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1、 2005 Byron Lilly De Anza CollegeChapter 2 Chapter 2 ConsiderationConsideration1 2005 Byron Lilly De Anza College“ “In contract law, In contract law, something of legal value something of legal value that has been bargained that has been bargained forfor讨价还价讨价还价讨价还价讨价还价 and given in and given in exc
2、hange by the parties.”exchange by the parties.”ConsiderationConsideration2 2005 Byron Lilly De Anza College“ “Promises are enforced Promises are enforced onlyonly where the parties where the parties have have exchangedexchanged something of value in the something of value in the eyes of the laweyes
3、of the law.” .”The Doctrine of The Doctrine of ConsiderationConsideration3 2005 Byron Lilly De Anza CollegeLegal Value QuestionLegal Value QuestionWhat has “legal value”?What has “legal value”?Or another way to ask it:Or another way to ask it:How can we tell if How can we tell if something has “valu
4、e in the something has “value in the eyes of the law”?eyes of the law”?4 2005 Byron Lilly De Anza CollegeLegal Value (Answer)Legal Value (Answer)The promisee The promisee doesdoes or or promises to promises to dodo something he had something he had no prior no prior legal duty to do, orlegal duty to
5、 do, orRefrainsRefrains克制，抑制克制，抑制 from from doing (or promises doing (or promises notnot to do)to do) something he had a something he had a legal rightlegal right to do.to do.5 2005 Byron Lilly De Anza CollegeWhen Mike is 16, his Mom says When Mike is 16, his Mom says “Mike, youve been such a good s
6、on, “Mike, youve been such a good son, Im going to give you a brand new Im going to give you a brand new Porsche 911 on your 18Porsche 911 on your 18thth birthday.” birthday.”His 18His 18thth birthday comes and she birthday comes and she doesnt buy him a Porsche.doesnt buy him a Porsche.He sues her
7、for the Porsche.He sues her for the Porsche.Will he win? Why or why not?Will he win? Why or why not?Consideration ExampleConsideration Example6 2005 Byron Lilly De Anza CollegeHamerHamer v. v. SidwaySidwayUncle promised to pay his nephew $5,000 if he Uncle promised to pay his nephew $5,000 if he ref
8、rained from smoking, drinking, swearing, and refrained from smoking, drinking, swearing, and playing cards or billiards for money until he was playing cards or billiards for money until he was 21.21.Nephew did so. Uncle said Ill pay you in a few Nephew did so. Uncle said Ill pay you in a few years.y
9、ears.The uncle died and his estate refused to pay.The uncle died and his estate refused to pay.Nephew transferred his rights to Mr. Nephew transferred his rights to Mr. HamerHamerMr. Mr. HamerHamer sued the estate. sued the estate.7 2005 Byron Lilly De Anza CollegeLegal Value RevisitedLegal Value Re
10、visitedAnother way to look at legal value Another way to look at legal value is it must be is it must be eithereither a: a:1. 1.Legal Legal benefitbenefit to the promisor, to the promisor, or or a a2. 2.Legal Legal detrimentdetriment削减削减 to the to the promisee.promisee.8 2005 Byron Lilly De Anza Col
11、legeExchanges That Fail to Meet Exchanges That Fail to Meet Consideration RequirementsConsideration RequirementsPast considerationPast considerationIllusoryIllusory promisespromisesPreexisting dutiesPreexisting duties9 2005 Byron Lilly De Anza CollegePast ConsiderationPast ConsiderationDespite its n
12、ame, is not consideration at all.Despite its name, is not consideration at all.Because it was not bargained for in Because it was not bargained for in exchange, exchange, past considerationpast consideration is not valid is not valid consideration.consideration. “Thanks for fixing my car stereo. I r
13、eally “Thanks for fixing my car stereo. I really appreciate it. Ill tell you what, Ill give appreciate it. Ill tell you what, Ill give you $100 when I get my next paycheck.”you $100 when I get my next paycheck.”10 2005 Byron Lilly De Anza CollegeKelsoeKelsoe v. International Wood v. International Wo
14、od ProductsProductsWhat did Carol What did Carol KelsoesKelsoes supervisor supervisor at International Wood promise her?at International Wood promise her?What did the trial court do?What did the trial court do?What did the Supreme Court of What did the Supreme Court of Alabama decide? Why?Alabama de
15、cide? Why?11 2005 Byron Lilly De Anza CollegeIllusory PromisesIllusory PromisesAn illusory promise is one that does not An illusory promise is one that does not bind the promisor to do anything.bind the promisor to do anything. “I promise to buy all the sugar I want.”“I promise to buy all the sugar
16、I want.” “I promise to buy your bike for $350 if I “I promise to buy your bike for $350 if I feel like it (after looking at it.)”feel like it (after looking at it.)”An illusory promise cannot serve as An illusory promise cannot serve as consideration.consideration.12 2005 Byron Lilly De Anza College
17、Culbertson v. BrodskyCulbertson v. BrodskyDid Mr. Brodsky give valid Did Mr. Brodsky give valid consideration that makes consideration that makes Culbertsons promise enforceable?Culbertsons promise enforceable?Show of handsShow of handsDecisionDecisionDiscussionDiscussion13 2005 Byron Lilly De Anza
