K's Consideration Test Outline
The Formation Stage: Conventional Consideration (Validity)
History
1) Debt
1. Quid pro quo: this 4 that
2. Give something in return
3. Bargain / exchange
2) Assumpsit
1. Show damages/detriment
3) Debt + Assumpsit = Bargain 4 detriment (concept of consideration)
1. D bargained 4 it
2. P gave it in exchange 4 Ds prom.
3. Holmes' version of barg. & legal value components
Bargain Components
1) Did D barg. 4 "it"? Ps detriment must @ least purport 2
B @ least part of the inducement of Ds prom
1. Look @ S/M of D; D promed b/c wanted the obj.
2. To @ least purport, there must B @ least
formal/nominal consid.
(1) Nominal consideration--some ct's won't
enforce even if
some small formal consideration given
(cloaked gift)
(2) Sham consideration--no formal/nominal
consideration so that ct.'s won't enforce (cloaked gift)
3. P's detriment doesn't have 2 B primary/sole
motivation but only @ least part of the inducement
(1) In PE, prom. comes before detriment
so no inducement
(2) Cond'al gifts/donative proms, no
detriment desired so no benefit 2 D
(3) Moral obligation, detriment before
prom. so X'ing reversed
2) Did P give "it" in exchange? D's prom. @ least purported
2 B @ least part of the inducement 4 Ps detriment
1. Look @ P's S/M
2. Past consideration is no consideration; can't
change by mere form
3. Must look @ every act &/ forebearance by P
3) Dovetail of Mutual Assent & Bargain Components
1. Offer is a cond. prom; Did D barg. 4 it where
prom. is cond'al on offerees giving something
2. Acceptance is giving req'ed return; Did P give
it, req'ed return, in exchange 4 D's prom.
Legal Value Component
1) Hohfeld's Terms
1. Legal Detriment--surrender of legal rt./pwr &
assumption of new legal duty/pwr of liab.
2. Legal Benefit--obtaining new legal rt./losing
old legal duty
3. Legal Value--Not concerned about econ. value,
detriment, etc.
2) Econ v Legal
1. Peppercorn Theory of Consid--econ. value can B
small as long as legal value there
2. Econ. relev. 4 barging but not 4 legal components
3) Did "it" entail legal detriment 2 P?
1. Implied prom.'s can entail legal detriment 2 P
2. Unilateral K--perf./forebearance 4 prom. but
no legal detriment if pre-existing duty 4 perf/forebearance
3. Bilateral K--subst. value of the prom.
restricts the freedom of K
4) Arguments by D that P didn't incur legal detriment
<1> Illusory Proms (IP)--P didnt really give a prom.
(1) Req't & output K
1. Req=quanity by buyers need
2. Output=quantity by sellers output
3. As long as theres partial
restriction(rsxn) from
outside of Ps control, no IP b/c
no freeway out
4. Abs rsxn=amt, cond'al rsxn=buy
if something else happen
(2) If there's freeway out 4 P, there'sIP
(3) Mutuality of Obligation Lacking
1. Econ. undertaking--prom's
roughly = in econ;
we don't consider this b/c only
look @ legal
2. Enforceability of Remedy--Both
parties can
enforce remedy but not good arg.
against voidable K sit.
3. Remedy --Both can ask 4
specif. perf. of
remedy but that's 4 litigation
stage not in formation stage
4. Consid. --Both D & P should
give consid;
doesn't make sense b/c P brought
the case so look @ only P
(4) Termination (term.) Clauses
1. Express term.--P doesn't have a
free way out
since cond. out of P's control
2. Req. P 2 give written notice &
specified per. of
X--P has legal detriment & D
barg'ed 4 it so no IP
3. Req. P 2 give written notice
effective immly--
even though close 2 freeway out,
D still barg'ed 4 writing; min. view holds
that its IP
4. Express but silent on written
notice--interp. as
rsbl X & interp. so treated like 3rd sit.
