Consideration

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CHAPTER 11

• Consideration

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Consideration?

• Consideration something of legal value,
  bargained for and given in exchange for an act or
  promise

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Consideration?

• Legal Value- Monetary value not necessary
• Promise
• Perform an act where no prior legal duty to
• Refrain from performing an act where prior legal
  right to do (e.g. quit smoking)

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Consideration?

• Legal Value
• Question 8 at end of chapter
• Bergen v. Wood (Palimony Case)
• A woman is unsuccessful in her palimony claim
  because she did not cohabit with her friend
  during their 7-year relationship.
• Did Bergen actually bargain for financial support
  in exchange for being Woods companion?
• Social relationships, such as dating, have
  traditionally not been viewed as contractual and
  cannot be enforced through the law even if one
  party has promised to go out with the other, and
  the other spent a considerable amount on the
  basis of that promise.
• This decision is a variation on the usual
  palimony case for the court focuses on the
  failure to live together. Note that a contract
  for sex is illegal in most states. Some courts,
  taking cognizance of the changing mores and
  habits of many people, have recognized some
  palimony arrangements and divided property as if
  a couple were married instead of living together
  without being married. This is generally done
  under a quasi contract theory.

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Consideration?

• Legal Value
• Dela Zoppa v. Dela Zoppa, p. 193 (Palimony
  Case)
• A woman is successful in her palimony claim
  because she cohabited with her partner before
  their marriage and because their agreement
  encompassed several aspects of life, not just a
  sexual relationship. Note that key to this
  holding, was the fact that Joe and Celeste lived
  together, rather than merely dated. Social
  relationships, such as dating, have traditionally
  not been viewed as contractual and cannot be
  enforced through the law even if one party has
  promised to go out with the other, and the other
  spent a considerable amount for example buying
  tickets from a scalper on the basis of that
  promise. Note that a contract for sex is illegal
  in most states. However, you may also want to
  note that some courts, taking cognizance of the
  changing mores and habits of many people, have
  recognized some palimony arrangements and divided
  property as if a couple were married instead of
  living together without being married. This is
  generally done under a quasi contract theory.

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Consideration?

• Adequacy
• Courts generally not concerned with whether equal
  value so will allow bad bargains based on
  freedom of contract idea
• Exception
• Inequality on the face of the agreement
• Assume attempt to hide gift as a contract
• Nominal
• Generally not adequate unless truly bargained for
• Gross inadequacy may suggest fraud, undue
  influence, lack of capacity, etc.
• Gross inadequacy may result in finding contract
  unconscionable under the U.C.C.
• Courts may refuse to grant equitable remedies
  to those who seek to enforce a grossly inadequate
  bargain and instead grant some measure of damages

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Consideration?

• Adequacy
• McBee v. Nance, p. 195
• A deed to a house is adequate consideration for a
  promissory note executed for 15,000. Monetary
  value and adequacy are not synonymous, and
  promises have legal value so long as they were
  bargained for. Consideration need not be of equal
  value. Here, that McBee gave up something she
  had a legal right to was sufficient.

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Consideration?

• Adequacy
• Question 11 at end of chapter
• Earl v. St. Louis University
• An agreement by a terminated employee to forgo a
  service letter and to continue working until he
  found another job is adequate consideration for 8
  months severance pay, a bonus, and a good buy on
  a company car.
• Do you think there was adequate consideration
  here?
• Even with the promise to release the University
  from all claims would be adequate consideration
  even if Earl had no claims since he gave up
  something he had a legal right to in exchange for
  the Universitys promises.

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Consideration?

• Bargained for/Given consideration that promisor
  requested (i.e. his price)

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Consideration?

• Analysis
• Which promise is at issue?
• Who is the promisee of that promise?
• Has promisee given the requested consideration?

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Preexisting Duties

• Not Commit Crimes/Torts
• Promise by Public Official to Perform Official
  Duty
• Question 6 at end of chapter.
• No. While Slattery was conducting the
  interrogation he was an employee of the law
  enforcement authorities. While so employed he
  was under a duty to give his employer any and all
  information ascertained by him through the
  interrogation that might be of aid to them.
  Thus, his giving of the information about the
  killing does not supply the consideration
  necessary to support a contract. As a matter of
  public policy, to allow Slattery to recover would
  be tantamount to undermining the integrity and
  the efforts of those involved in law enforcement.
  Slattery v. Wells Fargo Armored Service Corp.,
  366 So.2d 157 (Ct. App. Fla. 1979).

