Consideration in Contract Law
undefined
Consideration Basics
Richard Warner
What Do You Want To Learn?
The black letter law
How to recognize when that law applies in a
given fact pattern
How to use the law to create legal reasoning
that solves problems.
Is This Promise Enforceable?
To acknowledge your beginning the study of
contract law, I promise to pay you $1.
A promise is enforceable
only if
there is
consideration for it.
The Two-Way Exchange Requirement
There is consideration for a promise if
(
1
)
t
h
e
p
r
o
m
i
s
o
r
g
a
v
e
h
i
s
o
r
h
e
r
p
r
o
m
i
s
e
t
o
g
e
t
a
p
r
o
m
i
s
e
o
r
p
e
r
f
o
r
m
a
n
c
e
i
n
e
x
c
h
a
n
g
e
,
a
n
d
(2) the promisee gave that promise or
performance in return.
The Restatement On The Bargain Theory
1.
A contract is a legally enforceable promise (§1).
2. Exceptions aside, a promise is legally enforceable only
when there is consideration for it (§§ 17(1) - (2)).
3. The consideration may be another promise or a
performance (§3, §71).
4. A promise or performance is consideration when it is
"bargained for" (§71(1)).
5. A promise or performance is bargained for "if it is sought
by the promisor in exchange for his promise and is given by
the promisee in exchange for that promise" (§71(2)).
A Correct Statement?
The following is a correct statement of the bargain
theory of consideration: A promise or performance
is bargained for if it is sought by the promisor in
exchange for his promise, or is given by the
promisee in exchange for that promise.
(A)True.
(B) False.
A Car For Law School
When Alice’s parents found out she got into
Chicago-Kent, they said, “Alice, in
consideration of your achievement, we
promise to buy you a car.”
Is the promise legally enforceable?
(a) Yes
(b) No
(c) Not sure.
Dougherty v. Salt
Facts
Aunt Tillie promised in a promissory note to
pay her nephew Charley $3000 because he
was a good boy and was doing well in school.
She wanted to take care of him. Charley gave
nothing to Aunt Tillie in return for the promise.
What Did Aunt Tillie Do?
Did she give her promise to get a promise
or performance in exchange from
Charley?
a)
Yes
b)
No
What Did Charley Do?
Did he give a promise or
performance in return for Aunt Tillie’s
promise?
a)
Yes
b)
No
Executory Gift
Judge Cardozo says: “The transaction thus
revealed admits of one interpretation, and
one only. The note was the voluntary and
unenforceable promise of an executory
gift.
"Executory" means "undelivered."
In the United States (and common law
countries generally), the promise to make
a gift is legally enforceable
once the gift is
delivered but not before
.
When Is A Promise A Promise To Give A
Gift?
The answer: a promise to give something
for
which there is no consideration
.
Think of "gift" in this context as a technical term
just meaning promise unsupported by
consideration.
Don't get confused by ordinary, non-legal uses
of the word.
The Role of Intent
Aunt Tillie intended to legally obligate
herself to give $3000 to Charley in the
future.
Why is this not sufficient to make her
promise to give the money legally
enforceable?
The Funeral
Tillie’s favorite brother died recently, and Tillie very much
wants her nephew Charley to attend the funeral. She
promises to pay him $500 if he does. Charley promises to
attend and does so. However, when Tillie finds out that he
had planned to attend the funeral anyway before she
offered to pay $500, she refuses to pay.
Under the bargain theory, is Tillie’s promise enforceable?
a)
Yes
b)
No
Pleased With Results
Stuart, a buyer for Germania, a garment distributor,
negotiated a contract with Margaret Fashions to purchase a
specified quantity of garments for a price of $1,000,000.
When Perritt, president of Germania, learned of the
contract, he told Stuart that he was so pleased that he
would promot to general manager of Germania’s buying
department. Which of the following is true?
(A) There is no consideration for Perritt’s promise.
(B) There is consideration because Perritt conferred a
material benefit on Stuart.
(C) There is consideration because Perritt had a moral
obligation to perform as promised.
(D) None of the above.
Grandpa Augustus said to his
grandson Claudius . . .