5. P has abs. pwr. 2 term. @ any
X w/o writing in
expressive terms--real freeway
out so IP
<2> Pre-existing Duty
(1) Formation Arg.--if there's K2 relev. 2
K1, then no legal change & no legal detriment
(2) Perf. Arg.--modification of existing
K so pre-exist. duty
<3> Circumvention of Pre-exist Duty
(1) Additional / Dif. consid. given
(change in X/place)
(2) P surrendered legal pwr 2 breach in
modification of K--ct. doesn't accept this arg.
(3) Rescinded orig. K
1. When X lapse btwn rescission
of K1 & K2, then
K2 doesn't contain any pre-exist
duty & effective
2. Simultaneous rescission &
formation of K1 &
K2 then need expressed &
symbollic
destroying of K1 4 K2 2 B effective
3. Purported modification--split
of auth: (1) term.
can't B presumed so pre-exist duty
(2) implied, incompl. simultaneous, rescission
o.k. in mkt &
busi. by rsbl stand. of busi. so
no pre-exist duty
(3) UCC takes (2) 2 beyond mkt so
long as pers. prop.
(4) Party surrendered legal rt. 2 enter
into rescind
(5) 3 Party Sit.
1. Pers. rt. & duty R correlative
2. Dif. duty 2 dif. people b/c
duties R pers.al
(6) Modification w/o consid. b/c
customary practice--min.
<4> Invalid Claim
(1) P's consid. was invalid so insuff. consid.
1. If P honestly believed was
valid claim, then suff. consid. (subj.)
2. If P was subj. genuine & obj.
rsbl in believing
valid claim, then suff. consid.
(subj & obj.)
3. Rest 2§76 says either subj.
honest / obj. rsbl:
Ct. doesn't accept b/c have bad
faith prob.
4. Surrender of any invalid claim
is suff. consid.--split of auth.
(2) Unliquidated/disputed claims
1. Don't know the amt. of liab.
like tort claims
2. There's legal rt. 2 go 2 ct. 2
settle; hence, if
pay part, its consid. 4 that rt.
(3) Debt compositions
1. Legal detriment when debtor
surrenders legal
pwr. 2 prefer 1 creditor over the other
2. Hence, when give part 2 all
the creditors, pwr.2
prefer is given as consid.
(4) Cashing Checks: Undisputed
Liquidated Claims
1. Debtor gives check
K's Enforceability Test Outline
The Formation Stage: Enforceability
Def. : Even if there's valid K, a doc. can render it void,
voidable, / unenforceable
Statute of Frauds (S/F)
1) Fn. of S/F
1. Evidentiary --hard proof of prom.
2. Cautionary --make parties think
2) Types of K's w/in the Statutes purview
1. Spec. collateral / 2ndary proms: Suretyship
(1) Principal Debtor (PD) must have @
least valid/voidable duty 2 the creditor
(2) PD & surety must have surety rel. not
jointly agreeing
2 B liab. 2 creditor which is primary proms
(3) Must tell the creditor of the rel. of surety
(4) Surety must make dir. written agmt 2
creditor; suretys
prom. 2 PD can B oral since its indemnity
(5) Exceptions
1. Dir. Econ. benefit 2 the surety
2. Surety of the corporation
where I hold stock (split of auth.)
