Deck 12: Consideration

Question 1

The central idea behind consideration is that the parties have intentionally entered into a bargained-for exchange with one another and have given each other something in exchange for a promise or performance.

Answer 1

True

Question 2

The Code has changed the common law rule regarding modification of a preexisting contract by providing that a contract for the sale of goods can be effectively modified by the parties without new consideration, provided they intend to do so and act in good faith.

Answer 2

True

Question 3

"Consideration" does not require an actual benefit to both sides of an agreement.

Answer 3

True

Question 4

If Sam agrees to sell to Thomas all of the tomatoes he wants at $25 a bushel, there is no contract because of a lack of consideration.

Question 5

The parties to a contract may modify the agreement with no additional consideration by simply substituting a new contract.

Question 6

Sandy's private secretary promises to keep the contents of a letter she typed secret if Sandy will give her the next day off with pay. If the secretary takes the day off, Sandy has to pay her for the day.

Question 7

A few states provide by statute that the parties need to provide no new consideration when modifying any contract.

Question 8

Contracts generally require adequacy of consideration where the consideration given by both parties is of fair value and equitable.

Question 9

Consideration can be present regardless of whether the parties intend an exchange.

Question 10

The Abbot Corporation contracts with the Baker Corporation to sell to Baker its entire production. After signing the agreement, Abbot can increase its production from one shift to two shifts and Baker will have to buy all of the doubled production.

Question 11

Dana gives care to Marnie's dog when Dana finds Marnie's dog ill on the side of the road. After Marnie locates her dog, Marnie promises to reimburse Dana for the cost of treating the dog. Marnie's promise is binding, because there is a bargained-for-exchange.

Question 12

According to the UCC, only a merchant can make a firm offer to a buyer.

Question 13

An exclusive dealing contract is one type of contract which is illusory because it lacks consideration.

Question 14

An agreement to sell the entire production of a particular plant to a particular purchaser is a requirements contract.

Question 15

In most, if not all, cases where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.

Question 16

The element of exchange is absent where a promise is given for an act that has already been done.

Question 17

In some states a promise under seal is binding without consideration.

Question 18

Past actions unbargained for by the parties in an agreement can become valid consideration for a contract.

Question 19

The adequacy of consideration, while not important to the existence of consideration, may be relevant to the availability of certain defenses or remedies.

Question 20

In a unilateral contract, a promise is exchanged for an act or forbearance to act.

Question 21

Fran negligently drove her truck through Nick's fence, causing damage. If she promises to pay Nick $1,500 if he does not bring a lawsuit against her, Nick accepts and forms a unilateral contract by not filing suit. His forbearance is consideration.

Question 22

An illusory promise has the form of a promise but imposes no real obligation.

Question 23

Contracts binding without consideration include promises to pay debts barred by a statute of limitations and debts discharged in bankruptcy.

Question 24

Legal sufficiency of consideration and adequacy of consideration are virtually synonymous terms.

Question 25

Charitable subscriptions are one of the most frequently occurring applications of the doctrine of promissory estoppel.

Question 26

The term "past consideration" is not really consideration at all because the law will not find a contract where there is no bargained-for-exchange.

Question 27

D owes C a past-due undisputed debt of $500. D sees C in a bar and pays him $400. C then says to D, "Forget about the other $100 you owe me. I'm glad to get the $400." C's promise to discharge the remainder of the debt is binding.

Question 28

Under the common law, in order to be enforceable, a modification of an existing contract must be supported by mutual consideration.

Question 29

The performance of a pre-existing contractual duty which is neither doubtful nor the subject of an honest dispute is legally sufficient consideration to support a second contract.

Question 30

A promise to pay $1,000 a year to a local police officer to not have your store vandalized is legally unenforceable under the rule that makes performance of a pre-existing legal obligation legally insufficient consideration.

Question 31

The Restatement provides that a promise following the rendering of emergency services is binding even if not supported by consideration if necessary to prevent injustice.

