Final Exam (BCOR 2301) Questions and Answers
Consideration
The value given in return for a promise or performance in a contractual agreement.
1. Something of LEGALLY SUFFICIENT VALUE must be given in exchange for the
promise.
2. There must be a BARGAINED-FOR-EXCHANGE.
Legal Sufficient Value
Something of value in the eyes of the law; may be:
- Promise [to do something]
e.g. pay supplier upon receiving goods
- Performance [of an action otherwise not obligated to]
e.g. providing acct. services
- Forbearance [refraining from doing something]
e.g. purchasing from another supplier
Hamer v. Sidway
Facts: A man promised his nephew that if he stopped drinking, smoking, and gambling
until he was 21 that he would pay him $5000. When the nephew completed this
agreement the uncle told him that he would hold onto the money and let it collect
interest.
When the uncle died Sidway, the executor to the uncles estate, would not pay the
money to Hamer because he did not have consideration.
Issue: Did the original agreement show any consideration? In an agreement one must
give up something.
Decision: The court ruled in favor of Hamer because the legal rights given up by the
nephew are enough to satisfy consideration.
Bargined-For-Exchange
The basis for a bargain struck between or among the contracting parties.
Distinguishes contracts from gifts.
Consideration: Adequacy
Involves "how much" consideration is given; measuring whether bargain was fair.
See Freedom of Contract.
Freedom of Contract
Fundamental public policy recognizing one's ability to enter freely into contractual
arrangements.
Examples where Consideration is lacking:
,Preexisting Duty
Rescission
Past Consideration
Illusory Promise
Preexisting Duty
A duty that one is already legally obligated to perform and, thus, that is generally not
recognized as a legal detriment.
Does not constitute legally sufficient consideration; prevents against extortion.
Rescission
A remedy whereby a contract is canceled and the parties are returned to the positions
they occupied before the contract was made.
Past Consideration
Promises made in return for actions or events that have already taken place are
unenforceable.
Bargained-for-exchange is missing.
e.g. companies which attempt to impose a non-compete covenant upon an existing
employee
Illusory Promise
A statement that looks like a promise but is actually only an illusion of a promise due to
its conditional nature or its otherwise lack of a firm commitment.
Accord and Satisfaction
A common means of settling a disputed claim, whereby a debtor offers to pay a lesser
amount than the creditor purports to be owed.
See Accord and Satisfaction.
Accord
Agreement under which one party promises to give or perform, and the other party to
accept, in satisfaction of a claim, something different from what the parties originally
agreed.
Satisfaction
Performance (usually payment) which takes place after the accord is executed.
Liquidated Debt
A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly
determined.
Unliquidated Debt
A debt that is uncertain in amount.
Release
A contract in which one party forfeits the right to pursue a legal claim against the other
party.
Genererally binding if:
1. Given in good faith.
, 2. Stated in a signed writing.
3. Accompanied by consideration.
Promissory Estoppel
An equitable doctrine that prevents the promisor from revoking the promise when the
promisee justifiably acts in reliance upon the promise to his detriment.
"If you fall, I will catch you..."
Promissory Estoppel Requirements
1. There must be a clear and definite promise.
2. Promisor should have expected promisee would rely on the promise.
3. Promisee reasonably relied on the promise by acting or refraining from some act.
4. Promisee's reliance was definite and result in substantial detriment.
5. Enforcement of the promise is necessary to avoid injustice.
Contractual Capacity
The legal ability to enter into a contractual relationship.
Contractual Capacity: Minors
18yrs old is the cutoff.
A minor can enter into any contract that an adult can, provided that the contract is not
one prohibited by law for minors.
A contract is voidable at the option of the minor.
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation.
Must be whole contract; minor can disaffirm even after coming of age (18).
Exceptions to a Minor's Right to Disaffirm
- Marriage contracts
- Contracts to enlist in the military
- Contracts entered into by a minor engaged in business as an adult
- Contracts for necessaries: basic needs such as food, clothing, shelter, and medical
services
Ratification
The acceptance or confirmation of an act or agreement that gives legal force to an
obligation that previously was not enforceable.
See Express or Implied Ratification.
Express Ratification
Occurs when, after reaching age of majority, individual states (either orally or in writing)
that he/she intends to be bound by contract entered into while a minor.
Implied Ratification
Takes place when the minor, on reaching the age of majority, indicates an intent to
abide by the contract.
Reformation
A court-ordered correction of a written contract so that it reflects the true intentions of
the parties.
