agreements without consideration section 8.2. understanding business and personal law agreements...

Agreements Without ConsiderationAgreements Without ConsiderationSection 8.2Section 8.2

Understanding Business and Personal Law

Agreements without Agreements without Consideration Consideration

Section 8.2Section 8.2

Consideration

What You’ll Learn

How to identify agreements that How to identify agreements that are enforceable without are enforceable without consideration (p. 173)consideration (p. 173)

How to explain the legal concept of How to explain the legal concept of promissory estoppel (p. 175)promissory estoppel (p. 175)




Consideration

What You’ll Learn

How to identify agreements that are not How to identify agreements that are not enforceable without consideration (p. 176)enforceable without consideration (p. 176)

How to distinguish between past How to distinguish between past consideration and preexisting duties consideration and preexisting duties (p. 177)(p. 177)




Consideration

Why It’s Important

Understanding the difference between Understanding the difference between contracts that require consideration and contracts that require consideration and those that do not, will enable you to avoid those that do not, will enable you to avoid common problems associated with common problems associated with consideration or the lack thereof.consideration or the lack thereof.




Consideration

Legal Terms

seal (p. 173)seal (p. 173)promissory estoppel (p. 175)promissory estoppel (p. 175)option (p. 176)option (p. 176)firm offer (p. 176)firm offer (p. 176)illusory promise (p. 177)illusory promise (p. 177)past consideration (p. 177)past consideration (p. 177)preexisting duty (p. 177)preexisting duty (p. 177)




Consideration

Enforceable Agreements without Consideration

Promises under SealPromises after Discharge in BankruptcyDebts Barred by Statutes of LimitationsPromises Enforced by Promissory

EstoppelOption

Section OutlineSection Outline




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Section OutlineSection OutlineUnenforceable Agreements without Consideration

Illusory PromisesFuture GiftsPast ConsiderationPreexisting DutiesPromise to Attend a Social Engagement




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Pre-Learning Question Pre-Learning Question

Do you think any agreements would be enforceable without consideration? Why or why not?




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Enforceable Agreements Enforceable Agreements without Consideration without Consideration

Some courts have eliminated the Some courts have eliminated the requirement of consideration in certain requirement of consideration in certain agreements.agreements.




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These exceptions are allowed by state These exceptions are allowed by state statute or because the courts, in the statute or because the courts, in the interest in fairness or justice, find it interest in fairness or justice, find it inappropriate to require consideration.inappropriate to require consideration.




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Some common agreements in this Some common agreements in this category include: category include:


Promises under sealPromises under sealPromises after discharge in Promises after discharge in bankruptcy bankruptcy




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Debts barred by the statute of Debts barred by the statute of limitations limitations Promises enforced by promissory Promises enforced by promissory estoppelestoppelOptionsOptions





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Promises under Seal Promises under Seal

A A sealseal is a mark or impression placed is a mark or impression placed on a written contract indicating that on a written contract indicating that the instrument was executed and the instrument was executed and accepted in a formal manner. accepted in a formal manner.




Consideration

Promises under Seal Promises under Seal

Today most states that require a seal Today most states that require a seal will permit the seal to be indicated by will permit the seal to be indicated by the addition of the addition of sealseal or or L.S. (locus L.S. (locus sigillisigilli, which translates to “place of the , which translates to “place of the seal”).seal”).




Consideration

Promises after Discharge Promises after Discharge in Bankruptcy in Bankruptcy

A person who has had his or her A person who has had his or her debts discharged in bankruptcy can debts discharged in bankruptcy can reaffirm the debt, which means he or reaffirm the debt, which means he or she has decided to pay the debt she has decided to pay the debt voluntarily.voluntarily.




Consideration

Promises after Discharge Promises after Discharge in Bankruptcy in Bankruptcy

Under most state laws, no new Under most state laws, no new consideration needs to be provided in consideration needs to be provided in support of this reaffirmation. Instead, support of this reaffirmation. Instead, the reaffirmation must be supported the reaffirmation must be supported by contractual intent.by contractual intent.




Consideration

Debts Barred by Statutes Debts Barred by Statutes of Limitations of Limitations

A statute of limitations establishes the A statute of limitations establishes the time frame within which a party is time frame within which a party is allowed to bring suit. Different states allowed to bring suit. Different states set different time limits for the set different time limits for the collection of a debt.collection of a debt.




Consideration

Debts Barred by Statutes Debts Barred by Statutes of Limitations of Limitations

No new consideration is needed for a No new consideration is needed for a debtor to reaffirm a debt barred by the debtor to reaffirm a debt barred by the statute of limitations. statute of limitations.




Consideration

Promises Enforced Promises Enforced by Promissory Estoppel by Promissory Estoppel

Under Under promissory estoppelpromissory estoppel, a , a promise may be enforceable without promise may be enforceable without consideration.consideration.




Consideration


PromissoryPromissory—containing or —containing or consisting of a promise.consisting of a promise.EstoppelEstoppel—restraint on a person to —restraint on a person to prevent him or her from prevent him or her from contradicting a previous act.contradicting a previous act.




Consideration


The doctrine is used to prevent The doctrine is used to prevent injustice when a person changes his injustice when a person changes his or her position significantly in reliance or her position significantly in reliance on another person’s promise and the on another person’s promise and the promise is not fulfilled.promise is not fulfilled.




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The Elements The Elements of Promissory Estoppel of Promissory Estoppel

Three conditions must be met before Three conditions must be met before the courts will apply this principle.the courts will apply this principle.

1.1. The promise must be made to The promise must be made to bring about action or forbearance bring about action or forbearance by another person who gave no by another person who gave no consideration.consideration.




