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Chapter 8: Consideration

Chapter 8: Consideration. Chapter 8: Consideration. By: Mike Francini , Tasia Gorski , Caitlin McNamara, & Sam Zangara. Vocabulary. Consideration- what a person demands and generally must receive in order to make his/her promise legally binding.

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Chapter 8: Consideration

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  1. Chapter 8: Consideration Chapter 8: Consideration By: Mike Francini, TasiaGorski, Caitlin McNamara, & Sam Zangara

  2. Vocabulary • Consideration- what a person demands and generally must receive in order to make his/her promise legally binding. • Gift- a transfer of ownership without receiving anything in return. • Donor- a person giving gift. • Donee- a person receiving the gift. • Forbearance- refraining from doing what one has a right to do

  3. More Vocabulary… • Promisor- a person promising an action or forbearance • Promisee-a person to whom the promise is made • Legal Value- a change in a party’s legal position as a result of the contract • Nominal Consideration-the token amount identified in a written contract when parties either cannot or do not wish to state the amount precisely

  4. Key Concepts • Requirements • Each party must promise, perform an act, or forbear. • Each promise, action, or forbearance must be in exchange for a return promise, action, or forbearance. • Must have legal value (worth something in eye’s of the law). • Circumstantial Consideration: certain forms of consideration only legally binding in the proper circumstances. • Ex: Illusory promises (anything that allows you to escape legal obligation, ie termination clauses), existing legal and/or contractual duty (public and private).

  5. False Consideration • Certain acts or promises are falsely identified as consideration but never can be. • Mutual Gifts • When something of value is given by one party to another without demanding anything in return. • When this occurs, that something of value is not consideration for anything later promised/provided. • Past Performance (act already performed) • Since contractual bargaining (for immediate or future performance by both parties) takes place in the present, past performance (also known as past consideration) cannot serve as consideration.

  6. Exceptions • Promises made to charitable organizations • Churches, schools, non-profit hospitals • Pledges or completed gifts • Promises covered by UCC • Firm offers • Modification • Promises to renew debt barred from collection by certain statutes. • Statute of limitations, debts discharged in bankruptcy. • Promises enforceable under doctrine of promissory estoppel (prevents promisors from stating in court that they didn’t receive consideration for their promises).

  7. Conditions for Promissory Estoppel • Promisor should reasonably forsee that promisee will rely on promise. • Promisee does act in reliance on promise. • Promisee would suffer substantial economic loss if promise not enforced. • Injustice can be avoided only by enforcement of promise.

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