“Claudius, you’re my favorite grandchild. You’ve never been a hard
partier. I may not be around much longer. I’d like for you to have
something to remember me by. Is there anything you might like to have
as a remembrance of me?” Claudius said that he was fond of his
grandfather’s collection of antiquarian law books. Grandpa Augustus
was so moved by Claudius devotion to the books that he said, “I will
change my will to leave you my antiquarian law books.” Claudius
replied. “I promise I’ll make you proud.” Is there consideration for
Augustus’ promise to change his will?
a)
No, Augustus suffered no detriment from his promise.
b)
No, because Claudius did not seek Augustus’s promise in exchange
for Augustus’s promise to will the books to Claudius.
c)
Yes, because Augustus was morally obligated to keep his promise
to Claudius.
Claudius was a hard-partying 23-year-old
who, in Augustus’s opinion, was too fond of drinking,
gambling, and competing in video game tournaments.
Grandpa Augustus promised to will his antiquarian law
books to Claudius if Claudius would promise to refrain
from drinking and legal gambling, and did not compete in
video game tournaments for the remainder of Augustus’s
life. Claudius promised to refrain from drinking and
gambling and promised not to compete in video game
tournaments for the rest of Augustus’s life.
a)
Yes
b)
No
Unusual Motivations
On eBay in 2004, Britney Spear’s discarded
bubblegum sold for $14,000.
Is the buyer’s promise to pay $14,000
consideration for the seller’s promise to sell
at $14,000?
(a) Yes
(b) No
Not Inquiring into the Adequacy of
Consideration
From
Dougherty
: “The inference of consideration
to be drawn from the form of the note has been
so overcome and rebutted as to leave no
question for a jury. This is not a case where
witnesses, summoned by the defendant and
friendly to the defendant's cause, supply the
testimony in disproof of value.
Strickland v.
Henry.”
Ordinarily
,
courts do not inquire into the
adequacy of consideration.
In plain English, they take the parties at their word.
Promising Not To Refuse
Aunt Tilly promises to give some money to her nephew
Charlie. Uncle Fred says that the promise will not be
legally binding without consideration from Charlie. He says
to have Charlie promise not to refuse to accept the money.
(a) Charlie has a legal right to refuse the gift, so his
promise counts as consideration for Aunt Tilly's promise.
(b) Charlie's promise is a sham, an attempt to circumvent
consideration doctrine. It is inadequate as consideration.
(c) The money will benefit Charlie, and a benefit to the
promisee is sufficient for consideration.
(d) None of the above.
But In
Dougherty . . .
“This is a case where the testimony in disproof
of value comes from the plaintiff's own witness,
speaking at the plaintiff's instance. The
transaction thus revealed admits of one
interpretation, and one only. The note was the
voluntary and unenforceable promise of an
executory gift.”
Schnell v. Nell
is another case in which the court
does not take the parties at their word.
Schnell v. Nell
Zacharias Schnell’s wife, Theresa, made a will
leaving $200 each to J. B. Nell, Wedelin Lorenz, and
Donata Lorenz. The will was invalid. Zacharias
promised to pay each of the three $200. He got
one cent in exchange for this promise. Then,
Zacharias had a change of heart and refused to
pay. He claimed there is no consideration for the
promise.
Possible Consideration
1. A promise, on the part of the plaintiffs, to pay
him one cent.
2. The love and affection he bore his deceased
wife, and the fact that she had done her part, as his
wife, in the acquisition of property. . . .
One Cent: The Argument
A promise is enforceable only there is consideration for
it.
There is consideration for a promise only if the promisor
gave the promise in order to get a promise for performance
in exchange. [First part of the rule, but all we need here.]
All Schnell really got in exchange for his promise was a
penny.
He could not have been seeking a penny in exchange for
$600.
Therefore, he did not give his promise in exchange for
the penny.
Therefore, there was no consideration for his promise.
What About Love and Affection?
