ELEMENTS OF CONSIDERATION [4316]
• Consideration, which
must be given in order to make a contract legally binding, is legally sufficient and bargained-for value,
given by the promisor in return for the promisee performing or refraining from performing some
act which results in a detriment to the promisee
and/or a benefit to the promisor. “ A bargained for exchange in
which there is a legal determinant to the promisor or
legal benefit to the promise.”
• Legally Sufficient Value may be established by:
[4316.08]
(1) promising to do something that the promisor
has no prior legal duty to do (e.g., promising to pay
money for the promisor’s goods);
(2) performing an action
that the promisor is not
otherwise obligated to undertake; or
(3) refraining from exercising a
legal right which the promisor is otherwise entitled
to exercise.
• In a bargained-for exchange, the consideration given by the promisor must induce
the promisee to incur a legal detriment and/or
provide a legal benefit to the promisor, either or
both of which are sufficient to induce
the promisor to make the promise.
INSUFFICIENT CONSIDERATION [4316.07]
• Pre-Existing Legal Duty: Under
most circumstances, a promise to do (or refrain from doing) what one already
has a legal duty to do (or refrain from doing) does not constitute
legally sufficient consideration.
• A commonly-recognized
exception to the foregoing rule is the so-called “unforeseen
difficulties” doctrine, which permits an existing contract to be
modified to account for unforeseen difficulties that arise during the course of
performance.
• Past Consideration:
Promises made in return for acts or events that have
already taken place
are unenforceable for lack of sufficient consideration.
• Illusory Promises: If the
terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to dQ
(or refrain from doing) anything, the promise is unenforceable for lack
of sufficient consideration.
·
Moral obligation: while you may feel morally obligated, it
doesn’t mean there is a legal obligation….
RESCISSION AND NOVATION
• The unmaking of an
existing contract and making of a new contract between the same parties (e.g.,
to account for unforeseen difficulties) are known, respectively, as rescission and novation.
• Rescission:
Canceling an existing contract, and returning the parties to their pre-contract
states (i.e., stopping it before it goes further and going back to where you
were before the contract.)
• Novation:
Replacing an existing contract with a new, superseding contract between the
same partie (continuing)
ACCORD AND SATISFACTION 4326.06
• Accord and
Satisfaction: An agreement between an obligor (debtor) and obligee (creditor), by which the obligor agrees to pay the obligee some amount owed under the contract (generally less than the amount in
dispute) in exchange for a discharge of all obligations owed by the
obligor to the obligee.
• For
accord and satisfaction to occur, the amount of the obligor’s debt to the obligee must be in dispute, or unliquidated.
• Liquidated Debt: A debt whose amount has
been ascertained, fixed, agreed on, settled, or exactly determined.
• Unliquidated Debt: A
debt whose amount may be disagreed on by reasonable
persons.
RELEASES AN
• Release: An agreement whereby one party
forfeits its rights to pursue a legal claim against another party.
• Releases
are generally binding if they are:
(1) given in good faith,
(2) stated in writing, and
(3) accompanied by consideration.
• Covenant Not to Sue: An
agreement to substitute a contractual obligation for some other type of legal
action based on a valid claim.
PROMISSORY ESTOPPEL
• Promissory Estoppel: When a promisor
makes a clear and definite promise on which the promisee
justifiably relies, the promisor is bound by the
promise, even if it was insufficient to form the basis of a valid, legally
binding contract. This is equitable
relief.
• For the doctrine of promissory estoppel to be applied, the following elements must be established:
(1) the promise was
clear and definite;
(2) the promisee justifiably relied on the promise;
(3) the promisee’s reliance was substantial and of a definite
character; and
(4) enforcing the
promise will serve the best interests of justice.
• Other Promises Enforceable
Without Consideration:
Courts
may also enforce, despite the lack of consideration,
(1) promises to pay a debt, otherwise barred by limitations,
made after limitations have run, and, in rare cases,
(2) promises to charitable institutions.