Para 1 - Cengage



CHAPTER 8

Consideration

KEY POINTS IN THE CHAPTER

• Parties to a contract, as a general rule, are not bound unless consideration is given by both of them.

• Consideration is a promise by the offeror in return for either money or property or a sacrifice by the offeree. Sacrifice (called legal detriment) consists of doing an act (or promising to do an act) or refraining (or promising to refrain) from an act.

• A promise to make a gift is unenforceable because a transfer of property is made by one party without return consideration from the other party.

• The presence of consideration in an agreement is important, not the adequacy of that consideration, unless there is evidence of fraud, duress, or undue influence, or if the contract is grossly unfair (unconscionable).

• A moral promise (e.g., based on love and affection) is no more enforceable than any other promise unsupported by consideration.

• Past consideration is no consideration. The offeror, for example, is not bound by a promise to pay money for an act performed prior to the promise.

• Performing or promising to perform an existing obligation is not consideration unless the offeree does something in addition to what is required by the existing agreement.

• If a debtor and creditor disagree over the amount of a debt, they may compromise on an amount lower than the original debt. The consideration for the creditor’s agreement to accept the compromise amount is the debtor’s surrender of the right to go to court to determine the correct amount.

• Pledges to charitable, religious, educational, or scientific organizations are usually enforceable without consideration.

MULTIPLE-CHOICE QUESTIONS

Circle the letter of the best answer.

1. An agreement is unenforceable because of lack of consideration when

a. consideration is inadequate.

b. consideration is not in the form of money.

c. a person gives up his or her legal rights.

d. no promise is given or act completed for the offeror’s promise.

2. Lee owes Chaney $450. Both Lee and Chaney agree on the amount owed. The debt will be discharged if Chaney

a. accepts $300 and a set of books worth $125 from Lee.

b. accepts $375 in full payment.

c. accepts $400 in full payment.

d. orally agrees to cancel the debt.

3. After Buckman found Conrad’s wallet, Conrad orally promised to pay Buckman $15. Conrad is not legally bound to pay because the consideration for her promise was

a. present.

b. past.

c. future.

d. illegal.

4. Altier orally promised his daughter a silver bracelet as a gift. Altier is not legally bound because

a. a promise to make a gift is unenforceable.

b. he never intended to give the gift.

c. the consideration was inadequate.

d. the gift was too expensive.

5. When a debtor and a creditor disagree on the amount owed on a debt and agree to compromise, the debt is

a. not paid legally.

b. not binding legally.

c. settled legally.

d. partially settled.

6. A police officer is not entitled to a reward offered for the arrest of a criminal because

a. the officer has a legal duty to arrest criminals.

b. a reward is not legal consideration.

c. the reward is not an offer.

d. the reward is too high.

7. Your uncle gave you a TV. He could not claim lack of consideration and demand its return because

a. the promise of a gift is unenforceable.

b. the TV is future consideration.

c. consideration is unimportant once an agreement is executed.

d. the consideration was inadequate.

8. McIntyre was struck by a car driven by Gaines, who orally promised McIntyre $1,500 if she would not bring suit for injuries. McIntyre agreed. McIntyre

a. has made a void agreement.

b. is entitled only to actual expenses.

c. has no rights because she gave no consideration for Gaines’s promise.

d. has a right to $1,500 because she refrained from doing what she had a legal right to do.

9. Chang owed Scott $800 but was unable to pay Scott on the due date. Scott agreed to let Chang pay him the following month. This agreement

a. is not binding legally.

b. is binding legally.

c. is enforceable by Chang.

d. contains adequate consideration by Scott.

10. Allen repaired Hansen’s house while Hansen was sick. When she found out about the repairs, Hansen promised to pay Allen $50. Hansen’s promise is not enforceable in a court of law because it was

a. not adequate.

b. for past consideration.

c. for future consideration.

d. too indefinite.

11. Which of the following agreements is unenforceable because of lack of valid consideration?

a. Johnson agreed to donate $1,000 to the United Hospital Building Fund. On the basis of this and similar promises, construction was started.

b. Davis promised to give his neighbor’s son $50 if the boy would refrain from trespassing on his property. Because of Davis’s promise, the boy complied.

c. Boyd agreed to sell his used motorboat to Yates for $500. Yates offered the $500.

d. Philips promised his nephew $200 if the boy would refrain from smoking until he reached age twenty-one. Because of this promise, his nephew did not smoke.

CASE PROBLEMS

Read the case problems below. For each problem, answer yes or no, and then explain your answer in the space provided.

1. Adler was a medical research assistant at Mills General Hospital. Before his contract with the hospital expired, he was offered a position with another hospital at a higher salary. Mills General Hospital then offered Adler an increase in salary if he would complete his employment contract. Adler agreed to stay at Mills General Hospital. Is Adler entitled to the increase in salary offered by the hospital?

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2. Gurbowski, who was heavily in debt, offered to sell her motorcycle, which was valued at $1,200, for $800. Marconi accepted the offer. After thinking it over, Gurbowski decided not to deliver the motorcycle, claiming that $800 was not enough. Is Marconi entitled to delivery of the motorcycle?

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3. Visca, who was visiting a friend’s house, was injured by a ceiling tile that fell and hit her on the head. The friend gave her money for one visit to a doctor and for prescriptions ordered by the doctor. In return, Visca agreed not to sue for injuries. Later Visca complained of severe headaches and had to see a doctor several times and continue on medication. Visca then decided to sue for additional money. Can Visca collect?

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4. Springer promised to give his son a car on his twentieth birthday. Is Springer legally bound by this promise?

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5. Jenkins claimed he owed LaFond only $500; LaFond insisted the debt was $600. After much discussion, they agreed to settle for $550. Later, evidence proved that LaFond was correct. He sued to recover the $50. Will he win?

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SHORT-ANSWER QUESTIONS

Answer each of the following questions in the space provided.

1. Name four circumstances that lead the courts to question whether the consideration received by each party is fair.

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2. Why is the performance of a pre-existing contractual obligation by the offeree not consideration for an offeror’s promise? Give an example.

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3. What is the basis for enforcing a contract under the doctrine of promissory estoppel?

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4. Discuss the different theories for enforcing promises to charitable organizations.

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