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chapter 12 notes

by: Llamaq Bhuriwala

chapter 12 notes LEB 320F

Llamaq Bhuriwala

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About this Document

it covers the whole chapter
Brad Gold
court cases
75 ?




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This 5 page Bundle was uploaded by Llamaq Bhuriwala on Monday April 25, 2016. The Bundle belongs to LEB 320F at University of Texas at Austin taught by Brad Gold in Spring 2016. Since its upload, it has received 18 views. For similar materials see LEB in Business Law at University of Texas at Austin.


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Date Created: 04/25/16
Chapter 12: Consideration - Considerations don’t have to be tangible - They don’t have an identifiable value - Promise to do something, to exchange. - EXs: A dollar bill, someone’s time/experience. Can also be a promise - Keeping the secret has a value; however it doesn’t have to be equal value - The monetary exchange creates an obligation • ON THE EXAM- MONETARY VALUE IS NOT NEARLY AS IMPORTANT THAT IT HAPPENS ON BOTH SIDES OF THE AGREEMENT. • GIFT- NOT A CONTRACT/ GIVING OF A GIFT- DOESN’T CREATE ENFORCEABLE/DOESN’T CREATE CONSIDERATIONS • Unjust enrichment- 1 party has to think its unjustly enriched • Illusory Contract- Contract that lacks mutual considerations; if only 1 side has an understanding; - At will employment- By default if you don’t have a contract, the employee can quit their job anytime for any reason; the employer may terminate the employee at any time for any reason; most jobs are at will employment • 3 parts of Consideration- (1) whether the promise suffer a “legal detriment”, (doing or promising” to do something that it was not obligated to do, or refraining from doing (or promising to refrain from doing) something that it had the right to do. - (2) The detriment (the promise to deliver) must induce (influence) the promise that was not performed (promise to pay) – Did the detriment of the promise induce the promise of the promisor? - Ex: Did the uncle promising not to drink, and gamble make the uncle give the money? - (3) Detriment of the promisor must induce the promise of the promise (the promise to pay, must induce the detriment, the deliver. - Ex: Would the uncle give his nephew the money if he hadn’t fulfill the promise? - The 2nd and the 3rd elements are combined into a requirement known as “bargained-for-exchange.” Did the parties engage in this “bargain for exchange”- both parties exchange and bargain - This means that the parties must have bargained, or agreed, that each was giving something up in return for what the other party was giving up. • Case Hamer vs. Sidway- the court found that the nephew did restrict his lawful freedom of action within certain limits and the promise did suffer legal detriment and did what he wasn’t obligated to do so for $5,000 and in the end he didn’t receive it; therefore the court ruled in favor of the nephew; Hamer represented the nephew • Pre-existing obligation- this is when the promise doesn’t incur a detriment by performing, or promising to perform an act that he or she was under a preexisting duty to perform. - Ex: professor has to help you, and he can’t ask you to pay more; ex: police officers can’t take bribes. Paying a police officer money to find out who has committed the crime- don’t need to as the police officer has a duty to solve the crime and will get paid by the government • Modification Contract- It may be possible to modify the contract, as long as the contract has new mutual consideration - It’s a contract that alters the terms of an existing contract- it requires some new consideration in order to be enforceable - The court holds that “When a party merely does what he has already obligated himself to do, he cannot demand an additional compensation therefor, and although by taking advantage of the necessities of his adversary he obtains a promise for more, the law will regard it as “nudum pactum”, and will not lend its process to aid in the wrong” • Modification Contracts: Contracts for the Sale of Goods - Once you have a contract, you need a new one; UCC- Sanction 2: pertains to the sell of goods - UCC Uniform Commercial code- doesn’t require new mutual consideration for a modification contract - UCC imposes 2 requirements on all contracts (1) the modification must be made in good faith- it must not be a coerced (persuade using force or threat) modification (2) the contract must not be “unconscionable”- shockingly one sided • Illusory Contract- there is no mutuality because consideration is lacking of the part of one of the parties, neither party is bound by the agreement; the buyer or the seller doesn’t incur any detriment • The Unforeseen Difficulties Exception- unforeseen and substantial difficulties in the performance of the contract, which were not known or anticipated by the parties when the contract was entered into, and costed an additional burden not contemplated by the parties, and the opposite party promises him extra pay or benefits if he will complete his contract, and he so promises, the promise to pay is supported by a valid consideration • Force Majeure- In a contract, provisions says that this contract wont be effective if some big unfortunate event happens. Ex: natural disasters, terrorism, etc. - It’s a nice way of anticipating unforeseen difficulties • Mutual Rescission Exception- both parties agree to rescind a new contract; when