Chapter 2 The Law of Contract
Consideration
对价
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Facing a Legal Problem
Antonio says to his son, “When you finish
painting the garage, I will pay you $100.”
Antonio’s son paints the garage. The act of
painting the garage is the consideration that
creates the contractual obligation of Antonio to
pay his son $100. If, instead, Antonio had said to
his son, “In consideration of the fact that you are
not as wealthy as your brothers, I will pay you
$500,” would this promise have been
enforceable?
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Definition of Consideration
Something of legal value given in
exchange for a promise
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Requirements of Consideration
(1) something of legal value must be given
(e.g., either a legal benefit must be received
or legal detriment suffered)
(2) there must be a bargained-for exchange.
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Gift Promise
An unenforceable promise because it lacks
consideration
To change a gift promise into an enforceable
contract, the promisee must offer to do sth.
in exchange---consideration---for the
promise.
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Case 2-2
Alden v. Presley
Elvis Presley, a singer of great renown and a man
of substantial wealth, became engaged to Ginger
Alden. He was generous with the Alden family,
paying for installing a swimming pool, … and
making other gifts.
When his fiancee’s mother, Jo Laverne Alden, sought to
divorce her husband, Presley promised to pay off the
remaining mortgage indebtedness of the Alden home,
which Mrs. Alden was to receive in the divorce
settlement.
On August 16, 1977, Presley died suddenly,
leaving the mortgage unpaid. When the legal
representative of Presley’s estate refused to pay
the $39,587 mortgage, Mrs. Alden brought an
action to enforce Presley’s promise, the trial court
denied recovery. Mrs. Alden appealed.
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Key question:
Was Presley’s promise to pay the mortgage
enforceable?
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COURT’S
REASONING
Under contract law, gift promises are
unenforceable because they lack
consideration. The court found that
plaintiff Alden had not given any
consideration in exchange for Presley’s
promise. The court also found that the
gift promise had not been completed
by Presley. Therefore, the unexpected
gift promise could not be enforced
against Presley’s estate.
COURT’S DECISION
The supreme court held that
Presley’s promise was a gratuitous
无偿的，免费的 executory
promise that was not supported by
consideration. As such, it was
unenforceable against Presley’s
estate. The court dismissed the case
and assessed costs against the
plaintiff.
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Promises Lacking Consideration(1)
• Illegal consideration---promise to refrain
from doing an illegal act.
• Illusory consideration---promise where one
or both parties can choose not to perform
their obligation.
• Moral obligation---promise made out of a
sense of moral obligation or honor or love
or affection.
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Promises Lacking Consideration(2)
• Preexisting duty---promise based on the
preexisting duty of the promisee to perform.
The promise is enforceable if (1)the parties
rescind the contract and enter into a new
contract or(2)there are unforeseen
difficulties.
• Past consideration ---promise based on the
past performance of the promisee.
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Example 2-8
Bauman-Bache, Inc. begins construction on a
seven-story office building and after three months
demands an extra $75,000 on its contract. If the
extra $75,000 is not paid, it will stop working. The
owner of the land, having no one else to complete
construction, agrees to pay the extra $75,000.
If the owner later refuses to pay the extra money,
could Bauman-Bache successfully sue to enforce
the agreement?
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Example 2-9
Ellen, a nurse, spent many years living with,
and looking after, her parents. Shortly after
her parents died, her brother told her, in the
presence of several other people, that he
was so grateful to her for the care she gave
their parents that he would take care of her
for the rest of her life. When her brother
fails to keep his promise, Ellen brings an
action to have the promise enforced.
Will the court hold that a contract exists? 12
Settlement of Claims (1)
An accord和解 --- an executory contract to
perform some act in order to satisfy an
existing contractual duty. The duty is not
yet discharged.
A satisfaction清偿--- is the performance of
the accord. An accord and its satisfaction
(performance) discharge the original
contractual obligation.
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Settlement of Claims (2)
Release放弃文书---An agreement in which, for
consideration, a party is barred from further
recovery beyond the terms specified in the
release.
Covenant not to sue 保 证 不 起 诉 ---An
agreement not to sue on a present, valid claim.
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Example 2-10
Suppose that you are involved in an automobile
accident caused by Paul’s negligence. Paul offers
to give you $1,000 if you will release him from
further liability resulting from the accident. You
believe that this amount will cover your damages,
so you agree to the release. Later you discover that
it will cost $1,200 to repair you car. Can you
collect the balance from Paul ?
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Legal Sufficiency of Consideration
To be legally sufficient, consideration for a promise
must be leally beneficial to the promisor or
detrimental to the promisee.
Detriment means that in return for the promise, the
promisee has
(1) done, or promised to do, something that he or
she had no prior legal duty to do or
(2) refrained from, or promised to refrain from,
doing something that he or she had no prior legal
duty to refrain from doing .
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Example 2-11
In the 1850s when the age of majority was considerably
younger than twenty-one, William Story, Sr., promised his
fifteen-year-old nephew, William Story II, that if the nephew
refrained from alcohol, tobacco, and gambling until the age
of twenty-one, he would pay him $5,000. The nephew
agreed. Following his twenty-first birthday, the nephew
wrote to his uncle that he had performed his part of the
bargain and was thus entitled to the $5,000. They agreed that
the uncle would invest the money for the nephew. Four years
later, when the uncle died, the executor of the uncle’s estate
refused to pay the nephew, contending that the contract was
invalid. The executor argued that there was no consideration,
and therefore no contract, because the uncle had received
nothing, and the nephew had actually benefited by fulfilling
the uncle’s wishes.
Did the uncle and nephew have an enforceable contract?
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Adequacy of Consideration
Adequacy of consideration: The court usually
do not inquire into adequacy of consideration.
Thus, nominal consideration (e.g. $ 1 ) is usu.
sufficient.
Inadequacy of consideration: In some cases, a
party is permitted to escape from an contract if
the consideration received is so inadequate as
to “shock the conscience of the court”.
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Promissory Estoppel
An equitable doctrine that prevents the
withdrawal of a promise by a promisor if it
will adversely affect a promisee who has
adjusted his or her position in justifiable
reliance on the promise.
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Promissory Estoppel(continued)
1. The promisor made a promise.
2. The promisor should have reasonably
expected to induce the promisee to rely on
the promise.
3.The promisee actually relied on the promise
and engaged in an action or forbearance of a
right of a definite and a substantial nature.
4. injustice would be caused if the promise
were not enforced.
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