2. Consid. of Marriage --not used any more
3. Spec. prom. of an executor / adm.
(1) Really part of 1st type so ct. doesn't
like it
(2) Use own $ instead of the estates
4. Executory K 4 sale of realty land & fixtures
(1) When agmt is still executory
(2) Unimproved land--everything on it is
part of the land
(3) Industrial crop--fixed 2 land but
need energy 2 expand,
so personalty, not realty
(4) C/L of standing timber, minerals,
perennial crops--if
severed personalty, if attached realty
(5) UCC §2-107 of standing timber,
minerals, perennial crops
1. Sub 1--when there's severance
by seller, then
personalty so the K is 4 goods
2. Sub 2--when there's severance
by buyer, it's
personalty K when it can B
removed w/o material harm
5. K 4 Sale of Personalty
(1) UCC §2-201 applies 2 goods valued
over $500
(2) Sub 3)a--spec'ly mfgr'ed exception
where it's
customized item & seller has 2 generate
subst. reliance int.; no alt. mkt trxn available
(3) Pers. service can B det'ed by fair mkt
value by experts
(4) Construction K doesn't fall under
realty / personalty clauses
6. The 1yr. Clause
(1) K's that R impossible 2 B perf'ed w/in
1 yr.
(2) In cond'al K's where perf. is possible,
even if improbable, ct. will say it doesn't fall
under the S/F
(3) Term. clause can B interp'ed as pers.
serv. rendered w/in a yr.
3) Methods of Compliance
1. Note/Memorandum (satisfies all S/F Ks)
(1) Signed by party in charge, D: 1 way st.
(2) Essential Terms
(3) ID of all the parties
(4) Can B informal
(5) Compl. w/o extrinsic evid.; only D
can bring in extrinsic evid. 2 refute P's memo
(6) Must B correct
(7) Can accept FUTURE tense lang.
(8) Piecing Memos
1. View1 --must B physically attached
2. View2 --Signed refer 2
unsigned writings
3. View3 --Signed & unsigned
refer 2 same subj. matter
(9) UCC §2-201
1. Sub 1--Suff. 2 indicate K 4
sale was made; quanitity term like duration can
B incorr'ly stated so long as there's quantity
term 4 K of sale; need @ least PRESENT tense
2. Sub 2--Must B Merchants; D
bound by docs
signed by P; need PAST tense of confirmation
3. Initials suffice as sig. b/c
only intend 2 authenticate
2. Acceptance & Receipt (goods clause)
(1) Accept --title; Receipt --physical possn
(2) Orig. S/F--if accept part of the
good, then accept all
(3) UCC §2-201)3)c--accept & pay only 4
part, then that's all that's enforced
3. Part Payment (goods clause)
(1) Orig. S/F--Earnest $ didn't apply
toward final price
(2) UCC--part payment goes toward final price
4. Part Perf. (1 yr. clause)
(1) If a party perf. comp'ly, it lifts the
bar & can get expectation int.
5. Part Perf. (realty clause)
(1) If seller already conveyed, then
relied so buyer can't raise S/F defense
(2) If buyer
1. Puts some $ down, then can
simply return it by restitution
2. Moves into the prop & improve,
then satisfies the S/F
6. Admission (goods clause)
(1) UCC §2-201)3)b--if party against whom
the enforcement is sought admits K 4 sale
made, K can B enforced
(2) Encourages purgery so not apply
4) Effects of Noncompliance
1. Maj. Unenforceable K
(1) Need 2 affirmatively plead
(2) There's possiblity of tort liab.
2. Min. Void K
(1) Gen. denial is suff.
(2) Since void K is no K, no possibility
of tort liab.
5) Mitigating Doctrines
1. Specif. Restitution
(1) Put U back prior 2 K in fair mkt
value so usually short of K value
(2) In pers. prop, servs cases
2. Equitable Estoppel
(1) Reliance on misstatement/misrep. of fact
(2) Expectation int. & lifts the bar of S/F
(3) Enforce the K
3. PE
(1) Relied on prom. so that theres
detrimental change in position
(2) Must find change in position other
than mere loss of benefit of orig. barg.
1. When mkt shifts & can't enter
the mkt
2. Even if mkt didn't shift, value
went down b/c of the prod. (perishable goods)
3. Pers. serv. which was consumed
6) Arg's that P could make
1. K not in purview of S/F
2. Even if it was, complied
3. Even if S/F, didn't comply, D waived defenses
4. Even if S/F, didn't comply, didn't waive
defenses, estoppel doc's lifts the bar of the statute
5. Even if S/F, didn't comply, didn't waive
defenses, entitled 2
restitution (doesn't lift the bar & no dir.
enforcement of K)
Infancy/Minority Doc. : Status Doc. #1
1) Who is deemed infant/minor?