both parties cancel the contract before its fully performed, and enter into a new contract involving the same subject matter, the new contract is enforceable. The new contract frees the promise of his preexisting duty to do the job, and he has incurred a new detriment sufficient to support the promisor’s promise to pay the larger sum • Requirements Contracts- When a buyer says they will buy everything they want to buy from you; the quantity of the goods being sold is not specified; the quantity is determined by subsequent events. - Under this contract, consideration on the part of the buyer might not require any of the items or commodities in question, consideration on the part of the buyer exists because in the event that the buyer subsequently requires the product, he or she is obligated to buy it solely from the seller. That is, the buyer gives up the right to buy it from others. • Output Contracts- a seller contracts to sell his or her entire output of a particular article, or of a particular plant, for a specified period of time to the buyer at a designated unit price. - Its an implied promise not to sell them to anyone other than the buyer and it constitutes a detriment to the seller - • Accord and Satisfaction- Contract that would lack consideration if viewed closely but the law still allows for it; modification of debt is valid - Ex: if the boat is defective and if the renter doesn’t pay the full price because of the defectiveness of the boat, then the owner and the renter can get into a different agreement of the new price for the rent • Promissory Estoppel- Substituting RELIANCE for Consideration; exceptional situations where promises can be enforced by the same courts when consideration clearly isn’t present - It’s a “justifiable reliance” to enforce the promise - The idea is that if the promisor makes a promise under circumstances in which he or she would realize that the promisee is almost certainly going to rely on the promise in particular way, and if the promisee does so rely, thereby causing a substantial change in his or her position, the promisor is bound by the promise even though consideration is lacking on the part of the promises. - Even though we lack a contract, the court will pretend there is one - (1) A party makes a grotesque promise that he or she knows another party will rely upon (2) The other party does in fact rely on that party THE COURTS WILL USE THE REASONABLE PERSON STANDARD - Promissory Estoppel - The legal principle that a promise is enforceable by law when the promisor makes a promise to the promisee who relies on it to his or her detriment. - Intended to stop the promisor from denying that the statements, words or even conduct did not happen. - Ex. Getting promised a job, you quit your current job, and then the promised job is not available anymore. • Garwood Packaging vs. Allen and Co- all of its investors pulled out and so did Allen and Co so Garwood Packaging had to declare bankruptcy - The essence of the doctrine of promissory estoppel is not that the plaintiff has reasonably relied on the defendant’s promise, but that he has reasonably relied on its being a promise in the sense of a legal commitment, and not a mere prediction or aspiration or bit of puffery, or a mere prediction • The court enforces formal promises (charitable subscriptions and non-profit organizations as enfoceable) to make gifts to such institutions, even though technically there isn’t conventional consideration. The approaches of courts to enforce promises to make such gifts are (1) invention of consideration, (2) promissory estoppel, by finding that donors should foresee that the done institution will rely on the promised gift, by drawing up plans and beginning construction, and (3) many courts will simply enforce the promise on grounds of public policy • Statute of Limitations- Runs on a contract; automatically built in an agreement; “Statute of Limitations”- limiting the time a creditor has in which to bring suit against the debtor after the debt becomes due. If the specified period of time elapses without the initiation of legal proceedings by the creditor, the statute is said to have “run”. It causes the contract to be unenforceable- it prevents the creditor from successfully maintaining an action in court to collect the debt • Once a contract is dead- it’s possible to revive it by association of the contract - Ex: if you waive a fee but someone gives you a little of the fee, then it can bring back the contract to life - Such a promise, in writing, is enforceable despite the absence of consideration. The creditor now has a new statutory period in which to bring suit. - The debt is also revived if a part payment is made by the debtor after the statute has run. Ex: paying $50 of the $1000 debt of a 5 year statute can bring back a debt, and then it gives the creditor 5 years to bring legal action for the balance. A mere acknowledgement by the debtor that the debt exists will also revive the obligation to pay - It’s implying that the part payment is an acknowledgement to pay the remaining indebtness. The debtor can escape the operation of this rule by advising the creditor, when making payment or acknowledgement, that he or she is not making any promise as to payment of the balance. - These don’t apply to debts that have been discharged in bankruptcy. A debt that has been discharged in bankruptcy is not revived by part payment or acknowledgment.


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