Please, write a main discussion post about the below topic: Refer to the Debate this Question in the Review section at the end of Chapter 13. attached .Specifically: Courts should not be able to decide on the adequacy of consideration. Decide if you agree or disagree. State your reasoning. Support your response with detailed information from the chapters. (Citations needed for main post) Instructions for main post (Around 200 words) Please, write a main discussion post about the below topic: Refer to the
View complete question Please, write a main discussion post about the below topic: Refer to the Debate this Question in the Review section at the end of Chapter 13. attached .Specifically: Courts should not be able to decide on the adequacy of consideration. Decide if you agree or disagree. State your reasoning. Support your response with detailed information from the chapters. (Citations needed for main post) Instructions for main post (Around 200 words) Please, write a main discussion post about the below topic: Refer to the Debate this Question in the Review section at the end of Chapter 13. Specifically: Courts should not be able to decide on the adequacy of consideration. Decide if you agree or disagree. State your reasoning. Support your response with detailed information from the chapters. (Citations needed for main post) Chapter 13 131a Legally Sufficient Value To be legally sufficient, consideration must be something of value in the eyes of the law. The something of legally sufficient value may consist of the following: A promise to do something that one has no prior legal duty to do. The performance of an action that one is otherwise not obligated to undertake. The refraining from an action that one has a legal right to undertake (called a forbeance) Consideration in bilateral contracts normally consists of a promise in return for a promise. In a contract for the sale of goods, for instance, the seller promises to ship specific goods to the buyer, and the buyer promises to pay for those goods. Each of these promises constitutes consideration for the contract. In contrast, unilateral contracts involve a promise in return for a performance (an action). Example 13.1 Anita says to her neighbor, When you finish painting the garage, I will pay you $800. Anitas neighbor paints the garage. The act of painting the garage is the consideration that creates Anitas contractual obligation to pay her neighbor $800. Exhibit 131Consideration in Bilateral and Unilateral Contracts What if, in return for a promise to pay, a person refrains from pursuing harmful habits (a forbearance), such as the use of tobacco and alcohol? Does such forbearance constitute legally sufficient consideration? This was the issue before the court in the following classic case concerning consideration. Classic Case 13.1 Hamer v. Sidway Court of Appeals of New York, Second Division, 124 N.Y. 538, 27 N.E. 256 (1891). Background and Facts William E. Story, Sr., was the uncle of William E. Story II. In the presence of family members and others, the uncle promised to pay his nephew $5,000 ($76,000 in todays dollars) if he would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he reached the age of twenty-one. (Note that in 1869, when this contract was formed, it was legal in New York to drink and play cards for money before the age of twenty-one.) The nephew agreed and fully performed his part of the bargain. When he reached the age of twenty-one, he wrote and told his uncle that he had kept his part of the agreement and was therefore entitled to $5,000. The uncle wrote a letter back indicating that he was pleased with his nephews performance and saying you shall have five thousand dollars, as I promised you. The uncle also said that the $5,000 was in the bank and that the nephew could consider this money on interest. The nephew left the $5,000 in the care of his uncle, where it would earn interest under the terms and conditions of the letter. The uncle died about twelve years later without having paid his nephew any part of the $5,000 and interest. The executor of the uncles estate (Sidway, the defendant in this action) claimed that there had been no valid consideration for the promise. Sidway refused to pay the $5,000 (plus interest) to Hamer, a third party to whom the nephew had transferred his rights in the note. The court reviewed the case to determine whether the nephew had given valid consideration under the law. In the Language of the Court PARKER, J. [Justice] * * * * * * * Courts will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party, or is of any substantial value to any one. It is enough that something is promised, done, forborne, or suffered by the party to whom the promise is made as consideration for the promise made to him. In general a waiver of any legal right at the request of another party is a sufficient consideration for a promise. Any damage, or suspension, or forbearance of a right will be sufficient to sustain a promise. * * * Now, applying this rule to the facts before us, the promisee used tobacco, occasionally drank liquor, and he had a legal right to do so. That right he abandoned for a period of years upon the strength of the promise of the testator [his uncle] that for such forbearance he would give him $5,000. We need not speculate on the effort which may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncles agreement * * *. [Emphasis added.] Impact of This Case on Todays Law Although this case was decided more than a century ago, the principles enunciated by the court remain applicable to contracts formed today, including online contracts. For a contract to be valid and binding, consideration must be given, and that consideration must be something of legally sufficient value. 