1、 2005 Byron Lilly De Anza College1Chapter 2 Consideration 2005 Byron Lilly De Anza College2“In contract law,something of legal value that has been bargained for讨价还价讨价还价 and given in exchange by the parties.”Consideration 2005 Byron Lilly De Anza College3“Promises are enforced only where the parties
2、have exchanged something of value in the eyes of the law.”The Doctrine of Consideration 2005 Byron Lilly De Anza College4Legal Value QuestionWhat has“legal value”?Or another way to ask it:How can we tell if something has“value in the eyes of the law”?2005 Byron Lilly De Anza College5Legal Value(Answ
3、er)The promisee does or promises to do something he had no prior legal duty to do,orRefrains克制，抑制 from doing(or promises not to do)something he had a legal right to do.2005 Byron Lilly De Anza College6When Mike is 16,his Mom says“Mike,youve been such a good son,Im going to give you a brand new Porsc
4、he 911 on your 18th birthday.”His 18th birthday comes and she doesnt buy him a Porsche.He sues her for the Porsche.Will he win?Why or why not?Consideration Example 2005 Byron Lilly De Anza College7Hamer v.SidwayUncle promised to pay his nephew$5,000 if he refrained from smoking,drinking,swearing,and
5、 playing cards or billiards for money until he was 21.Nephew did so.Uncle said Ill pay you in a few years.The uncle died and his estate refused to pay.Nephew transferred his rights to Mr.HamerMr.Hamer sued the estate.2005 Byron Lilly De Anza College8Legal Value RevisitedAnother way to look at legal
6、value is it must be either a:1.Legal benefit to the promisor,or a2.Legal detriment削减 to the promisee.2005 Byron Lilly De Anza College9Exchanges That Fail to Meet Consideration RequirementsPast considerationIllusory promisesPreexisting duties 2005 Byron Lilly De Anza College10Past ConsiderationDespit
7、e its name,is not consideration at all.Because it was not bargained for in exchange,past consideration is not valid consideration.“Thanks for fixing my car stereo.I really appreciate it.Ill tell you what,Ill give you$100 when I get my next paycheck.”2005 Byron Lilly De Anza College11Kelsoe v.Interna
8、tional Wood ProductsWhat did Carol Kelsoes supervisor at International Wood promise her?What did the trial court do?What did the Supreme Court of Alabama decide?Why?2005 Byron Lilly De Anza College12Illusory PromisesAn illusory promise is one that does not bind the promisor to do anything.“I promise
9、 to buy all the sugar I want.”“I promise to buy your bike for$350 if I feel like it(after looking at it.)”An illusory promise cannot serve as consideration.2005 Byron Lilly De Anza College13Culbertson v.BrodskyDid Mr.Brodsky give valid consideration that makes Culbertsons promise enforceable?Show of
10、 handsDecisionDiscussion 2005 Byron Lilly De Anza College14Requirements ContractsFujitsu factory#1Fujitsu factory#2Hewlett-Packard FactorySemiconductorsSemiconductorsThe requirements of the buyer determine the quantity exchanged.2005 Byron Lilly De Anza College15A promise to supply all that another
11、firm requires for a specified period of timeIs it supported by consideration?Many common law courts said the buyers promise was illusory,since they could decide to require zero units.But with the enactment of the UCC,the law was changed to make requirements contracts enforceable.Requirements Contrac
12、ts 2005 Byron Lilly De Anza College16Output ContractsFujitsu factory#1Hewlett-Packard FactorySemiconductorsThe manufacturing capacity of the seller determines the quantity exchanged per unit time.2005 Byron Lilly De Anza College17A promise to purchase the entire output of a supplier for a specified
13、period of timeUnder the common law,the sellers promise was seen as illusory,or the key term of quantity was seen as too indefinite.The UCC enforces these contracts for two reasons:1)Because business people find them valuable,and 2)Because if the seller acts in good faith,his promise could bind.Outpu
14、t Contracts 2005 Byron Lilly De Anza College18Preexisting Public DutiesA promise to perform a preexisting duty,whether public or private,cannot constitute consideration because the promisor already had an obligation to do it.Examples of preexisting public duties:The duty not to commit assault,batter