The court says:
The past services of his wife, and the love and
affection he had borne her, are objectionable as legal
considerations for
Schnell's
promise, on two grounds:
1. They are past considerations.
2. The fact that
Schnell
loved his wife, and that she
had been industrious, constituted no consideration for
his promise to pay
J. B. Nell,
and the
Lorenzes,
a sum
of money. . . . Nor is the fact that
Schnell
now
venerates the memory of his deceased wife, a legal
consideration for a promise to pay any third person
money.
Explore the concept of consideration in contract law through examples and explanations. Learn what makes a promise legally enforceable, including the two-way exchange requirement and the bargain theory. Understand the importance of consideration in forming valid contracts and test your knowledge with practical scenarios.
Uploaded on Sep 18, 2024 | 0 Views
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author.If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
You are allowed to download the files provided on this website for personal or commercial use, subject to the condition that they are used lawfully. All files are the property of their respective owners.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author.
E N D
Presentation Transcript
Consideration Basics Richard Warner
What Do You Want To Learn? The black letter law How to recognize when that law applies in a given fact pattern How to use the law to create legal reasoning that solves problems.
Is This Promise Enforceable? To acknowledge your beginning the study of contract law, I promise to pay you $1. A promise is enforceable only if there is consideration for it.
The Two-Way Exchange Requirement There is consideration for a promise if (1) the promisor gave his or her promise to get a promise or performance in exchange, and (2) the promisee gave that promise or performance in return.
The Restatement On The Bargain Theory 1. A contract is a legally enforceable promise ( 1). 2. Exceptions aside, a promise is legally enforceable only when there is consideration for it ( 17(1) - (2)). 3. The consideration may be another promise or a performance ( 3, 71). 4. A promise or performance is consideration when it is "bargained for" ( 71(1)). 5. A promise or performance is bargained for "if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise" ( 71(2)).
A Correct Statement? The following is a correct statement of the bargain theory of consideration: A promise or performance is bargained for if it is sought by the promisor in exchange for his promise, or is given by the promisee in exchange for that promise. (A)True. (B) False.
A Car For Law School When Alice s parents found out she got into Chicago-Kent, they said, Alice, in consideration of your achievement, we promise to buy you a car. Is the promise legally enforceable? (a) Yes (b) No (c) Not sure.
Dougherty v. Salt Facts Aunt Tillie promised in a promissory note to pay her nephew Charley $3000 because he was a good boy and was doing well in school. She wanted to take care of him. Charley gave nothing to Aunt Tillie in return for the promise.
What Did Aunt Tillie Do? Did she give her promise to get a promise or performance in exchange from Charley? a) Yes b) No
What Did Charley Do? Did he give a promise or performance in return for Aunt Tillie s promise? a) Yes b)No
Executory Gift Judge Cardozo says: The transaction thus revealed admits of one interpretation, and one only. The note was the voluntary and unenforceable promise of an executory gift. "Executory" means "undelivered." In the United States (and common law countries generally), the promise to make a gift is legally enforceable once the gift is delivered but not before.
When Is A Promise A Promise To Give A Gift? The answer: a promise to give something for which there is no consideration. Think of "gift" in this context as a technical term just meaning promise unsupported by consideration. Don't get confused by ordinary, non-legal uses of the word.
The Role of Intent Aunt Tillie intended to legally obligate herself to give $3000 to Charley in the future. Why is this not sufficient to make her promise to give the money legally enforceable?
The Funeral Tillie s favorite brother died recently, and Tillie very much wants her nephew Charley to attend the funeral. She promises to pay him $500 if he does. Charley promises to attend and does so. However, when Tillie finds out that he had planned to attend the funeral anyway before she offered to pay $500, she refuses to pay. Under the bargain theory, is Tillie s promise enforceable? a)Yes b)No
Pleased With Results Stuart, a buyer for Germania, a garment distributor, negotiated a contract with Margaret Fashions to purchase a specified quantity of garments for a price of $1,000,000. When Perritt, president of Germania, learned of the contract, he told Stuart that he was so pleased that he would promot to general manager of Germania s buying department. Which of the following is true? (A) There is no consideration for Perritt s promise. (B) There is consideration because Perritt conferred a material benefit on Stuart. (C) There is consideration because Perritt had a moral obligation to perform as promised. (D) None of the above.