Consideration
The value given in return for a promise or performance in a contractual agreement.
1. Something of LEGALLY SUFFICIENT VALUE must be given in exchange for the
promise.
2. There must be a BARGAINED-FOR-EXCHANGE.
Legal Sufficient Value
Something of value in the eyes of the law; may be:
- Promise [to do something]
e.g. pay supplier upon receiving goods
- Performance [of an action otherwise not obligated to]
e.g. providing acct. services
- Forbearance [refraining from doing something]
e.g. purchasing from another supplier
Hamer v. Sidway
Facts: A man promised his nephew that if he stopped drinking, smoking, and gambling
until he was 21 that he would pay him $5000. When the nephew completed this
agreement the uncle told him that he would hold onto the money and let it collect
interest.
When the uncle died Sidway, the executor to the uncles estate, would not pay the
money to Hamer because he did not have consideration.
Issue: Did the original agreement show any consideration? In an agreement one must
give up something.
Decision: The court ruled in favor of Hamer because the legal rights given up by the
nephew are enough to satisfy consideration.
Bargined-For-Exchange
The basis for a bargain struck between or among the contracting parties.
Distinguishes contracts from gifts.
Consideration: Adequacy
Involves "how much" consideration is given; measuring whether bargain was fair.
See Freedom of Contract.
Freedom of Contract
Fundamental public policy recognizing one's ability to enter freely into contractual
arrangements.
Examples where Consideration is lacking:
,Preexisting Duty
Rescission
Past Consideration
Illusory Promise
Preexisting Duty
A duty that one is already legally obligated to perform and, thus, that is generally not
recognized as a legal detriment.
Does not constitute legally sufficient consideration; prevents against extortion.
Rescission
A remedy whereby a contract is canceled and the parties are returned to the positions
they occupied before the contract was made.
Past Consideration
Promises made in return for actions or events that have already taken place are
unenforceable.
Bargained-for-exchange is missing.
e.g. companies which attempt to impose a non-compete covenant upon an existing
employee
Illusory Promise
A statement that looks like a promise but is actually only an illusion of a promise due to
its conditional nature or its otherwise lack of a firm commitment.
Accord and Satisfaction
A common means of settling a disputed claim, whereby a debtor offers to pay a lesser
amount than the creditor purports to be owed.
See Accord and Satisfaction.
Accord
Agreement under which one party promises to give or perform, and the other party to
accept, in satisfaction of a claim, something different from what the parties originally
agreed.
Satisfaction
Performance (usually payment) which takes place after the accord is executed.
Liquidated Debt
A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly
determined.
Unliquidated Debt
A debt that is uncertain in amount.
Release
A contract in which one party forfeits the right to pursue a legal claim against the other
party.
Genererally binding if:
1. Given in good faith.
, 2. Stated in a signed writing.
3. Accompanied by consideration.
Promissory Estoppel
An equitable doctrine that prevents the promisor from revoking the promise when the
promisee justifiably acts in reliance upon the promise to his detriment.
"If you fall, I will catch you..."
Promissory Estoppel Requirements
1. There must be a clear and definite promise.
2. Promisor should have expected promisee would rely on the promise.
3. Promisee reasonably relied on the promise by acting or refraining from some act.
4. Promisee's reliance was definite and result in substantial detriment.
5. Enforcement of the promise is necessary to avoid injustice.
Contractual Capacity
The legal ability to enter into a contractual relationship.
Contractual Capacity: Minors
18yrs old is the cutoff.
A minor can enter into any contract that an adult can, provided that the contract is not
one prohibited by law for minors.
A contract is voidable at the option of the minor.
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation.
Must be whole contract; minor can disaffirm even after coming of age (18).
Exceptions to a Minor's Right to Disaffirm
- Marriage contracts
- Contracts to enlist in the military
- Contracts entered into by a minor engaged in business as an adult
- Contracts for necessaries: basic needs such as food, clothing, shelter, and medical
services
Ratification
The acceptance or confirmation of an act or agreement that gives legal force to an
obligation that previously was not enforceable.
See Express or Implied Ratification.
Express Ratification
Occurs when, after reaching age of majority, individual states (either orally or in writing)
that he/she intends to be bound by contract entered into while a minor.
Implied Ratification
Takes place when the minor, on reaching the age of majority, indicates an intent to
abide by the contract.
Reformation
A court-ordered correction of a written contract so that it reflects the true intentions of
the parties.
