson 8-3 Review (continued)
4. Explain why the law recognizes the doctrine of promissory estoppel even when consideration
is not present.
While certain kinds of promises do not always involve consideration, if a party acts in
reliance on the promise and would suffer a substantial economic loss if the promise were
not honored, injustice would result.
Goals Review
5. Describe situations in which consideration is not required.
Consideration is not required when promissory estoppel occurs, when pledges are made to
charitable organizations, or when there is a firm offer.
6.
Identify when promissory estoppel applies.
Promissory estoppel applies to enforce a contract without mutual consideration if: (1) The
promisor should reasonably foresee that the promisee will rely on the promise; (2) The
promisee does act in reliance on the promise; (3) The promisee would suffer substantial
economic loss if the promise is not enforce; (4) Injustice can be avoided only by
enforcement of the promise.
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