15、y,arson,defamation诽谤诽谤,etc.2005 Byron Lilly De Anza College19Preexisting Private Duties:The General RuleUnder the common law,an agreement to modify an existing contractual obligation requires some new consideration to be enforceable.Otherwise,a person could be forced to agree to a change in contract
16、 terms that is disadvantageous to them because they have made plans and commitments.2005 Byron Lilly De Anza College20Additional WorkIf,on the other hand,the builder offers to finish the house on August 15th if you agree to pay an additional$60,000,then you will be bound to pay the additional$60,000
17、!2005 Byron Lilly De Anza College21Preexisting Private Duties:Exceptions to the General RuleUnforeseen circumstancesContract rescission废除 and substitution 2005 Byron Lilly De Anza College22A contract substitution consists of a rescission and a new contractA rescission must meet all the tests of a co
18、ntract:agreement,consideration,legality,and capacity.Each party absolves the other party of their remaining promises.But what if one party has secretly coerced the other party?Contract Substitution 2005 Byron Lilly De Anza College23Modification of contracts under the UCCUnder the UCC,an agreement to
19、 modify a contract for the sale of goods requires no consideration to be enforceable!The modification can even be ORAL even though the original contract was WRITTEN!2005 Byron Lilly De Anza College24Adequacy of ConsiderationAdequacy has a very different meaning than legally valuable under the law.Co
20、urts generally do not look at whether the consideration was adequate to the promise given.They dont want to second guess the bargaining decisions of the parties.2005 Byron Lilly De Anza College25The courts define adequacy as“the degree to which the consideration is equal in value to the promise or i
21、tem given.”Then they very clearly say that consideration need not be adequate as so defined if the two parties have freely agreed to the exchange and if the consideration was the inducement 引诱for the promise!Adequacy of Consideration:The General Rule 2005 Byron Lilly De Anza College26Exceptions to t
22、he General Rule on Adequacy of ConsiderationCourts may refuse to enforce disguised gift promises supported by nominal consideration.Courts may use inadequacy of consideration as evidence that there was fraud,duress逼迫,undue influence不正当压力,lack of capacity,or unconscionability,and may look elsewhere i
23、n the facts for additional evidence.2005 Byron Lilly De Anza College27Preexisting Duty and Agreements to Settle DebtsAn agreement by a creditor to accept less than what was originally agreed upon may be enforceable.Depends on the nature of the debt and whether the loan is past due or not.Liquidated
24、debt已清算债务 a debt that is both due and certain.2005 Byron Lilly De Anza College28Liquidated DebtsA creditors promise to discharge a liquidated debt for part payment at or after its due date is unenforceable for lack of consideration.Example:You and your friend Felicity 2005 Byron Lilly De Anza Colleg
25、e29Unliquidated DebtsUnliquidated debt:A debt for which there exists a good faith dispute about 善意的争论its existence or amount.The settlement of an unliquidated debt is called an accord and satisfaction和解与清偿还.The consideration that supports an accord and satisfaction is the rendering of the disputed d
26、ebt into a certain debt of known amount.2005 Byron Lilly De Anza College30Hylton v.MeztiztaDid CeCe Hylton cash a check that said“final payment/payment in full”?Is that why the trial court says there was an accord and satisfaction?2005 Byron Lilly De Anza College31Hylton v.MeztiztaDid CeCe Hylton wr
27、ite on the check“cashing this check does not constitute my acceptance of this amount as payment in full?Is that why the appeals court reversed the trial courts decision and found no accord and satisfaction?2005 Byron Lilly De Anza College32Hylton v.MeztiztaWhat error did the Alabama Supreme Court say the appeals court made?Read end-of-chapter practice test problems 1,9,and 10.
