Chapter 4 Business Law by qfq60948

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									  Business Law

Chapter 4: Consideration
(Bargained for Exchange)
              Introduction
• Consideration is often defined as “some
  right, interest, profit or benefit accruing
  to one party” or the loss, detriment or
  responsibility assumed by another party
  to the contract.
• Consideration is also a requirement of a
  legally valid contract.
     What is consideration?
• The basic reason for a contract; a
  person gives up something of value in
  exchange for receiving something of
  value through the contract.
      Why is consideration
           required?
• Consideration is required for the
  formation of a valid contract for the
  simple reason that it shows the parties’
  intent to be bound.
• A one-sided promise does not put the
  other party in any different footing than
  he or she had prior to the promise.
       Types of Consideration
•   A right
•   A profit
•   An interest
•   A physical object
•   A responsibility undertaken
•   A legal detriment
          Legal Detriment
• Consideration can also be satisfied
  through actions.
• When a person assumes a legal
  detriment, this can also satisfy the
  requirement of a consideration.
              Detriment
• The “bargained for exchange" in a
  contract, where the parties take on
  some responsibility that they are not
  legally obligated to undertake
     Proving Consideration
• When the consideration for a contract is
  under dispute, the parties involved must
  devote time and energy in proving (or
  disproving) the existence of
  consideration.
• Many times, the contract itself will recite
  the actual consideration.
• In many jurisdictions, there are legal
  presumptions that may also help to
  establish the existence of consideration.
• Written contracts, for example, are often
  presumed to have consideration,
  although the other party can rebut this
  presumption.
• As a general rule, there is no
  requirement that consideration for a
  contract be recited or expressed in the
  writing.
           Quid Pro Quo
• The phrase “quid pro quo” is a Latin
  term that is usually translated as
  “something for something.”
         Quid pro quo and
          Consideration
• Quid pro quo is a general term;
  consideration is a specific, legal term.
   Inadequate or Insufficient
        Consideration
• Courts often refrain from determining
  the value of the consideration.
• Parties are free to negotiate any
  contract terms that they choose, as long
  as the contract does not involve fraud,
  duress or undue influence over one
  party, or a contract that is void for public
  policy reasons.
• Inadequate consideration is not
  considered insufficient consideration
  and therefore will not automatically void
  a contract.
       Grossly Inadequate
         Consideration
• Grossly inadequate consideration is
  often a feature of unconscionable
  contracts.
• An unconscionable contract is one in
  which the terms or bargain is so
  obviously one-sided that the contract
  should be voided for public policy
  reasons.
     Contracts “Under Seal”
• Seals are rare in modern contracts.
• Under the common law, a contract
  under seal was presumed to have
  consideration and therefore no
  additional evidence or testimony about
  the consideration was required.
   Legal doctrines that affect
         consideration
• Courts have created several legal
  doctrines that affect the analysis of
  consideration in a contract.
       Promissory Estoppel
• The basic idea behind estoppel is that
  when person A makes a statement that
  person B relies upon, A is prevented
  from denying the truth of his statement.
        What is Estoppel?
• When a person is barred by prior
  actions from claiming a right or a duty
  against another person who relied, in
  good faith, on those actions.
   Promissory Estoppel and
       Consideration
• Under the theory of promissory
  estoppel, when Party B suffers some
  legal detriment as a result of the
  contract, Party A cannot claim that there
  was no consideration for the contract.
 The Elements of Promissory
         Estoppel
• 1) there was a clear and definite
  promise; 2) the promisor intended to
  induce reliance, and that reliance
  occurred; and 3) the only way to avoid
  injustice is to enforce the contract.
                Waiver
• When a person gives a waiver, he or
  she surrenders a right, requirement or
  obligation.
    Accord and Satisfaction
• When parties change the terms of their
  contracts, or negotiate entirely new
  contracts based partly on a previously
  existing contract.
     Contracts for an Illegal
           Purpose
• A contract that contemplates an illegal
  purpose, such as a criminal act, will not
  become enforceable simply because it
  is supported by consideration.

								
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