Forbearance Expectations and the Subordinated Debt Signal of ...
CHAPTER 8 Consideration...Chapter 8 SLIDE 4 TYPES OF CONSIDERATION Promise, act, or forbearance Have...
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LAW for Business and Personal Use © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 8 Consideration 8-1 Types of Consideration 8-2 Questionable Consideration 8-3 When Consideration Is Not Required
Transcript of CHAPTER 8 Consideration...Chapter 8 SLIDE 4 TYPES OF CONSIDERATION Promise, act, or forbearance Have...
LAW for Business and Personal Use
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 8
Consideration
8-1 Types of Consideration
8-2 Questionable Consideration
8-3 When Consideration Is Not
Required
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Chapter 8
SLIDE 2
8-1 Types of Consideration
GOALS
Identify the three requirements of consideration
Discuss the adequacy of consideration
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3 Requirements of Consideration
Each party must make a promise, perform an
act or forbear (refrain from doing something)
Each party’s promise, act or forbearance
must be in exchange for a return promise,
act or forbearance by the other party.
What each party exchanges must have legal
value; must be worth something in the eyes
of the law.
Chapter 8
SLIDE 3
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Chapter 8
SLIDE 4
TYPES OF CONSIDERATION
Promise, act, or forbearance
Have value in the eyes of the law
Consideration and a valid contract
Contractual exchange
Consideration must be mutual
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TYPES (cont’d)
Legal value
Act and promise have legal value to each party
Exchange of benefits
Adequacy of consideration
Values placed on property may vary widely.
If grossly inadequate, courts will intercede
Nominal consideration
Token amount
Chapter 8
SLIDE 5
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Chapter 8
SLIDE 6
8-2 Questionable Consideration
GOALS
Describe situations in which consideration is
present only under limited circumstances
Recognize when what appears to be binding
consideration is not
What's In It For Me?
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Chapter 8
SLIDE 7
CIRCUMSTANTIAL
CONSIDERATION
Illusory promises
Termination clauses
Output and requirements contracts
Existing duty
Existing public duty
Existing private duty
Settlement of liquidated debts
Settlement of unliquidated debts
Release
Composition of creditors
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Chapter 8
SLIDE 8
FALSE CONSIDERATION
Mutual gifts
Something of value is given by one to another
without demanding anything in return.
Past consideration
An act that has been performed cannot serve as
consideration for a later promise
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Chapter 8
SLIDE 9
8-3 When Consideration Is Not
Required
GOALS
Distinguish situations in which consideration is
not needed
Recognize when the doctrine of promissory
estoppel can be applied
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Chapter 8
SLIDE 10
EXCEPTIONS TO THE REQUIREMENT
OF CONSIDERATION
Promises to charitable organizations
Church – school – hospital (sample pledge cards)
Promises covered by the UCC
Firm offers
Modifications
After sale has been made, seller agrees to give the buyer
a valid warranty without further charge.
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Exceptions (cont’d)
Promises barred from collection by statute
Statute of repose and limitations
Time limit to bring a lawsuit
Debts discharged in bankruptcy
Promissory estoppel
Courts can take certain actions in the name of
basic fairness
Chapter 8
SLIDE 11
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Chapter 8
SLIDE 12
PREVENT
LEGAL
DIFFICULTIES
Remember that under contract law . . .
Generally both parties must give and receive
consideration if their agreement is to be
enforceable as a contract.
Adequacy of consideration generally is immaterial
to whether or not a contractual promise is
enforceable.
Continued on the next slide
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Chapter 8
SLIDE 13
PREVENT
LEGAL
DIFFICULTIES
Accepting money in exchange for giving up a
legal right constitutes consideration and is
binding. Consult a lawyer before making such an
agreement in any major dispute.
A pledge to a charitable institution is generally
binding without consideration and should not be
made unless you intend to fulfill it.
Continued on the next slide
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Chapter 8
SLIDE 14
PREVENT
LEGAL
DIFFICULTIES
Generally, however, promises to make gifts
cannot be enforced by the intended donee.
You should use care and good judgment in
making contracts. Courts generally will not rescue
you from “bad bargains” or unfavorable deals
voluntarily made.
