Term
| For an agreement to have consideration, that which each party gives in the exchange must be of what? |
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Definition
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Term
| Why is the "legal value" requirement for consideration often called the benefit-detriment test? |
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Definition
| Because it is often said that for there to be consideration each party must either receive a benefit or suffer a detriment from the transaction (the so-called benefit-detriment test). |
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Term
| Any promise, act, or forbearance has "legal value" except for what two situations? |
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Definition
| (1) Promise to perform or performance of a preexisting legal duty; and (2) a promise not to assert an invalid legal claim. |
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Term
| When is a promise to perform, or the performance of, a preexisting legal duty still consideration under the modern rule? |
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Definition
| When, at the time the promise is made, the duty is doubtful or the subject of an honest dispute. |
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Term
| When is a promise to perform, or the performance of, a preexisting legal duty still consideration under the traditional rule? |
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Definition
| When, at the time the promise is made, the duty is doubtful and the subject of an honest dispute. |
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Term
| What does it mean for a legal duty or a claim to be "doubtful"? |
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Definition
| A duty or claim is "doubtful" if, at the time of contract formation, it is uncertain whether it is a legal duty or whether it is valid as a result of either the facts or the law (an objective standard). |
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Term
| What does it mean for a legal duty or claim to be the subject of an honest dispute? |
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Definition
| A duty or claim is "subject to an honest dispute" if, at the time of contract formation, the party with the legal duty or the invalid legal claim actually believes the duty might not exist or the claim might be valid (a subjective standard). |
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Term
| For something to have "legal value," must there be an actual benefit or an actual detriment? |
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Definition
| No, just a "legal" benefit or a "legal" detriment (that is the lesson of Hamer v. Sidway). |
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Term
| The rule that provides that a preexisting duty is not consideration is called what? |
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Definition
| The preexisting-duty rule or the legal-duty rule. |
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Term
| What is the reason for the preexisting-duty rule? |
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Definition
| The suspicion that a promise that is given in exchange for a return promise to perform, or the performance or forbearance of, a legal duty was obtained by an express or implied threat to withhold performance of the legal duty (the "hold-up game"). |
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Term
| Is the preexisting-duty rule limited to situations in which there is coercion by the promisee (the "hold-up game")? |
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Definition
| No; motive or apparent motive is irrelevant. |
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Term
| True or false: Under the preexisting-duty rule, the source of the duty must be a contract. |
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Definition
| False. The source of the preexisting duty may be tort law, a contract, a statute, or anything else. |
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Term
| Does a promise to perform, or the forbearance of, a legal duty have legal value if the duty is owed to a third party? |
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Definition
| The majority rule is that it does have legal value. The minority rule is that it does not have legal value. |
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Term
| Most cases involving the preexisting-duty rule involve what situation? |
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Definition
| A promise to modify a contract. |
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Term
| Is a promise to modify a contract automatically binding? |
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Definition
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Term
| What is typically necessary to make a contract modification binding? |
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Definition
| New or independent consideration for the modification. |
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Term
| The rule that new or independent consideration is typically required to make a contract modification binding is called what? |
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Definition
| The independent-consideration requirement. |
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Term
| What is the Rule of Foakes v. Beer? |
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Definition
| A creditor's promise to a debtor to forgive the balance of a debt or an agreement for immediate discharge is unenforceable unless there is something extra to make the promise legally binding, usually consideration or reliance along with the other elements of promissory estoppel. |
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Term
| The Rule of Foakes v. Beer is a specific example of what general rules? |
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Definition
| The independent-consideration requirement and the preexisting-duty rule. |
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Term
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Definition
| An agreement between a debtor and two or more creditors for the adjustment or discharge of an obligation for some lesser amount; an agreement among the debtor and two or more creditors that the debtor will pay the creditors less than their full claims in full satisfaction of their claims. |
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Term
| Do compositions ordinarily have consideration despite the preexisting-duty rule? |
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Definition
| Yes, because the debtor usually promises to not pay each creditor more than a specified amount, something the debtor is not under a legal duty to do, or the agreement includes promises by each creditor to forgo a portion of their claim in exchange for the other creditors' promises. |
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Term
| Does the Rule of Foakes v. Beer apply even if the agreement is executed in the sense that the debtor handed over the money and the creditored waived a claim for the remaining balance? |
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Definition
| Yes. The waiver or release is treated like a promise and is therefore not effective unless there is consideration or a consideration substitute. The transaction is not considered an executed "gift." |
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