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
