Business Law Ch. 13 – Business Law Clarkson 13th edition – Flashcards
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what are the 2 Elements of Consideration
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1) something of legally sufficient value must be give in exchange for the promise 2) There must be a bargain-for exchange
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legally sufficient value
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consideration must be something of value in the eyes of the law
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what 3 things might legally sufficient value consist of?
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1) a promise to do something that one has no prior legal duty to do 2) the performance of an action that one is otherwise not obligated to undertake 3) the refraining from an action that one has a legal right to undertake aka forbearance
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bargained-for exchange
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the item of value must b given or promised by the offeror in return for the promisee's promise, performance or promise of performance
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adequacy of consideration
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involves how much consideration is given; concerns fairness of the bargain.
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general rule
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a court will not question the adequacy of consideration based solely on the comparative value of the things exchanges
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doctrine of freedom of contracts
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under what docrtine can courts leave it up to the parties to decide what something is worth and the parties are usually form to bargain they wish
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when might voluntary consent be lacking
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inadequate consideration can indicate that fraud, duress, or undue influence was involved it may also cause a judge to question whether the contract is so one sided that its unjustifiable
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preexisting duty
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the preexisting legal duty may be imposed by law or may arise out of a previous contract
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unforseen difficulties
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if during performance of a contract, extraordinary difficulties arise that were totally unseen at the time the contract was formed, the court may allow an exception to the rule they key is whether the court finds modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made
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rescission and new contract
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the law recognizes that 2 parties can mutually agree to rescind or cancel their contract at least to the extent that is still to be carried out
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rescission
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unmaking of a contract so as to return the parties to the positions they occupied before the contract was made
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past consideration
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promises made in return for actions or events that have already taken place are unenforceable. These promises lack consideration in that the element of bargain-for exchange is missing
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noncompete agreement
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the employee agrees not to compete with the employer for a certain period of time after the employment relationship ends
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illusory promises
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a promise is illusory when it fails to bind the promisor
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option-to-cancel clauses
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when the promisor has the option to cancel the contract before performance has begun
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requirements contracts
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a buyer and seller agree that the buyer will purchase from the seller all of the goods of a designated type that the buyer needs
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output contracts
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the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces or the seller's output
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Accord and satisfaction
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a debtor offers to pa and a creditor accepts a lesser amount than the creditor originally was claimed owed.
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liquidated debts
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one whose amount has been ascertained, fixed, agreed upon, settles or exactly determined
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unliquidated debts
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the amount of the debt that is not settled, fixed, agreed upon, ascentalled, or determined and reassemble persons may differ over amount owed
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release
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a contract in which one party forfeits the right to pursue a legal claim against the other party
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a release will be binding if it meets the following 3 requirements
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1) the agreement is made in good faith 2) the release contract is in a signed writing 3) the contract is accompanied by consideration
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covenant not to sue
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the parties substitute a contractual obligation for some other type of legal action based on a valid claim
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the 3 following promises may be enforced despite the lack of consideration
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1) promises that induce detrimental reliance, under the doctrine of promissory estoppel 2) promises to pay debts that are barred by statute of limitations 3) promises to make charitable contributions
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promissory estoppel
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a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery
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5 requirements to state a claim
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1) there must be a clear and definite promise 2) the promisor should have expected that the promisee would rely on the promise 3) the promisee reasonably relied on the promise by acting or refraining from some act 4) the promisee reliance was definite and resulted in substantial determinant 5) enforcement of the promise is necessary to avoid injustice
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application of the doctrine
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promissory estoppel was originally applied to situations involving gifts and donations to charities. later courts began to apply it to avoid the hardship of other situations
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promises to pay debts barred by that statute of limitations
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require a creditor to sue within a specified period to recover a debt. if the creditor fails to sue in time, recovery of the debt is barred by the statute of limitations
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charitable subscriptions
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a promise to make a donation to a religious educational or charitable institution
