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Fall 2018 (84432) 3:30 PM Consideration

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Josiah Showalter

on 5 November 2018

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Transcript of Fall 2018 (84432) 3:30 PM Consideration

Moral Consideration:
Even in the absence of consideration, a court may enforce a promise, if this will prevent a great injustice to the relying party.
Some courts will require donors to make good on their pledges to charities, even though the charitable organization has promised nothing in return. This is called “moral consideration.”
Promissory Estoppel
A
covenant not to compete
is an agreement in which an employee promises not to work for a competitor for some time after leaving the company. It used to be that these covenants were rare and reserved for top officers, but they have now become commonplace throughout many organizations.
Employment Agreements
Common Law ruling:

If a debtor writes “Full Settlement” on a check, and the creditor cashes it, the payment is in full whether or not it was the right amount.
Accord & Satisfaction by Check
Settlement of Debts --
Unliquidated Debt
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.
Settlement of Debts --
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.
Liquidated Debt
3. Exception:
Unforeseen Circumstances.
When unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is generally valid consideration.
Preexisting Duty (continued)
A promise to do something the promisor is already obligated to do is not consideration.
Preexisting Duty
Illusory Promise
If one party’s promise is
conditional
, the other party is not bound to the agreement.
Mutuality of Obligations
Courts seldom inquire into the adequacy of consideration.

BUT....

The question of adequacy is for the parties to answer as they bargain. It’s not for the courts to second guess later, when a lawsuit ensues.
Adequacy of Consideration
“Bargaining is obligating yourself in order to induce the other side to agree.”
another promise or action.
A Bargain and an Exchange
Consideration means that there must be bargaining that leads to an exchange between the parties.
A Bargain and an Exchange
CONSIDERATION
A promisor is the person who makes the promise, and promisee, the person to whom the promise is made.
1. Exception:
Additional work. When a promisor agrees to do something above and beyond what he is obligated to do, the promise is generally valid consideration.
2. Exception:
Modification. If both parties agree to a modification, the best solution is to
rescind
the contract and draft a new one.
CONTRACT
Agreement
Offer and Acceptance
Consideration
Consideration
can be anything
that someone might want to bargain for.
Jame's Shoe Store agrees that he will pay $20,000 for 100 pairs of boots from Brenna's Boot Company. Brenna agrees.
They both get something of value. James gets the boots. Brenna gets the money. The two have
bargained
for this deal, so there is a valid contract.
Is it a contract?

What type of Contract?
Ridge
is in a great mood for class today. Before class, he goes to Judge Showalter (his favorite professor and Business Law is his favorite class) promises to buy him a Starbucks after class.
Judge Showalter is delighted and agrees to the coffee--cinnamon dulce latte with extra whipped cream.
Judge Showalter picks on him during class, and
Ridge
changes his mind about the coffee.
Is this a contract?
Ridge
's promise created a one-way street; Judge Showalter stood to receive all the benefit of the agreement, while
Ridge
got nothing. No consideration.
?
A reward is an act. Is it a contract?
What type of Contract?
Unilateral
. It is an offer to pay the reward in exchange for performance.
On the eve of the Virginia Tech game against Ohio State, Eric was walking through the Tech campus. He spotted a dead body on the ground.
Eric reported the body to police, who identified the body as a 21 year old co-ed, Byrum Robes. Robes had been missing and his family had offered a $25,000 reward for information leading to his whereabouts.
Eric, when he found the body, did not know of the reward money.
Does the Robes family have to pay the reward?
What type of Contract?
Unilateral. Robe's family offered to pay the reward in exchange for performance information about Byrum's whereabouts. Eric's information led to the discovery of Byrum's body.
HOWEVER, Eric's phone call to the police was not induced by the reward offer.
Eric may have been a good citizen, but he was not tendering performance in response to an on offer to form a unilateral contract.
NO CONSIDERATION. NO CONTRACT.
An illusory promise is not consideration. Neither party can enforce.
UCC §3-311
Affirms the Common Law ruling, but adds
two exceptions:
1.
Organizations may notify debtors that any offers to settle debt for less than the whole amount must be directed to a certain person.
2.
The creditor can refund the paid amount within 90 days and then demand the full amount.
Paid in full
Remember the Elements:
1. The defendant made a promise knowing that the plaintiff would likely rely on it;
2. The plaintiff did rely on the promise; and
3. The only way to avoid injustice is to enforce the contract.
There is a lack of consideration.
Plaintiffs alleging promissory estoppel very frequently, but seldom succeed.
Plaintiffs thought they were insured when their house burned down?

The insurance agents assured the homeowners that they were covered.
There was NO CONTRACT!
But their insurance had lapsed.
What is the consideration?
V.
Unliquidated Debt
An example is a loan. If you borrow money, you owe a certain amount.
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 my debt was liquidated to , his agreement to accept is NOT binding.
I have not given consideration to support the creditor's promise to accept a reduced payment.
I accepted an offer to teach business law. I now demand an additional $3,000 to finish the semester. Va. Tech agrees (because...).
It's now the end of the semester and Va. Tech refuses to pay. I sue. Who wins?
Va. Tech offers me an additional $3,000 if I would hold two seminars about.....

Va. Tech refuses to pay. Who wins?
I contract to have Kaitlin's DUMPS to remove soil and debris.
Who wins?
Kaitlin's
trucks begin work, but after crossing the work site, they sink into slime.
Kaitlin
d
emands an additional 20% to finish the work.
No one knew that the subsurface water.
I refuse to pay
Kaitlin
the additional amount.
Kaintlinn wins.
What about the UCC?
Issue of Consideration of OUTPUT and REQUIREMENT contracts.
UCC 2-306 expressly allows for
output
and
requirement
contracts
in the sale of goods
. A term that measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as my occur in
GOOD FAITH
.
DG
agrees to sale all of his chocolate to M & M's They propose an output contract, in which
DG
agrees to sale 100% of the chocolate they need, for the next year. They offer to pay him today's going rate per pound of chocolate.
What type of contract?
Requirements or Output contracts not allowed in Common Law because of the uncertainty of the consideration.
GOODS
Legality
peppercorn rule
Courts may look at some of the other elements.
I sale my car to
Perri for $100.
To cancel.
Ucc has changed common law.
Under Common Law modifications are not enforceable.
UCC Section 2-209 makes it easier for merchants to modify agreements for the sale of goods.
An agreement modifying a contract within this Article needs no consideration to be binding.
However, a
signed agreement which excludes

modification
or rescission except by a signed writing cannot be otherwise modified or rescinded.
Remember,
Blake
, the photographer, who was offered the job with playboy?
UNLESS....
a promise to do something or a promise to refrain from doing something in response to an offer.
The thing bargained for can be:
a benefit to the promisor or a detriment to the promisee.
Neema shows up to Julia's house with a cake he made.
Julia takes the cake.
Neema says, "That will be $50.00."
Is this a contract?
Bilateral
Unilateral
Not a contract. Lack of consideration
Not a contract.
Lacks consideration
Not a contract.
Lacks consideration.
Consideration
is what a person will receive in return for performing a contract obligation.
Not a contract.
Lack of

consideration
4. Exception
HAMER V. SIDWAY
What type of agreement is an employment contract?
THE COMMON LAW HAS EVOLVED
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