Enforcing Contracts: Consideration
Restatement § 71
(1) “To constitute consideration, a performance or a return promise must be bargained for
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promiseand is given by the promisee in exchange for that promise
(3) The performance may consist of
(a) an act other than a promise, or
(b) a forbearance, or
(c) the creation, modification, or destruction of a legal relation”
(4) can be a third party
- A promise without consideration is a mere conditional gift; not enforceable by the courts. A goodfeeling is not consideration. [FORK: Bargained for exchange or conditional gift]* Test of whether it is conditional gift is if both parties could sue for breach.
Binding Gift Promises
- Most courts will not recognize binding gift promises even if supported by seal. UCC 2-203"every effect of the seal which relates to sealed instruments" as such is wiped out insofar as contracts for sale areconcerned."
Exceptions; some places recognize notary seal because of method of signing. Trusts are also ways tomake binding gift promises.
UCC 1-107- a right that comes out of breach can be waived without consideration
UCC 2-205- merchant firm offer; "an offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open for certain time isn't revocable"
Kirksey v. Kirksey
(Conditional Gift / Brother in Law Promises house)
Brother-in-law wrote to recently widowed sister-in-law, invites her to move onto his property, she sells her house and moves there. Then he made her leave.
; not enforceable. Good feeling is not consideration.
- consideration can consist of either consist of a benefit accrued to one party or a legaldetriment to another party.
Hamer v. Sidway
(Promise to pay $5,000 if nephew gives up smoking)
Consideration exists; court applies benefit-detriment model; consideration may consist of "a benefit accruing toone party or a detriment to another party." This includes limiting own legal freedom.
It is not the court's job to ask whether the thing which forms consideration is actually a benefit to the promisee.It is enough that the action of consideration is performed.
Bargained For Requirement
- Courts set low hurdle for bargaining; does not require haggling, rather it just meanswhether there is some reasoning behind what is being bargained for. Must be intended to induce action,
. [FORK:Bargained for exchange or conditional gift]
Langer v. Superior Steel Corp.
(Receives pension if he forgoes opportunity to work for another company)
Enforceable on basis of consideration; induced former worker to not work for another company (this is a benefit)
Also could be enforced on basis of promissory estoppel
Jara v. Suprema Meats, Inc.
(Helps son get a line of credit; son gives a promise back to not get raise)
To be valid consideration, contracts must be bargained for which is indicated by the phrase "as an inducement to the promisor."
In this case, Jara Sr. was not an inducement to change; he helped provide the credit before and then was given anunrelated promise.
Adequacy of Consideration -must be something of value in consideration; altruism is not enough of a consideration,there needs to be something going both ways and it must be bargained for.