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Understanding Consideration in Contracts: Types, Exceptions, and Applications

Explore the various types of consideration in contracts, including questionable consideration situations and when consideration is not required. Learn about illusory promises, types of duties, false consideration, and exceptions to the requirement of consideration.

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Understanding Consideration in Contracts: Types, Exceptions, and Applications

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  1. CHAPTER 8Consideration 8-1 Types of Consideration 8-2 Questionable Consideration 8-3 When Consideration Is Not Required

  2. 8-1 Types of Consideration GOALS • Identify the three requirements of consideration • Recognize the various forms of consideration Chapter 8

  3. FOCUS • List five promises you have recently made. • Beside each promise list what you received in return. • Review the list and place a check by the promise(s) that you believe would be legally binding on you if the promisee pursued the issue in court. Chapter 8

  4. CONSIDERATION • Act, forbearance, or promise • Trading • Legal value • Adequacy of consideration • Nominal consideration Chapter 8

  5. List the three requirements of consideration. Chapter 8

  6. 8-2 Questionable Consideration GOALS • Describe situations in which consideration is present only under limited circumstances • Recognize when what appears to be binding consideration is not Chapter 8

  7. FOCUS Scenario • Ms. Miller tells her students: “You have worked hard, and if you continue to perform at this high level, I'll pay for a pizza party at the end of the year—if I think it is warranted.” The students continue to work hard, and class grades are high, but no party is given. Question • Can the students enforce the promise? Chapter 8

  8. CIRCUMSTANTIAL CONSIDERATION • Illusory promises • Termination clauses • Output and requirements contracts Chapter 8

  9. CIRCUMSTANTIAL CONSIDERATION (continued) • Existing duty • Existing public duty • Existing private duty • Settlement of liquidated debts • Settlement of unliquidated debts • Release • Composition of creditors Chapter 8

  10. Why is consideration not binding in illusory contracts? Chapter 8

  11. FALSE CONSIDERATION • Mutual gifts • Past performance Chapter 8

  12. What distinguishes a gift from a valid contract? Chapter 8

  13. 8-3 When Consideration Is Not Required GOALS • Distinguish situations in which consideration is not needed • Recognize when the doctrine of promissory estoppel can be applied Chapter 8

  14. FOCUS • Why are exceptions to the doctrine of consideration needed? Chapter 8

  15. EXCEPTIONS TO THE REQUIREMENT OF CONSIDERATION • Promises to charitable organizations • Promises covered by the UCC • Firm offers • Modifications • Promises barred from collection by statute • Statute of limitations • Debts discharged in bankruptcy • Promissory estoppel Chapter 8

  16. Name four exceptions to the requirement of consideration. Chapter 8

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