131b Bargained-for Exchange The second element of consideration is that it must provide the basis for the bargain struck between the contracting parties. That is, the item of value must be given or promised by the promisor (offeror) in return for the promisees promise, performance, or promise of performance. This element of bargained-for exchange distinguishes contracts from gifts. Example 13.2 Sheng-Li says to his son, In consideration of the fact that you are not as wealthy as your brothers, I will pay you $5,000. The fact that the word consideration is used does not, by itself, mean that consideration has been given. Indeed, Sheng-Lis promise is not enforceable, because the son does not have to do anything in order to receive the $5,000 promised. Because the son does not need to give Sheng-Li something of legal value in return for his promise, there is no bargained-for exchange. Rather, Sheng-Li has simply stated his motive for giving his son a gift. Sometimes, employers offer to cover the costs of employment-related education for their employees. The employees may then be required to repay their employers for all or a portion of the costs. At the center of the dispute in the following case was an agreement signed by an employee to reimburse his employer for educational costs. The question was whether the agreement met the requirement of a bargained-for exchange. Case Analysis 13.2 USSPOSCO Industries v. Case California Court of Appeal, First District, Division 1, 244 Cal.App.4th 197, 197 Cal.Rptr.3d 791 (2016). In the Language of the Court BANKE, J. [Judge] * * * * [USSPOSCO Industries (UPI) in Pittsburg, California,] hired [Floyd] Case in 2007. He initially worked as an entry-level Laborer and Side Trim Operator. As a condition of employment, Case joined Local 1440 of the United Steelworkers of America. UPI faced a shortage of skilled Maintenance Technical Electrical (MTE) workers. To address this, UPI, after consultation with Local 1440, decided to implement a Learner Program. Thus, in June 2008, the company and Local 1440 entered into a Memorandum of Understanding (MOU) stating UPI would train up to 10 current employees, while continuing to pay their wages and benefits, in an effort to qualify them as MTEs. UPI and the union recognized that, due to the strong demand for Maintenance Technician Electrical [workers] the Company needs to retain successful candidates as employees for a reasonable period of time in order to recoup its substantial $46,000 investment in their training. UPI and the union therefore agreed UPI may require candidates in the Learner Program to sign [a] Reimbursement Agreement that would require reimbursement for a portion of the training should a candidate voluntarily terminate employment within 30 months of completion of the Learner Program. The Learner Program required 135 weeks of instruction, 90 weeks of on the job training and 45 weeks of classroom work (partially courses at a local community college, partially other courses). The goal was to complete training within 162 weeks, or just over three years. If a participant successfully completed the program and then passed UPIs MTE test, he or she would be assigned to an MTE vacancy. The MTE position and Learner Program aligned with Cases desire to work as an engineer. Case understood joining the Learner Program was voluntary. He also understood he did not need to go through the Learner Program or a similar formal educational program to obtain an MTE position. * * * A prospect could simply take and pass UPIs MTE test. However, Case did not attempt the test prior to participating in the Learner Program because he did not think he had the knowledge to pass. He was also unsure if he would pass if he undertook a self-study program. In any case, the Learner Program allowed him to get trained during the workday instead of after hours, and it would lead to higher pay. Accordingly, he applied for the program and was one of [the] selected participants. Case was informed of the reimbursement obligation during a training session for prospective participants. A presentation slide entitled Repayment Agreement told prospects they would sign an agreement to reimburse a portion of their training cost should they voluntarily terminate employment within 30 months of program completion. The slide, consistent with the MOU, indicated the obligation would be $46,000 prorated over 30 months. Case was subsequently presented with a written reimbursement agreement and signed it without objection. Under that one-page agreement, Case acknowledged UPI would pay his wages, benefits and training expenses while he was in the Learner Program, but there would be no guarantee participation in the program would insure promotion, transfer, or continued employment with UPI. He further agreed that if he was fired for cause or voluntarily left UPI within 30 months after completing the program, he would, absent a compelling hardship such as a serious injury or family death, refund $30,000 of the expense of his training, less $1,000 per month of subsequent service at UPI. Two months after completing the Learner Program and obtaining an MTE position, Case left UPI for Lawrence Livermore National Laboratory to work as a high voltage electrician. * * * * When Case refused to reimburse UPI, the company filed the instant lawsuit [in a California state court] alleging breach of contract * * *. UPI sought damages of $28,000that is, $1,000 per month that remained in Cases 30-month earn-back period. Case, in turn, filed a cross-complaint. [He] alleged the [reimbursement] agreement was unlawful because * * * it lacked consideration. UPI subsequently moved for summary judgment on its complaint and Cases cross-complaint, asserting the reimbursement agreement was valid. The trial court granted UPIs motion, and the