Question 32

Jerry received a bill for $300 from Johnson for a tune-up Johnson had performed on Jerry's car. Jerry called Johnson and told him, "The car runs no better now than before the tune-up. I am sending you $100 and no more." Johnson received the $100 check which was marked "paid in full" and cashed it. Jerry is still liable to Johnson for $200.

Question 33

If a promise is illusory, mutuality of obligation is lacking.

Question 34

Consideration exchanged for a promise does not require both legal detriment to the promisee and legal benefit to the promisor.

Question 35

Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain.

Question 36

A conditional promise is a promise the performance of which depends upon the happening or nonhappening of an event not certain to occur.

Question 37

In settling a liquidated debt, payment of a smaller amount before the due date would constitute consideration, but paying a lesser amount on the due date at an agreed-upon different place of payment would not be legally sufficient consideration.

Question 38

In most states, a contract under seal is binding without consideration.

Question 39

In a bilateral contract, if one party is not bound, neither party is bound.

Question 40

Otherwise illusory promises may be transformed by some courts into actual promises by implying an obligation of good faith and fair dealing.

Question 41

Which of the following would most likely be enforceable?

A) An agreement supported by past consideration
B) A substitute agreement to settle an undisputed debt
C) A debt agreed to seven years ago in a state where the statute of limitations is six years
D) A promise following the rendering of emergency services that is not supported by new consideration

Question 42

A liquidated debt is an obligation the existence or amount of which is in dispute.

Question 43

Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $1 million from her mother's will. Janet has made:

A) an illusory promise.
B) a legally sufficient promise unless Janet knew at the time she made the promise that she could not inherit the $1 million.
C) a conditional promise which is not sufficient to form consideration.
D) a legally inadequate promise, and the courts will therefore not enforce it.

Question 44

Carlos ordered an aluminum storm door for $249.99. Before it was delivered, the same store from which he ordered the door ran an ad in the paper for the same storm door at $179.99. Carlos calls the store and demands the advertised price. If the store agrees:

A) Carlos must pay $179.99.
B) Carlos must pay $249.99.
C) there is no contract.
D) there is a contract for the reasonable value of the door.

Question 45

Consideration has only one basic element, which is a bargained-for exchange.

Question 46

Which of the following are the two basic elements to consideration?

A) Bargained-for exchange and legal sufficiency
B) Legal detriment and legal benefit
C) Legal sufficiency and legal adequacy
D) Promise and forbearance

Question 47

Pablo promises to sell to Candice an automobile for $12,000, for which Candice promises $12,000. A bilateral contract exists.

Question 48

A modification of a preexisting contract occurs when the parties agree to change one or more of its terms and, under the common law, must be supported by mutual consideration to be enforceable.

Question 49

Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:

A) an illusory promise.
B) past consideration.
C) the pre-existing duty rule.
D) good consideration.

Question 50

Jack moved from New Hampshire to Florida and decided to have an air conditioner installed in his car. After it was installed, Jack received a bill for $1,200. Jack called the dealer and told him he'd never heard of this service costing more than $500. They argued, but the dealer finally agreed to take $900. Is the agreement enforceable?

A) Yes, there is no way for the dealer to get the extra money anyway.
B) Yes, there is consideration for the modified amount.
C) No, there is no consideration and the dealer can sue for the extra $300.
D) No, there is an implied contract to pay the dealer whatever he billed Jack.

Question 51

Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship. The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer?

A) No, because the bank can still sue for the remaining $2,000
B) No, because the manager's promise is not binding on the bank
C) Yes, because the early payment of the loan is consideration that makes the bank's promise binding
D) Yes, because the bank must do whatever the manager says

Question 52

Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct?

A) Marilyn will have to pay $20,000.
B) This is a contract under seal which is enforceable.
C) This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.
D) This is the settlement of a disputed debt that requires no additional consideration on the part of Bravo Builders.

Question 53

Which of the following is enforceable without consideration?

