In contract law, the term consideration refers to the serious thought that underlies a party’s intent to enter into a contract.
If a promise is made, it can be enforced.
To be legally sufficient, consideration must be evidenced by something tangible
A determination of whether consideration exists depends on a comparison of the values of the things exchanged.
The element of bargained-for exchange distinguishes contracts from gifts.
A promise to do what one already has a legal duty to do constitutes legally sufficient consideration
Essentially, adequacy of consideration concerns the fairness of the bargain
Risks ordinarily assumed in business constitute consideration for the modification of a contract
A court is not likely to allow an exception to the preexisting duty rule even if extraordinary difficulties arise that were totally unforeseen at the time a contract was formed
Rescission is the substitution of one party to a contract for a third party, who agrees to assume the contractual duties.
An obligation is enforceable only if it is made in return for actions or events that have already taken place.
Even if the terms of a contract express such certainty of performance that the promisor has not definitely promised to do anything, the promise binds the promisor.
For accord and satisfaction to occur, the amount of the debt cannot be in dispute.
A release bars any further recovery beyond the terms stated in the release.
In many states, a release contract must be in a signed writing.
There can be no satisfaction unless there is first an accord.
A covenant not to sue does not always bar further recovery.
Under the doctrine of promissory estoppel, a promise will not be enforced unless it is supported by consideration.
For the doctrine of promissory estoppel to be applied, there must be a clear and definite promise.
Statutes of limitations in all states require a debtor to pay a debt within a specified period of time.
Chicken & Egg Farms promises to pay Dex $500 to install a sump pump in its warehouse. Dex com¬pletes the installation. The act of installing the pump
a. imposes a moral obligation on Chicken & Egg to pay Dex.
b. imposes no obligation on Chicken & Egg unless it is satisfied with the job.
c. is not sufficient consideration because it is not goods or money.
d. is the consideration that creates Chicken & Egg’s obligation to pay Dex.
Henry promises not to open his Hank’s Lunchbox Café before 10:00 A.M. if Isis, who owns Isis’s Danish & Donuts next door, promises to close by 4:00 P.M. Henry’s consideration is
a. the destruction of a legal relationship.
b. the creation of a legal relationship.
c. a forbearance.
d. an exchange of money.
Esmeralda promises to pay Fiorello $400 because “he does not have as much money as other people.” Esmeralda’s promise is not enforceable because
a. society does not want gifts cheapened by making them legally enforceable.
b. the redistribution of wealth on a one-to-one basis is not a valid social goal.
c. Esmeralda could have paid more.
d. Fiorello has not given consideration in return.
Quentin questions whether there is consideration for his contract with Rainey to exchange his performance with the Symphonic Saxophone Sextet for her payment of a certain amount. To constitute consideration, there must be
a. a payment.
b. a performance.
c. a bargained-for exchange.
d. serious thought underlying each party’s intent to contract.
Valley Paragliders Association files a suit against Wing Designers, Inc., claiming that the consideration for their contract is inadequate. The court will most likely not examine the adequacy of the considera¬tion if
a. there is a large disparity in the amount of consideration exchanged.
b. the consideration involves the performance of services.
c. something of value passed between the parties.
d. the consideration is worth less than $100.
Mobile Minutes Company offers Nate an unlimited number of monthly phone minutes for $4.50 per month. Nate ac¬cepts. If a dispute arises, a court would likely
a. enforce the deal after questioning the adequacy of the consideration.
b. not question the adequacy of the consideration.
c. rewrite the deal after questioning the adequacy of the consideration.
d. set aside the deal after questioning the adequacy of the consideration.
Genovese Contracting, Inc., agrees to build a warehouse for Hawthorne Wholesale Distributors. When Genovese runs into the types of difficulties that contrac¬tors ordinarily confront, Hawthorne agrees to pay extra compensation to over¬come them. Regarding the agreement to pay more, a court would likely
a. enforce it.
b. rescind it.
c. order the parties to renegotiate it.
d. not enforce it.