parties thereafter stipulated to a judgment in favor of UPI in the amount of $28,000 plus prejudgment interest and costs. [The court also awarded UPI attorneys fees of $80,000.] [Case appealed the judgment to a state intermediate appellate court.] Case maintains the reimbursement agreement * * * lacked consideration because UPI had no obligation to keep Case employed and, thus, no obligation to provide education, which Case views as the only possible consideration listed in the Reimbursement Agreement. Cases view of the bargained-for exchange is too constrained. On entering the program, Case held a new position of Learner, which meant he would remain on UPIs payroll while additionally getting classroom and on-the-job training, the costs of which UPI would front. While Case was not guaranteed a promotion, transfer, or continued employment, exactly the same had been true with respect to his previous position. The exchange, frankly, is obvious: Case got continued wages and fronted education costs, and UPI got Cases agreement to repay those costs if he both completed the training and left the company before it could benefit from the investment. That either Case or UPI could have terminated the agreement by ending the employment relationship at some point during the educational program does not render illusory the parties bargained-for exchangeor require us to ignore the substantial benefits Case obtained every day he spent on the payroll receiving advanced training with no upfront cost and potentially no cost at all to him. [Emphasis added.] * * * * The summary judgment in favor of UPI is affirmed. 131c Adequacy of Consideration Adequacy of consideration involves how much consideration is given. Essentially, adequacy of consideration concerns the fairness of the bargain. The General Rule On the surface, when the items exchanged are of unequal value, fairness would appear to be an issue. Normally, however, a court will not question the adequacy of consideration based solely on the comparative value of the things exchanged. In other words, the determination of whether consideration exists does not depend on a comparison of the values of the things exchanged. Something need not be of direct economic or financial value to be considered legally sufficient consideration. In many situations, the exchange of promises and potential benefits is deemed to be sufficient consideration. Under the doctrine of freedom of contract, courts leave it up to the parties to decide what something is worth, and parties are usually free to bargain as they wish. If people could sue merely because they had entered into an unwise contract, the courts would be overloaded with frivolous suits. When Voluntary Consent May Be Lacking When there is a large disparity in the amount or value of the consideration exchanged, it may raise a red flag for a court to look more closely at the bargain. Shockingly inadequate consideration can indicate that fraud, duress, or undue influence was involved. Example 13.3 Spencer pays $500 for an iPhone 7 that he later discovers is a fake (counterfeit). Because the device is not authentic, he could claim that there was no valid contract because of inadequate consideration and fraud. Disparity in the consideration exchanged may also cause a judge to question whether the contract is so one sided that it is unconscionable. For instance, an experienced appliance dealer induces a consumer to sign a contract written in complicated legal language. If the contract requires the consumer to pay twice the market value of the appliance, the disparity in value may indicate that the sale involved undue influence or fraud. A judge would thus want to make sure that the person voluntarily entered into this agreement. Concept Summary 13.1 provides a review of the main aspects of consideration. Concept Summary 13.1 Consideration Elements of Consideration Consideration is the value given in exchange for a promise that is necessary to form a contract. Consideration is often broken down into two elements: Legal valueSomething of legally sufficient value must be given in exchange for a promise. This may consist of a promise, a performance, or a forbearance. Bargained-for exchangeThere must be a bargained-for exchange. Adequacy of Consideration Adequacy of consideration relates to how much consideration is given and whether a fair bargain was reached. Courts will inquire into the adequacy of consideration (if the consideration is legally sufficient) only when fraud, undue influence, duress, or the lack of a bargained-for exchange may be involved. 132 Agreements That Lack Consideration Sometimes, one of the parties (or both parties) to an agreement may think that consideration has been exchanged when in fact it has not. Here, we look at some situations in which the parties promises or actions do not qualify as contractual consideration. 132a Preexisting Duty Under most circumstances, a promise to do what one already has a legal duty to do does not constitute legally sufficient consideration. The preexisting legal duty may be imposed by law or may arise out of a previous contract. A sheriff, for instance, has a duty to investigate crime and to arrest criminals. Hence, a sheriff cannot collect a reward for providing information leading to the capture of a criminal. Likewise, if a party is already bound by contract to perform a certain duty, that duty cannot serve as consideration for a second contract. Example 13.4 . Ajax Contractors begins construction on a seven-story office building and after three months demands an extra $75,000 on its contract. If the extra $75,000 is not paid, the contractor will stop working. The owner of the land, finding no one else to complete the construction, agrees to pay the extra $75,000. The agreement is unenforceable