Chapter 8.2: Agreements Without Consideration

Chapter 8.2: Agreements Without Consideration Made by: Peter Obertan, Hakim Hamer, and Lizette Vargas

Enforceable Agreements Without Consideration • Some courts have eliminated the requirement of consideration in certain agreements. • These exceptions are allowed by state statute or because the courts, in the interest in fairness or justice, find it inappropriate to require consideration.

Enforceable Agreements Without Consideration • Some common agreements in this category include: • Promises under seal • Promises after discharge in bankruptcy • Debts barred by the statute of limitations • Promises enforced by promissory estoppel • Options

Promises Under Seal • Seal: is a mark or an impression placed on a written contract indicating that the instrument was executed and accepted in a former manner • Some states still require the use of a seal in contracts involving real property

Promises after Discharge in Bankruptcy • Its possible for a person who has had his or her debts discharged in bankruptcy to decide to pay debt voluntarily • Reaffirmation is Optional

Debts Barred by Statutes of Limitations • Stat of limitations est. the time frame within which a party is allowed to bring suit • A partial payment of debt will result in affirmation

Conditions • Promise must be made to bring about action or for be arrange by another person who gave no consideration • Party that gave no consideration by another person who gave no consideration

Promises Enforced by Promissory Estoppel • Promissory Estoppel: Under this doctrine, a promise may be enforceable without consideration • Promissory means “containing or consisting of a promise” • Estoppel means “restraint on a person to prevent him or her from contradicting a previous act” • Court will “estop”

CONT. • These certain conditions must be met before a court will apply the principle of promissory estoppel: • The promise must be made to bring about action or forbearance by another person who gave no consideration • The party that gave no consideration must have relied upon the promise and changed his or her position in a significant way • Injustice can be avoided only by enforcing the promise • EX: McIntosh v. Murphy (1970)

OPTION • Option: When an offeree gives consideration to an offeror in exchange for a promise from the offeror to keep an offer open for a specified period of time • When a merchant makes a written offer stating a period of time during which an offer will remain open, consideration is not needed • The offer is called a firm offer, or an irrevocable offer

Unenforceable Agreements Without Consideration • Included in this category are: • Illusory promises • Promises of future gifts • Promises of legacies • Promises based on past consideration • Promises based on preexisting duties • Agreements to attend social engagements

Illusory Promises • For a binding contract to be formed, both parties must be under an obligation to do something • If this is not the case, then neither party is bound to do anything • Some contracts are illusory, meaning they appear at first glance to be contracts but on further scrutiny are revealed to be hollow • Such agreements are said to involve illusory promises • EX: I will give you 10 dollars if I feel like it

Future Gifts • If a person bestow a gift at some time or in a will that promise is not enforceable if no consideration is given for the promise • This rule would also include promises to provide • Injustice can be avoided only by enforcing the promise

Past Consideration • The act of giving or exchanging benefits and detriments must occur when a contract is made • Past consideration: or consideration that took place in the past or that is given for something that has already been done

Preexisting Duties • Preexisting duties: If a person is already under a legal obligation to do something, a promise to do that same thing is not consideration • Police officers, fire fighters, etc… who might promise special services in exchange for monetary or other rewards for doing what is actually their job would also be affected by this rule

Promises to Attend a Social Engagement • All contracts consists of agreements, but not all agreements consists of contracts • An agreement to meet a friend for lunch or another social engagement would not be legally binding agreement because the friend has nothing in exchange for the promise

Chapter 8.2: Agreements Without Consideration