1. C/L --under 21 yrs
2. Now --under 18 yrs.
2) Conseq's of being an infant/minor
1. Only show was a minor @ the X of entrance 2 K
2. No need 2 show b/c was a minor, didn't
understand K
3. K's R voidable except in (1) bail bond
(enforceable) (2) surety (void)
4. Ratification must B made after minor status
n over by
(1) Expressed
(2) Implied by receiving further
additional benefit after minor status is over
(3) Silence 4 a long per. of X
5. Disaffirmance
(1) In a X'ly fashion
(2) Only return what the minor still
possesses; no need 2
put the other party in status quo unless
P is a minor
(3) Full restitution when nec. like
food--quasi-K enforceability
6. Liab. in Torts
(1) Tort fraud counterclaim=rsbl value of
purchase - rsbl value @ the return
Insanity: Status Doc. #2
1) Who is Insane?
1. Congnitive Ability--Trad. C/L 2 test the
persons understanding of the nat. & basic conseq. of trxn
2. Volitional Test--Rest 2d §15 2 test inability
2 control axn;
unable 2 act in a rsbl manner & the other party
knows of the full fledged psychosis
3. K test now--Cog. + Volitional tests
4. Only need 2 show mental illness exists & it
impacts rsn'ing & capacity
2) The Conseq's of Insanity
1. Void v. Voidable: If gen. guardian before K,
then void, but if
limited guardian (guardian ad litem), then voidable
2. Only guardians can ratify unless fully recover
from insanity & demonstrates full recovery
3. In disaffirmance, insane P's must put the other
side full status quo ante
4. Quasi K enforced where essential nec. of food,
shelter, clothes
Intoxication: Status Doc. #3
1) Rest 2d §16
1. Voidable K where other party must have rsn 2 know
2. Either unable 2 understand OR unable 2 act
Duress: Curb Extortion
1) Physical
1. Used when someone resort 2 actual use/threat 2 use
crim/tortious means 2 extort 1 sided modification
2. No reqt 2 show rsbly resistance 2 physical harm
3. Subj. stand.
2) Econ (ED)
1. Breach of K enough; no reqt of crim cond.
2. Est'ed 4 the need of real assent
3. Pre-exist duty rule used less against extortion
so needed (ED)
4. Remedy 4 pre-exist duty rule limited 2 not paying
future
payment not getting back $
5. Elements of ED
(1) Illegal threat / act--breach of K is enough
(2) Illegal threat/act placed D in dire econ.
sit.
(3) P delib'ly capitalized on D's sit; improper
demand
(4) D yielded 2 P's demand of illegal act/threat
(subj.)
(5) D acted rsbly in yielding 2 P's demand (obj.);
b/c pressure is fact of life in mkt place
(6) D had no other choice than yielding; factor
of (5)
6. Voidable K
(1) Must look @ P's subseq. axns 2 det. if ratified
(2) Delay isn't implied ratification
7. Scope of Rev. 2 Dec. Rsblness
(1) Pure quest. of law--appellate only recog.
elements of duress
(2) Pure quest. of fact--trial only look @
facts
(3) Mixed quest. of law & fact--policy involved
in dec'ing if
axn was rsbl; middle spectrum on dec'ing abuse
of discretion
8. Policy Bias--Favor innocent party in close quest.
of ED
Fraud/Misrepresentation
1) Intentional Misrep
1. The test of pure heart, empty head--innocent must
have subj. honest but can have obj. unrsbl S/M
2. Guilty party had intention 2 misrep.
3. Does not have 2 B material aspect of the trxn
4. Legal conseq. of punitive damage since intentional
tort
2) Negligent Misrep.