A) A new promise to pay a debt barred by the statute of limitations.
B) An illusory promise.
C) Under the common law, a promise made to satisfy a preexisting moral obligation.
D) A promise by a father to pay someone for rendering emergency services to his injured son before the father had arrived at the accident scene.

Question 54

Rob repairs a door for Howard. In return, Howard is supposed to pay Rob $75 on November 1 at Howard's house. Which of the following would constitute legally sufficient consideration?

A) Howard pays Rob $60 on November 1 but, after checking with Rob, brings payment to Rob's house.
B) Rob comes to Howard's house to collect the $75 on November 1, but Howard only has $50. Rob tells Howard to forget the other $25.
C) Since this is an unliquidated debt, the only legally sufficient consideration is Howard's payment of $75 to Rob on November 1 at Howard's house.
D) Since this is a liquidated debt, the only legally sufficient consideration is Howard's payment of $75 to Rob on November 1 at Howard's house.

Question 55

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?

A) No, because Robbie gave no benefit to Aunt Ellie
B) No, because Robbie did not suffer any detriment
C) Yes, because stopping smoking will benefit Robbie's health
D) Yes, because Robbie gave up a legal right

Question 56

Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pay:

A) $50, since that is the original agreement.
B) $50, since a modification must be in writing.
C) $60, since the modified agreement is supported by additional consideration.
D) $60, since any subsequent agreement is enforceable.

Question 57

Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction?

A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable.
B) If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit.
C) Stan is under a pre-existing legal obligation to pay the $800.
D) Stan must return the defective gloves to Isaac, who must replace them. Then, Stan must pay the $800.

Question 58

Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise. Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed, only to discover that McHenry had awarded the franchise to a large corporation. McHenry claims no liability to Nancy since there was no consideration. Which statement is most accurate?

A) McHenry is not liable to Nancy since there is no consideration.
B) McHenry is not liable to Nancy since there is past consideration.
C) McHenry is liable to Nancy since adequate consideration is given by both parties.
D) McHenry is liable to Nancy based on the concept of promissory estoppel.

Question 59

A unilateral contract may consist of a promise exchanged for an act or forbearance.

Question 60

Wayne helped Hank study all night for an important exam. After Hank got an "A" on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it." There is:

A) no contract because there is no mutual assent.
B) no contract because there is no valid consideration.
C) no contract because $10 is reasonably inadequate consideration.
D) a contract with sufficient consideration.

Question 61

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise?

A) It is enforceable, because Jason returned to college.
B) It is enforceable, because Jason is giving up the right to do something else.
C) It is unenforceable, because it is a unilateral contract.
D) It is unenforceable, because Jason had already enrolled in school and there is no consideration.

Question 62

Which of the following gratuitous promises is/are enforceable by statute?

A) A good-faith contract modification in a contract for the sale of goods
B) A written offer signed by a merchant to buy or sell goods that assures it will be kept open for one month
C) A renunciation of a claim in a written waiver that is signed and delivered by the aggrieved party when the ^{contract involves a sale of goods}
D) All of these are enforceable by statute.

Question 63

Ken, a research chemist, has been promised a fellowship with a stipend of $10,000 to do research on synthetic fuel oil. Under the terms of the fellowship, Ken is free to use the money as he sees fit. Ken decides to build his own laboratory, so he will not have to rent one. He hires a carpenter who begins working on shelving and cabinets in the laboratory. Then Ken receives a telegram saying the fellowship has been canceled. No reason is given for the cancellation. If Ken sues, will he be able to collect the money from the foundation which promised the fellowship? Explain your answer using legal terminology.

Question 64

A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible?

A) The employees of the bank
B) An on-duty sheriff's deputy in the county where the arrest occurred
C) An off-duty deputy sheriff from a county other than the one where the arrest occurred
D) None of these are eligible.

Question 65

The requirement of legally sufficient consideration:

A) is that the parties have agreed to an exchange and it imposed a legal detriment upon the promisee or conferred a legal benefit upon the promisor.
B) has nothing to do with the legal value of what is exchanged.
C) means the subject matter that the parties agree to exchange has to have the same value.
D) is the same as the requirement of adequacy of consideration.