Todos, Ltd., agrees to market the products of United Sales, Inc., in Venezuela. When the gov¬ern¬ment is unexpectedly overthrown in a revolution, Todos can continue to fulfill its contract but only for a much higher price. United agrees to pay but later files a suit to recover the difference. The court will most likely rule that
a. a change in government is a risk ordinarily assumed in business.
b. an unforeseen difficulty supported the contract modification here.
c. Todos engaged in extortion or the so-called holdup game.
d. Todos had a preexisting duty to supply the goods at the initial price.
Quik Downtown Delivery contracts with Rico’s Tacos to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
B9. Refer to Fact Pattern 13-B1. The next day, Quik again offers to deliver Rico’s products. Rico’s is willing to deal, but for a new price. Quik and Rico’s
a. may agree to a new contract, but it cannot include a new price.
b. may agree to a new contract that includes the new price.
c. must perform their original contract.
d. must perform the part of their original contract that is executory.
Refer to Fact Pattern 13-B1. Quik and Rico’s
a. may rescind their entire contract.
b. may rescind their contract to the extent that it is executory.
c. must perform their entire contract.
d. must perform the part of their contract that is executory.
Industrial Engineering, Inc., promises to give stock options to Jasmine for processes she has already designed for the firm. This promise is enforceable
a. because it is a new contract.
b. because it is an illusory promise.
c. because it is supported by past consideration.
d. under no circumstances.
Dave’s uncle tells Dave that if “he feels that Dave deserves it,” he will give Dave $10,000 when Dave graduates from college. Dave’s uncle’s promise is
b. a contract.
c. a forbearance.
d. a preexisting duty.
Produce Packaging Company promises its employees a 10 percent raise at the end of the year if productivity has increased and management feels the raise is warranted. Produce Packaging must
a. do nothing.
b. give the employees a 10 percent raise only at the end of the year.
c. give the employees a 10 percent raise only if produc¬tivity increases.
d. give the employees a 10 percent raise under any circumstances.
Apples & Pears Orchards contracts to hire Brigit for one year to tend the fruit in its commercial orchards but reserves the right to cancel the employment on thirty days’ notice at any time after Brigit begins work. This promise is
Qiana writes a check to Payday Loans, Inc., in an amount that represents half of her debt to the lender. On the back of the check, Qiana includes the words “payment in full.” Payday agrees to accept the lesser sum and cashes the check. This dis¬charges the entire debt
a. if the debt is liquidated.
b. if the debt is past due.
c. if the debt is unliquidated.
d. under no circumstances.
While sailboarding, Jolene is injured when Kilroy carelessly crosses her path. Kilroy’s insurance company offers Jolene $50,000 to release Kilroy from liability, and she accepts. Later, she learns that her injuries are more serious than she realized. The release is
b. unenforceable because Jolene’s injuries are unforeseeably difficult.
c. unenforceable because Kilroy has a preexisting duty to pay.
d. unenforceable because the release is an illusory promise.
Gustaf and Hilltop Country Club disagree as to the exact amount Hilltop owes Gustaf for his landscaping work. They form a new agreement that, on fulfillment, will discharge the prior obli¬gation. This is
a. a covenant not to sue.
b. an accord and satisfaction.
c. a release.
d. promissory estoppel.
After an accident with a vehicle licensed to Guardian Security Company, Heidi signs a covenant not to sue Guardian Security for damages in a tort action if it pays for the damage to her car. This covenant is
a. a bar to recovery only if Guardian Security pays.
b. an illusory contract.
c. barred by the preexisting duty rule.
d. barred by the doctrine of promissory estoppel.
Rudy files a suit against Shakes & Shingles, Roofing Contractor, Inc., under the doctrine of prom¬issory estoppel. Rudy must show that
a. he justifiably refused to fulfill a promise to Shakes & Shingles.
b. he justifiably relied on Shakes & Shingles’ promise to his detriment.
c. Shakes & Shingles justifiably refused to fulfill a promise to him.
d. Shakes & Shingles justifiably relied on his promise to its detriment.
Readymade Credit Company loans Start-Up Enterprise, Inc., $150,000 to invest in new equipment. If Start-Up fails to pay the loan within a specified period, Readymade’s recovery of the debt will be barred by
a. the preexisting duty rule.
b. the doctrine of promissory estoppel.
c. a statute of limitations.
d. none of the choices.
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