18、CollegeRequirements ContractsRequirements ContractsFujitsu factory #1Fujitsu factory #2Hewlett-Packard FactorySemiconductorsSemiconductorsThe requirements of the buyer determine the quantity exchanged.14 2005 Byron Lilly De Anza CollegeA promise to supply A promise to supply all that another firm al
19、l that another firm requiresrequires for a specified period of time for a specified period of timeIs it supported by consideration?Is it supported by consideration?Many common law courts said the Many common law courts said the buyers promise was illusory, since they buyers promise was illusory, sin
20、ce they could decide to could decide to requirerequire zero units. zero units.But with the enactment of the UCC, the But with the enactment of the UCC, the law was changed to make requirements law was changed to make requirements contracts enforceable.contracts enforceable.Requirements ContractsRequ
21、irements Contracts15 2005 Byron Lilly De Anza CollegeOutput ContractsOutput ContractsFujitsu factory #1Hewlett-Packard FactorySemiconductorsThe manufacturing capacity of the seller determines the quantity exchanged per unit time.16 2005 Byron Lilly De Anza CollegeA promise to purchase the entire out
22、put of a A promise to purchase the entire output of a supplier for a specified period of timesupplier for a specified period of timeUnder the common law, the sellers promise Under the common law, the sellers promise was seen as illusory, or the key term of was seen as illusory, or the key term of qu
23、antity was seen as too indefinite.quantity was seen as too indefinite.The UCC enforces these contracts for two The UCC enforces these contracts for two reasons: 1) Because business people find reasons: 1) Because business people find them valuable, and 2) Because if the seller them valuable, and 2)
24、Because if the seller acts in good faith, his promise could bind.acts in good faith, his promise could bind.Output ContractsOutput Contracts17 2005 Byron Lilly De Anza CollegePreexisting Public DutiesPreexisting Public DutiesA promise to perform a preexisting duty, A promise to perform a preexisting
25、 duty, whether public or private, cannot constitute whether public or private, cannot constitute considerationconsideration because the promisor already had an because the promisor already had an obligation to do it.obligation to do it.Examples of preexisting public duties:Examples of preexisting pu
26、blic duties: The duty The duty notnot to commit assault, battery, to commit assault, battery, arson, defamationarson, defamation诽谤诽谤诽谤诽谤, etc., etc.18 2005 Byron Lilly De Anza CollegePreexisting Private Duties: The Preexisting Private Duties: The General RuleGeneral RuleUnder the common law, an agre
27、ement to Under the common law, an agreement to modifymodify an existing contractual obligation an existing contractual obligation requires some requires some new considerationnew consideration to be to be enforceable.enforceable.Otherwise, a person could be forced to Otherwise, a person could be for
28、ced to agree to a change in contract terms that is agree to a change in contract terms that is disadvantageous to themdisadvantageous to them because they have because they have made plans and commitments.made plans and commitments.19 2005 Byron Lilly De Anza CollegeAdditional WorkAdditional WorkIf,
29、 on the other hand, the builder If, on the other hand, the builder offers to finish the house on offers to finish the house on August 15August 15thth if you agree to pay if you agree to pay an additional $60,000, then you an additional $60,000, then you will be bound to pay the will be bound to pay
30、the additional $60,000!additional $60,000!20 2005 Byron Lilly De Anza CollegePreexisting Private Duties: Preexisting Private Duties: Exceptions to the General RuleExceptions to the General RuleUnforeseen circumstancesUnforeseen circumstancesContract rescissionContract rescission废除废除 and and substitu
31、tionsubstitution21 2005 Byron Lilly De Anza CollegeA contract substitution consists of a A contract substitution consists of a rescissionrescission and a new contract and a new contractA rescission must meet all the tests of a A rescission must meet all the tests of a contract: agreement, contract:
32、agreement, considerationconsideration, , legality, and capacity.legality, and capacity.Each party absolves the other party of Each party absolves the other party of their their remaining promisesremaining promises. .But what if one party has secretly But what if one party has secretly coerced the ot
33、her party?coerced the other party?Contract SubstitutionContract Substitution22 2005 Byron Lilly De Anza CollegeModification of contracts Modification of contracts under the UCCunder the UCCUnder the UCC, an agreement to modify a Under the UCC, an agreement to modify a contract for the sale of goods
34、contract for the sale of goods requires no requires no consideration to be enforceableconsideration to be enforceable! !The modification can even be ORAL even The modification can even be ORAL even though the original contract was though the original contract was WRITTEN!WRITTEN!23 2005 Byron Lilly