because it is not supported by legally sufficient consideration. Ajax Contractors had a preexisting contractual duty to complete the building. Unforeseen Difficulties The rule regarding preexisting duty is meant to prevent extortion and the so-called holdup game. Nonetheless, if, during performance of a contract, extraordinary difficulties arise that were totally unforeseen at the time the contract was formed, a court may allow an exception to the rule. The key is whether the court finds that the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. Suppose that in Example 13.4, Ajax Contractors had asked for the extra $75,000 because it encountered a rock formation that no one knew existed. If the landowner agrees to pay the extra $75,000 to excavate the rock and the court finds that it is fair to do so, Ajax Contractors can enforce the agreement. If rock formations are common in the area, however, the court may determine that the contractor should have known of the risk. In that situation, the court may choose to apply the preexisting duty rule and prevent Ajax Contractors from obtaining the extra $75,000. Rescission and New Contract The law recognizes that two parties can mutually agree to rescind, or cancel, their contract, at least to the extent that it is executory (still to be carried out). Rescission is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made. Sometimes, parties rescind a contract and make a new contract at the same time. When this occurs, it is often difficult to determine whether there was consideration for the new contract, or whether the parties had a preexisting duty under the previous contract. If a court finds there was a preexisting duty, then the new contract will be invalid because there was no consideration. 132b Past Consideration Promises made in return for actions or events that have already taken place are unenforceable. These promises lack consideration in that the element of bargained-for exchange is missing. In short, you can bargain for something to take place now or in the future but not for something that has already taken place. Therefore, past considerationpast considerationSomething given or some act done in the past, which cannot ordinarily be consideration for a later bargain. past consideration Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain. is no consideration. In a variety of situations, an employer will often ask an employee to sign a noncompete agreement, also called a covenant not to compete. Under such an agreement, the employee agrees not to compete with the employer for a certain period of time after the employment relationship ends. When a current employee is required to sign a noncompete agreement, his or her employment is not sufficient consideration for the agreement, because the individual is already employed. To be valid, the agreement requires new consideration. 132c Illusory Promises If the terms of the contract express such uncertainty of performance that the promisor has not definitely promised to do anything, the promise is said to be illusorywithout consideration and unenforceable. A promise is illusory when it fails to bind the promisor. Example 13.6 The president of Tuscan Corporation says to her employees, If profits continue to be high, everyone will get a 10 percent bonus at the end of the yearif management agrees. This is an illusory promise, or no promise at all, because performance depends solely on the discretion of management. There is no bargained-for consideration. The statement indicates only that management may or may not do something in the future. Therefore, even though the employees work hard and profits remain high, the company is not obligated to pay the bonus now or later. Option-to-Cancel Clauses Sometimes, option-to-cancel clauses in contracts present problems in regard to consideration. When the promisor has the option to cancel the contract before performance has begun, the promise is illusory. Example 13.7 Abe contracts to hire Chris for one year at $5,000 per month, reserving the right to cancel the contract at any time. On close examination of these words, you can see that Abe has not actually agreed to hire Chris, as Abe could cancel without liability before Chris started performance. This contract is therefore illusory. But if Abe instead reserves the right to cancel the contract at any time after Chris has begun performance by giving Chris thirty days notice, the promise is not illusory. Abe, by saying that he will give Chris thirty days notice, is relinquishing the opportunity (legal right) to hire someone else instead of Chris for a thirty-day period. If Chris works for one month and Abe then gives him thirty days notice, Chris has an enforceable claim for two months salary ($10,000). Requirements and Output Contracts Problems with consideration may also arise in other types of contracts because of uncertainty of performance. Uncertain performance is characteristic of requirements and output contracts, for instance. In a requirements contract, a buyer and a seller agree that the buyer will purchase from the seller all of the goods of a designated type that the buyer needs, or requires. In an output contract, the buyer and seller agree that the buyer will purchase from the seller all of what the seller produces, or the sellers output. These types of contracts will be discussed further in a later chapter. 