Question 66

Is a promise to pay a pre-existing moral obligation enforceable? Explain.

Question 67

A purchaser's agreement to buy from a particular seller all the materials of a particular kind he needs is a(n) contract.

A) illusory
B) requirements
C) output
D) exclusive dealing

Question 68

Andrew agrees to paint Betty's house for $500. Two days after he starts the job, he decides that $500 isn't enough money. He refuses to finish the job unless Betty agrees to pay him $100 more. What law applies to this fact situation?

A) The acceptance of additional money to settle a disputed claim is supported by consideration.
B) A past obligation is sufficient consideration for a new promise.
C) Andrew gives no additional consideration in return for modification of a preexisting contract.
D) Betty has made a promise in exchange for a forbearance.

Question 69

Define legal detriment.

Question 70

Which of the following statements is most accurate concerning charitable subscription promises?

A) They are generally not enforceable.
B) The courts equate them with gifts.
C) They are generally enforceable if there is reliance by the charity.
D) The Restatement uses a strict reliance requirement in relation to charitable subscriptions.

Question 71

William agrees to drill a well up to 200 feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount. In this case:

A) the parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.
B) the substitute contract is binding under the UCC because there is the payment of additional money.
C) William is in breach of contract. John need not pay any additional money.
D) William is under a pre-existing moral duty to perform at the originally agreed-upon price.

Question 72

Doug obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years. In this case:

A) Acme is obligated to use its best efforts to supply the goods only if this clause appears in the written franchise agreement.
B) according to the UCC, unless otherwise agreed, Doug must use his best efforts to promote the sale of the widgets in his territory.
C) under the UCC, such an agreement lacks consideration.
D) consideration is not required because this is a moral obligation.

Question 73

Define a substituted contract and describe how it affects an agreement.

Question 74

Ron owes Matt an unsecured debt of $3,000. Ron has a discharge of all his unsecured debts by a bankruptcy court.
Can the contract between Matt and Ron be reinstated?

Question 75

Which of the following requires consideration in order to be binding upon the parties?

A) A written promise by a merchant to keep an offer to buy goods open for 14 days
B) Material modification of a sale of goods contract under Article 2 of the UCC
C) Material alteration of a personal service contract
D) Settlement of a disputed debt

Question 76

Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated. She expects to know for sure how much she will receive within a week or so. In this case:

A) this is an illusory contract, because Darla doesn't know whether she will receive the money for sure.
B) the consideration of the promise of $6,000 is insufficient because it is subject to a condition.
C) Darla's conditional promise is sufficient consideration unless Darla knows she cannot receive at least $6,000 from her uncle's estate.
D) There is no consideration.

Question 77

In which of the following situations will a smaller sum be unable to discharge a larger debt?

A) If the smaller sum is paid before the due date of the larger debt.
B) If an additional article or service is given together with the payment of the smaller sum.
C) If the smaller sum is paid when the larger sum would ordinarily be due, but the debtor is on the verge of insolvency.
D) A smaller sum is never able to discharge a larger debt.

Question 78

Consideration:

A) must be given by the promisee to the promisor.
B) must be adequate.
C) may be given to the promisor or to some other person by the promisee or by some other person.
D) need not be equal between the parties, but must be proportionate.

Question 79

Which of the following will support a contract?

A) An illusory promise
B) Past consideration
C) Forbearance to do an act
D) A pre-existing public obligation

Question 80

Barbara, a wealthy widow, promises the pastor of her church that she will donate $20,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $80,000 mortgage. Other pledges are obtained to pay off the mortgage, but now Barbara has changed her mind and plans to take an around-the-world cruise instead. In this case:

A) the doctrine of promissory estoppel can be applied.
B) the promise to pay $20,000 is a promise to give a gift and is therefore not enforceable.
C) under the Restatement, Barbara's promise is enforceable only if it is in writing.
D) Barbara's promise is not enforceable because the church did not give consideration.