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Exam 12: Consideration

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Question 1

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A transaction that lacks a bargained-for exchange lacks an element of consideration.

A) True
B) False

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Question 2

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Two parties can mutually agree to rescind a contract unless it is executory.

A) True
B) False

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A release does not require consideration to be legally binding.

In contract law, "consideration" refers to the courtesy that one party shows another in negotiating a deal.

Berkie's bicycle is damaged in an accident caused by Imogene. Berkie agrees not to sue Imogene if she will pay for the damage. If she fails to pay, Berkie can bring an action for breach of contract. This is

Fact Pattern 12-A1 Jesse defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal—a student loan accruing interest at a certain rate and payable beginning on a certain date—was unfair because the consideration for their contract was inadequate. -Refer to Fact Pattern 12-A1. "Adequacy" of consideration refers to

A covenant not to sue is against public policy.

A promise to do what one already has a legal duty to do is legally sufficient consideration.

Use of the word consideration in an agreement means that consideration has been given.

Real Estate Investments, Inc., owns and manages an office building. Secure Insurance Company agrees to lease the building for five years. Under the lease, Secure is obligated to pay all of the utility costs. Two years into the term, Secure asks Real Estate to modify the lease to provide that the utility costs be split equally between them. Real Estate agrees, but later decides it does not want to share the costs and refuses to pay. Is the landlord bound to its agreement to share the utility costs Why or why not

Homebuyers Mortgage Corporation's promise to pay its employees a year-end bonus "if it seems like a good idea at the time" is

Inadequate consideration may indicate undue influence.

Venture Capital Corporation loans Wally $15,000 to start a new business. Wally does not pay, but Venture fails to sue within the time prescribed by the applicable statute of limitations. Wally's promise to pay the debt even though recovery is barred

Fact Pattern 12-A2 Cut-Rate Construction Company (CCC) begins building a restaurant for Diners Restaurants, Inc., but after two months demands an extra $100,000. Diners agrees to pay. -Refer to Fact Pattern 12-A2. If CCC offers no reason for the extra $100,000, but says only that it will otherwise stop construction, the agreement is

Cherry is injured in an accident caused by Bronco. Bronco agrees to pay Cherry $2,500 if she agrees to release him from further liability. Cherry agrees. If Cherry's damages ultimately exceed $2,500, she can

If a debt is liquidated, an accord and satisfaction cannot take place.

Panini Vittles, Inc., contracts with Qino to deliver its sandwiches. Later, the parties decide to cancel their contract. They can

Fact Pattern 12-A1 Jesse defends against a breach-of-contract suit by College Credit Corporation by claiming that their deal—a student loan accruing interest at a certain rate and payable beginning on a certain date—was unfair because the consideration for their contract was inadequate. -Refer to Fact Pattern 12-A1. A court is most likely to evaluate the adequacy of consideration if

Fact Pattern 12-A2 Cut-Rate Construction Company (CCC) begins building a restaurant for Diners Restaurants, Inc., but after two months demands an extra $100,000. Diners agrees to pay. -Refer to Fact Pattern 12-A2. If CCC offers, as a reason for the extra $100,000, that extraordinary unforeseen difficulties will add considerable cost to the project, the agreement is

Courts typically consider the adequacy of consideration.