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Preexisting Duties

• Not Commit Crimes/Torts
• Promise by Public Official to Perform Official
  Duty
• Question 10 at end of chapter
• No. Although the general rule is that a reward
  offered to the general public is payable to
  anyone performing the specified act, this is not
  the case for agents, employees, and public
  officials who are acting within the scope of
  their employment or official duties. Only the
  officer who was out of his jurisdiction and under
  no legal duty to make the arrest, is entitled to
  the reward. Denney v. Reppert, Ky. Ct. App., 432
  S.W.2d 647 (1968).

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Preexisting Duties

• Preexisting Contractual Duties
• No new consideration to support agreement to
  modify existing contract
• M. Gold Son Inc. v. A.J. Eckert Inc., P.197
• A subcontractor who substituted more expensive
  thermostats when the ones specified were not
  available cannot collect the difference in price.
• Should it matter that the additional work and
  equipment expenses were necessary because the
  designated materials were unavailable?
• Who should bear that risk?
• Note that Gold could have avoided the problem by
  consulting with the contractor or the school and
  getting permission for a substitute.

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Preexisting Duties

• Preexisting Contractual Duties
• No new consideration to support agreement to
  modify existing contract
• Question 5 at end of Chapter
• Yes. Diehl promised nothing more than it had a
  preexisting duty to do under Grosss original
  employment contract. Gross lost many benefits
  under the new contract but he received nothing in
  return for giving them up. There was not
  consideration for the 1982 contract. Gross v.
  Diehl Specialties Intl , 776 S.W. 2d 879 (Mo.
  Ct. App. 1989).
• Question 7 at end of Chapter
• No. If no benefit is received by the promisee
  except what he was entitled to under the original
  contract, and the other party to the contract
  parts with nothing except what he was already
  bound to do, there is no consideration for the
  additional promise. If, without legal
  justification, a party threatens to break a
  contract and the other party promises to pay more
  to get performance, the promise to pay more is
  without consideration. Moyer did nothing more
  than what he was under contract to do. He is not
  entitled to extra compensation for the extra work
  occasioned by the collapsing of the ditches.
  Crookham Vessels v. Larry Moyer Trucking, 699
  S.W. 2d 414 (Ct. App. Ark. 1985).
• Exception Unforeseeable Circumstances
• Exception UCC doe not require new consideration
  for agreed to modification

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Debt Discharge- Part Payment

• Debts
• Generally a promise to discharge a liquidated
  debt for part payment of the debt at or after its
  due date is unenforceable
• Liquidated due and certain (I.e. no dispute as
  to the existence or amount of the debt)
• If do something beyond duty (e.g. pay early)
  o.k.

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Debt Discharge- Part Payment

• Debts
• Generally a promise to discharge an unliquidated
  debt for payment of the debt is enforceable
• Consider using a settlement release or
  accord satisfaction agreement here (or
  Composition agreement where multiple creditors)
• Cash a paid in full usually discharge of debt

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Other Considerations

• Past Consideration No Consideration
• In re Lovekamp, p. 201
• A check for 60,000 written in 1981 to an ex-wife
  when she come back and lived with her ex-husband
  is not enforceable in 1999 for lack of
  consideration.
• Why was her staying with him was not good
  consideration.?
• The ex-wife had returned to live with her
  ex-husband before he wrote the check. No bargain
  seems to have been involved.
• Note that the ex-wife was suing the estate of her
  ex-husband because the check could not be cashed.
  Note the difficulty of trying to determine what
  actually was said 18 years earlier. Also note
  that the ex-wife could not have cashed the check
  earlier because there was not that much money
  without the sale of the real estate.

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Other Considerations

• Forbearance to Sue Generally valid
  consideration
• Promisee must in good faith believe has valid
  claim (Otherwise possibly extortion)
• Duncan v. Duncan, p. 202
• A promise not to change a will in exchange for a
  promise not to challenge the will is enforced
  against the estate of the decedent.
• Note that Duncans son Lawrence had not
  challenged the will before he died, and on his
  death his interest passed to Mildred.
• Note that while Mildred was entitled to an
  undivided 1/5 interest in the estate, the real
  property was not in the estate. The court held
  that the conveyance of the real property was
  valid because the agreement only prohibited
  changing or revoking the will, not conveying
  property that could be subject to the will.

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Other Considerations

• Mutuality of Obligation
• Generally, bilateral contract that lacks
  mutuality is unenforceable
• An illusory promise cannot serve as consideration

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Exceptions

• Promissory Estoppel
• Firm Offer
• Charitable Subscriptions
• Debts Barred by Bankruptcy
• Discharge/Statute of Limitations