1. Statement must B false
2. Must B material part of the trxn
3. Objly rsbl belief
4. Legal conseq. of only limiting 2 not enforcing the
K
Mistake
1) General Norm
1. Unilateral Mistake--K enforced unless other side
induced mistake / knew of the mistake
2. Mutual Mistake
(1) K void/voidable unless 1 party assumed
the risk of the mistake
(2) Mistake rel. 2 same issue/same part of
the trxn
(3) Material mistake/imp. in trxn
2) Intrinsic Error
1. Oral Words--inattentive then unilateral mistake
(UM) & enforced
2. Contents of Writing--1 term written but think another,
UM & enforced
3. Slip of the tongue--intent 2 say 1 but says another;
UM & enforced
4. Terms of the Communication
(1) If offeror called before telegraphing,
then offeree can't snap up mistaken offer
(2) If teleg. viewed as indep. contractor,
then mutual mistake (MM) & both can disaffirm
(3) If teleg. viewed as offerors agent, then
UM
(4) Most ct's say offerors agent b/c chose it
5. Meaning
(1) Understood & said same words but dif. meanings
attached by parties
(2) If 1 party more @ fault b/c should've known
/in better position, then UM & enforced
(3) If both were equally innocent, then MM
& not enforced
3) Extrinsic Error
1. Subj. matter was mistaken (infertile cow v. pregnant
cow)
2. In MM, K enforced when a party has assumed the risk
(1) Consciously disregarding risk/gambling
S/M
(2) Can't infer neg. on P's part but conscious
disregard
(3) Must know that don't know it's valuable
(4) Conscious that pertinent fact may not B
true
3. Trade custom must B universal not widespread 2
say that foregoing it is assuming risk
4. Punitive damages 4 conscious disregard
4) Assumption of Risk in UM
1. Assumption of risk isn't imposed in UM
2. Rest 2d§153, must impose assumption of risk even
in UM but doesn't make sense
3. Gambler is less liab. than defrauder in UM
5) Mistake in Collateral Assumption of Fact: Gen. contractor
cases
(1) Limitation on pwr. 2 revoke in contractor cases
by statute
(2) Statutory Construction
1. Statute --specif. lang. & can B changed
ez'ly by leg. so origionalism
2. Const. --open text & can't change as ez'ly
so dynamic
(3) View1
1. K enforced in UM unless there's excessive
hardship & granting relief doesn't result in prejudice
against other party
2. Prejudice must B more than mere loss of
the benefit of the barg.
(4) View2
1. K not enforced if material part, no neglect
of legal duty, prompt notice of mistake, enforce
is unconscionable, & can put 2 statuts quo ante
2. Dif. test b/c can document the mistake so
greater confidence there's mistake
6) Mistake in Econ Value
1. Usually don't grant relief & enforce K
2. Econ. value is subj. & there's inherent risk
3. Exception when 1 party holds 2 B expert & in fiduciary
where U R beneficiary of trust
Economic Enadequacy of Consideration in Equity
1) Special Equitable Remedies
1. Specific Decree--perf. the K in K cases
2. Injunctions --prohibitory order not 2 perf. the
act in torts cases
3. Conseq's of not perfing the orders--go 2 jail; liberty
taken away
2) Special Equitable Reqt
1. B/C take away liberty, must prove legal cts remedy,
$ judgment is inadeq.
(1) Intolerable uncertainty in computation
of $ judgment b/c of uniqueness of prod.
(2) Inability 2 cover given the mkt sit.; theres
no subst. available even if can get $ judgment
3) Special Equitable Defenses 4 D
1. Econ. adeq. of consid.
2. Maj. --do NOT recog. econ. inadeq. consid. @ all
/ only if + factor of quasi-duress/fraud
(1) Inducing pub. official
(2) Illegal act
(3) Collusive bidding in pub. K
(4) Common denominator--illegality
3. Paves the way 4 Unconscionability