35、De Anza CollegeAdequacy of ConsiderationAdequacy of ConsiderationAdequacyAdequacy has a very different meaning than has a very different meaning than legally valuablelegally valuable under the law. under the law.Courts generally do Courts generally do notnot look at whether the look at whether the c
36、onsideration was consideration was adequateadequate to the promise to the promise given.given.They dont want to second guess the They dont want to second guess the bargaining decisions of the parties.bargaining decisions of the parties.24 2005 Byron Lilly De Anza CollegeThe courts define adequacy as
37、 “The courts define adequacy as “the degree to the degree to which the consideration is which the consideration is equal in valueequal in value to to the promise or item giventhe promise or item given.” .”Then they very clearly say that consideration Then they very clearly say that consideration nee
38、d not be adequateneed not be adequate as so defined as so defined if the two if the two parties have freely agreedparties have freely agreed to the exchange to the exchange and if the consideration was the inducement and if the consideration was the inducement 引诱引诱for the promise!for the promise!Ade
39、quacy of Consideration: The Adequacy of Consideration: The General RuleGeneral Rule25 2005 Byron Lilly De Anza CollegeExceptions to the General Rule on Exceptions to the General Rule on Adequacy of ConsiderationAdequacy of ConsiderationCourts may refuse to enforce Courts may refuse to enforce disgui
40、sed gift disguised gift promisespromises supported by supported by nominal nominal considerationconsideration. .Courts may use inadequacy of consideration Courts may use inadequacy of consideration as as evidenceevidence that there was fraud, duress that there was fraud, duress逼迫逼迫, undue influence,
41、 undue influence不正当压力不正当压力, lack of , lack of capacity, or unconscionability, and may look capacity, or unconscionability, and may look elsewhere in the facts for additional elsewhere in the facts for additional evidence.evidence.26 2005 Byron Lilly De Anza CollegePreexisting Duty and Agreements Pre
42、existing Duty and Agreements to Settle Debtsto Settle DebtsAn agreement by a creditor to accept less An agreement by a creditor to accept less than what was originally agreed upon may than what was originally agreed upon may be enforceable.be enforceable. Depends on the nature of the debt and Depend
43、s on the nature of the debt and whether the loan is past due or not.whether the loan is past due or not.Liquidated debtLiquidated debt已清算债务已清算债务 a debt that is a debt that is both due and certain.both due and certain.27 2005 Byron Lilly De Anza CollegeLiquidated DebtsLiquidated DebtsA creditors prom
44、ise to discharge a A creditors promise to discharge a liquidated debt for part payment at or liquidated debt for part payment at or after its due date is after its due date is unenforceableunenforceable for for lack of consideration.lack of consideration.Example: You and your friend FelicityExample:
45、 You and your friend Felicity28 2005 Byron Lilly De Anza CollegeUnliquidated DebtsUnliquidated DebtsUnliquidated debtUnliquidated debt: A debt for which there : A debt for which there exists a good faith dispute about exists a good faith dispute about 善意的争论善意的争论its existence or amount.its existence
46、or amount.The settlement of an unliquidated debt is called The settlement of an unliquidated debt is called an an accord and satisfactionaccord and satisfaction和解与清偿还和解与清偿还. .The consideration that supports an The consideration that supports an accord and accord and satisfactionsatisfaction is the r
47、endering of the is the rendering of the disputeddisputed debt into a debt into a certaincertain debt of known amount. debt of known amount.29 2005 Byron Lilly De Anza CollegeHyltonHylton v. v. MeztiztaMeztiztaDid Did CeCeCeCe HyltonHylton cash a check that said cash a check that said “final payment/
48、payment in full”?“final payment/payment in full”?Is that why the trial court says there Is that why the trial court says there was an accord and satisfaction?was an accord and satisfaction?30 2005 Byron Lilly De Anza CollegeHyltonHylton v. v. MeztiztaMeztiztaDid Did CeCeCeCe HyltonHylton write on th
49、e check write on the check “cashing this check does not constitute “cashing this check does not constitute my acceptance of this amount as my acceptance of this amount as payment in full?payment in full?Is that why the appeals court reversed Is that why the appeals court reversed the trial courts de
50、cision and found no the trial courts decision and found no accord and satisfaction?accord and satisfaction?31 2005 Byron Lilly De Anza CollegeHyltonHylton v. v. MeztiztaMeztiztaWhat error did the Alabama Supreme What error did the Alabama Supreme Court say the appeals court made?Court say the appeals court made?Read end-of-chapter practice test Read end-of-chapter practice test problems 1, 9, and 10.problems 1, 9, and 10.32
