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Bell Ringer

Bell Ringer. What are the 6 parts of a contract? What does it mean to consider something? Why do parties exchange goods or services in a contract? What do you think a court is most concerned with when enforcing a contract? Why?. Bell Ringer. What are accord and satisfaction?

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Bell Ringer

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  1. Bell Ringer • What are the 6 parts of a contract? • What does it mean to consider something? • Why do parties exchange goods or services in a contract? • What do you think a court is most concerned with when enforcing a contract? Why?

  2. Bell Ringer • What are accord and satisfaction? • If someone agrees to pay a specific amount to settle a debt, can they change the ammount later on?

  3. CH 8: Consideration

  4. Requirements of Consideration • Courts and the law don’t necessarily enforce free agreements • In a real agreement, each side is required to exchange something of value • The promise of the exchange is what binds the parties to one another. • Consideration  Binding element

  5. Legal Concept of Consideration • Consideration is the exchange of benefits and detriments by the parties in the agreement • Benefit: Something that a party was not previously entitled to • Detriment: any loss suffered • Forbearance: Not doing something that you have the legal right to do.

  6. Characteristics of Consideration • There are three important characteristics of consideration • Promises must involve the concept of a bargained- for exchange • Something of value must be involved • The benefits and detriments promised must be legal

  7. Something of Value… • The law has no specific value requirements on consideration • For consideration the parties must promise something of value • The value of items do not need to be market value, and items do not need to be of equal value, as long as they are exchanged freely and willingly • The courts are not overly concerned with the fairness of the exchange, just the legality of it

  8. Unconscionable • The only time a court will step in to an agreement when the are considered unconscionable • An agreement is considered unconscionable when there is a great inequality in the bargaining power of the two parties • An inequality would be a situation where one of the parties holds all or most of the power over the other party

  9. Types of Consideration • Something of value can take different forms: • Money: Money is often promised by one party in exchange for the other party’s performance or promise • Unless it is a price fixed item (government controlled) the value does not have to correspond to the promise • Property: before established currency property was used as consideration. This is commonly known as barter (Trading Cards)

  10. Promise not to Sue: A party, who has the right to sue, can waive their right to sue in exchange for something of value (example of forbearance). • When a person could sue, but waives their right to sue they are often required to sign a release. • This is common when doing certain activities: zip-lining, bungee jumping, white water rafting, college athletics, etc • Charitable Pledges: Since non-profit organizations depend on donations a “pledge” legally becomes a binding contract.

  11. Problems with Consideration • Problems will occasionally arise where value or amount of money comes into question • If the two parties can not agree on an amount the amount is said to be “in dispute” • This results in accord and satisfaction • Accord: when a creditor agrees to take an amount less than that of the billing • Satisfaction: the agreement and ultimate payment of the amount in the accord

  12. Undisputed Amounts • If both parties agree to a specific amount, then it is an undisputed amount • If an amount has been agreed upon the debtor is required to repay it regardless if • They later feel remorse over the amount that they agreed to pay • They later find out that a different individual made a different (and better) deal than them.

  13. Contracts that are enforceable without Consideration • In specific situations certain contracts can be considered enforceable without consideration • Promise under Seal: when a contract has a state issued seal promising the contract • Promises after discharge in Bankruptcy: after bankruptcy a person could still pay a debt • Debts barred by statute of limitation: is a debt was previously paid, a creditor can collect as long as the statue of limitation allows • Promissory Estopple: when the court allows for a promise to be enforceable without consideration

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