133 Settlement of Claims Businesspersons and others often enter into contracts to settle legal claims. It is important to understand the nature of consideration given in these kinds of settlement agreements, or contracts. A claim may be settled through an accord and satisfaction, a release, or a covenant not to sue. 133a Accord and Satisfaction In an accord and satisfaction. An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the accord and satisfaction is complete, and the obligation is discharged. After the payment has been accepted or other performance has been made, the accord and satisfaction is complete, and the obligation is discharged. , a debtor offers to pay, and a creditor accepts, a lesser amount than the creditor originally claimed was owed. The accord is the agreement. In the accord, one party undertakes to give or perform, and the other to accept, in satisfaction of a claim, something other than that on which the parties originally agreed. Satisfaction is the performance (usually payment) that takes place after the accord is executed. A basic rule is that there can be no satisfaction unless there is first an accord. In addition, for accord and satisfaction to occur, the amount of the debt must be in dispute. Liquidated Debts If a debt is liquidated, accord and satisfaction cannot take place. A liquidated debt is one whose amount has been ascertained, fixed, agreed on, settled, or exactly determined. In the majority of states, a creditors acceptance of a lesser sum than the entire amount of a liquidated debt is not satisfaction, and the balance of the debt is still legally owed. The reason for this rule is that the debtor has given no consideration to satisfy the obligation of paying the balance to the creditor. The debtor had a preexisting legal obligation to pay the entire debt. (Of course, even with liquidated debts, creditors often do negotiate debt settlement agreements with debtors for a lesser amount than was originally owed. Creditors sometimes even forgive, or write off, a liquidated debt as uncollectable.) Unliquidated Debts An unliquidated debt is the opposite of a liquidated debt. The amount of the debt is not settled, fixed, agreed on, ascertained, or determined, and reasonable persons may differ over the amount owed. In these circumstances, acceptance of a lesser sum operates as satisfaction, or discharge, of the debt because there is valid consideration. The parties give up a legal right to contest the amount in dispute. 134 Exceptions to the Consideration Requirement There are some exceptions to the rule that only promises supported by consideration are enforceable. The following types of promises may be enforced despite the lack of consideration: Promises that induce detrimental reliance, under the doctrine of promissory estoppel. Promises to pay debts that are barred by a statute of limitations. Promises to make charitable contributions. 134a Promissory Estoppel Sometimes, individuals rely on promises to their detriment, and their reliance may form a basis for a court to infer contract rights and duties. Under the doctrine of promissory estoppel (also called detrimental reliance), a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery. Promissory estoppel is applied in a wide variety of contexts in which a promise is otherwise unenforceable, such as when a promise is made without consideration. Under this doctrine, a court may enforce an otherwise unenforceable promise to avoid the injustice that would otherwise result. Requirements to Establish Promissory Estoppel For the promissory estoppel doctrine to be applied, the following elements are required: 1.There must be a clear and definite promise. 2.The promisor should have expected that the promisee would rely on the promise. 3.The promisee reasonably relied on the promise by acting or refraining from some act. 4.The promisees reliance was definite and resulted in substantial detriment. 5.Enforcement of the promise is necessary to avoid injustice. If these requirements are met, a promise may be enforced even though it is not supported by consideration. In essence, the promisor will be estopped(prevented) from asserting the lack of consideration as a defense. Promissory estoppel is similar in some ways to the doctrine of quasi contract. In both situations, a court, acting in the interests of equity, imposes contract obligations on the parties to prevent unfairness even though no actual contract exists. The difference is that with quasi contract, no promise was made at all. In contrast, with promissory estoppel, an unenforceable promise was made and relied on but not performed. Application of the Doctrine Promissory estoppel was originally applied to situations involving promises of gifts and of donations to charities. Later, courts began to apply the doctrine to avoid inequity or hardship in other situations, including business transactions, some employment relationships, and even disputes among family members. 134b Promises to Pay Debts Barred by a Statute of Limitations Statutes of limitations in all states require a creditor to sue within a specified period to recover a debt. If the creditor fails to sue in time, recovery of the debt is barred by the statute of limitations. A debtor who promises to pay a previous debt even though recovery is barred by the statute of limitations makes an enforceable promise. The promise needs no consideration. (Some states, however, require that it be in writing.) In effect, the promise extends the limitations period, and the creditor can sue to recover the entire debt or at least the amount promised. The promise can be implied if the debtor acknowledges the barred debt by making a partial payment. 134c Charitable Subscriptions A charitable subscription is a promise to make a donation to a religious, educational, or charitable institution. Traditionally, such promises were unenforceable because they are not supported by legally sufficient consideration. A gift, after all, is the opposite of bargained-for consideration. The modern view, however, is to make exceptions to the general rule by applying the doctrine of promissory estoppel.
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