Grandpa Augustus said to his grandson Claudius . . . Claudius, you re my favorite grandchild. You ve never been a hard partier. I may not be around much longer. I d like for you to have something to remember me by. Is there anything you might like to have as a remembrance of me? Claudius said that he was fond of his grandfather s collection of antiquarian law books. Grandpa Augustus was so moved by Claudius devotion to the books that he said, I will change my will to leave you my antiquarian law books. Claudius replied. I promise I ll make you proud. Is there consideration for Augustus promise to change his will? a) No, Augustus suffered no detriment from his promise. b) No, because Claudius did not seek Augustus s promise in exchange for Augustus s promise to will the books to Claudius. c) Yes, because Augustus was morally obligated to keep his promise to Claudius.
Claudius was a hard-partying 23-year-old who, in Augustus s opinion, was too fond of drinking, gambling, and competing in video game tournaments. Grandpa Augustus promised to will his antiquarian law books to Claudius if Claudius would promise to refrain from drinking and legal gambling, and did not compete in video game tournaments for the remainder of Augustus s life. Claudius promised to refrain from drinking and gambling and promised not to compete in video game tournaments for the rest of Augustus s life. a) Yes b) No
Unusual Motivations On eBay in 2004, Britney Spear s discarded bubblegum sold for $14,000. Is the buyer s promise to pay $14,000 consideration for the seller s promise to sell at $14,000? (a) Yes (b) No
Not Inquiring into the Adequacy of Consideration From Dougherty: The inference of consideration to be drawn from the form of the note has been so overcome and rebutted as to leave no question for a jury. This is not a case where witnesses, summoned by the defendant and friendly to the defendant's cause, supply the testimony in disproof of value. Strickland v. Henry. Ordinarily, courts do not inquire into the adequacy of consideration. In plain English, they take the parties at their word.
Promising Not To Refuse Aunt Tilly promises to give some money to her nephew Charlie. Uncle Fred says that the promise will not be legally binding without consideration from Charlie. He says to have Charlie promise not to refuse to accept the money. (a) Charlie has a legal right to refuse the gift, so his promise counts as consideration for Aunt Tilly's promise. (b) Charlie's promise is a sham, an attempt to circumvent consideration doctrine. It is inadequate as consideration. (c) The money will benefit Charlie, and a benefit to the promisee is sufficient for consideration. (d) None of the above.
But In Dougherty . . . This is a case where the testimony in disproof of value comes from the plaintiff's own witness, speaking at the plaintiff's instance. The transaction thus revealed admits of one interpretation, and one only. The note was the voluntary and unenforceable promise of an executory gift. Schnell v. Nell is another case in which the court does not take the parties at their word.
Schnell v. Nell Zacharias Schnell s wife, Theresa, made a will leaving $200 each to J. B. Nell, Wedelin Lorenz, and Donata Lorenz. The will was invalid. Zacharias promised to pay each of the three $200. He got one cent in exchange for this promise. Then, Zacharias had a change of heart and refused to pay. He claimed there is no consideration for the promise.
Possible Consideration 1. A promise, on the part of the plaintiffs, to pay him one cent. 2. The love and affection he bore his deceased wife, and the fact that she had done her part, as his wife, in the acquisition of property. . . .
One Cent: The Argument A promise is enforceable only there is consideration for it. There is consideration for a promise only if the promisor gave the promise in order to get a promise for performance in exchange. [First part of the rule, but all we need here.] All Schnell really got in exchange for his promise was a penny. He could not have been seeking a penny in exchange for $600. Therefore, he did not give his promise in exchange for the penny. Therefore, there was no consideration for his promise.
What About Love and Affection? The court says: The past services of his wife, and the love and affection he had borne her, are objectionable as legal considerations for Schnell's promise, on two grounds: 1. They are past considerations. 2. The fact that Schnell loved his wife, and that she had been industrious, constituted no consideration for his promise to pay J. B. Nell, and the Lorenzes, a sum of money. . . . Nor is the fact that Schnell now venerates the memory of his deceased wife, a legal consideration for a promise to pay any third person money.