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The Elements The Elements of Promissory Estoppel of Promissory Estoppel

2.2. The one who gave no The one who gave no consideration must have relied on consideration must have relied on the promise and changed his or the promise and changed his or her position in a significant way.her position in a significant way.

3.3. Injustice can be avoided only by Injustice can be avoided only by enforcing the agreement.enforcing the agreement.




Consideration

OptionOption

When an offeree gives consideration When an offeree gives consideration to an offeror in exchange for a to an offeror in exchange for a promise from the offeror to keep an promise from the offeror to keep an offer open for a specified period of offer open for a specified period of time, this is known as an time, this is known as an optionoption..




Consideration

OptionOption

When a merchant makes a written When a merchant makes a written offer stating a period of time during offer stating a period of time during which an offer will remain open, which an offer will remain open, consideration is not needed. consideration is not needed.

The offer is called a The offer is called a firm offerfirm offer, or an , or an irrevocable offer.irrevocable offer.




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Pre-Learning Question Pre-Learning Question

What do you think an illusory promise is?




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Unenforceable Agreements Unenforceable Agreements without Consideration without Consideration

There are certain promises that the There are certain promises that the courts will not enforce because they courts will not enforce because they lack even the most basic qualities of lack even the most basic qualities of valid consideration.valid consideration.




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Included in this category are:Included in this category are:

Illusory promisesIllusory promisesPromises of future giftsPromises of future giftsPromises of legaciesPromises of legacies




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Promises based on past Promises based on past considerationconsiderationPromises based on preexisting Promises based on preexisting dutiesdutiesAgreements to attend social Agreements to attend social engagementsengagements




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Illusory Promises Illusory Promises

For a binding contract to be formed, For a binding contract to be formed, both parties must be under an both parties must be under an obligation to do something. obligation to do something.

If this is not the case, then neither If this is not the case, then neither party is bound to do anything. party is bound to do anything.




Consideration

Illusory Promises Illusory Promises

Some contracts appear to be Some contracts appear to be contracts but on further scrutiny are contracts but on further scrutiny are revealed to be hollow. revealed to be hollow.

Such an agreement is said to involve Such an agreement is said to involve illusory promisesillusory promises..




Consideration

Future Gifts Future Gifts

If a person promises to bestow a gift If a person promises to bestow a gift at some future time or in a will, that at some future time or in a will, that promise is not enforceable if no promise is not enforceable if no consideration is given for the promise. consideration is given for the promise.




Consideration

Past Consideration Past Consideration

The act of giving or exchanging The act of giving or exchanging benefits and detriments must occur benefits and detriments must occur when a contract is made. when a contract is made.




Consideration

Past Consideration Past Consideration

Past considerationPast consideration, or consideration , or consideration that took place in the past or that is that took place in the past or that is given for something that has already given for something that has already been done, is not regarded as legal by been done, is not regarded as legal by the courts.the courts.




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George Whitehead had an agreement with Main Street Pharmacy to perform for $10 per hour any maintenance that the pharmacy might need for the next two years.




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What type of agreement does Whitehead and Main Street Pharmacy have?




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ANSWERANSWER

An illusory promise




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Preexisting Duties Preexisting Duties

If a person is already under a legal If a person is already under a legal obligation to do something, a promise obligation to do something, a promise to do that same thing is not to do that same thing is not consideration. consideration.

These obligations are called These obligations are called preexisting dutiespreexisting duties..




Consideration

Promise to Attend Promise to Attend a Social Engagement a Social Engagement

An agreement to meet a friend for An agreement to meet a friend for lunch or another social engagement lunch or another social engagement would not be a legally binding would not be a legally binding agreement because the friend has agreement because the friend has given nothing in exchange for the given nothing in exchange for the promise.promise.




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Reviewing What You Learned

1. What agreements are enforceable without consideration?

Section 8.2 Assessment




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Promises under seal, promises after discharge in bankruptcy, debts barred by the statute of limitations, promises enforced by promissory estoppel, and options.


Answer




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2. What is the legal doctrine of promissory estoppel?





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A promise may be enforceable without consideration; used to prevent injustice when a person changes his or her position significantly in reliance on another’s promise, and the promise is not fulfilled.


Answer




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3. What agreements are not enforceable without consideration?





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Illusory promises, promises of future gifts, promises of legacies, promises based on past consideration, promises based on preexisting duties, and agreements to attend social engagements.


Answer




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4. What is the difference between past consideration and preexisting duties?





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Past consideration is consideration given in the past or given for something already done. A preexisting duty is an obligation a person already has and cannot serve as consideration.


Answer




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Critical Thinking ActivityPublic Policy Why does the law support the doctrine of promissory estoppel?




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Answers should recognize that the doctrine of promissory estoppel is used to prevent injustice when a person changes his or her position significantly in reliance on another person’s promise, and the promise is not fulfilled.

Critical Thinking Activity AnswerPublic Policy




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Legal Skills in ActionPromissory Estoppel Your cousin, Geri, has just called you from California.




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Legal Skills in ActionPromissory Estoppel She recently quit her job, broke the lease on her apartment, emptied her bank account to buy a used car, and moved to California because a movie producer promised her a job.




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Legal Skills in ActionPromissory Estoppel Now in California, she realizes that the job offer was an empty promise. Write a letter to the producer in which you explain how the doctrine of promissory estoppel applies in this situation.




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Answers will vary, but should relate the elements of promissory estoppel to these circumstances.

Legal Skills in Action AnswerPromissory Estoppel

Agreements Without ConsiderationAgreements Without ConsiderationEnd of Section 8.2End of Section 8.2

agreements without consideration section 8.2. understanding business and personal law agreements...

Documents

consideration section

consideration slide

past consideration

consideration debts

requirement of consideration

personal law agreements

common agreements

unenforceable agreements