Deck 11: Consideration and Promissory Estoppel

Question 1

A party has given consideration for a contract if that party suffers a legal detriment even if the other party does not receive a benefit.

Answer 1

True

Question 2

A promise to make a gift that has been completed can be rescinded by the donor if it was not supported by consideration.

Answer 2

False

Question 3

An illusory promise is an example of a promise that will be enforced even when consideration is lacking.

Answer 3

False

Question 4

Promises made out of affection generally lack consideration.

Question 5

Generally,a moral obligation is sufficient consideration to bind someone to a contract.

Question 6

Something of "legal" value must be given to support a contract.

Question 7

A promise to not inflict bodily harm on another is supported by consideration.

Question 8

Output and requirements contracts are unenforceable because the buyer or seller is not obligated to buy or sell a specific quantity.

Question 9

Under the law,written contracts are presumed to be supported by consideration.

Question 10

Sandra accepts an out of court settlement in exchange for dropping a lawsuit.The settlement agreement is supported by consideration in the form of forbearance of a legal right.

Question 11

Requirements contracts are not valid contracts as they are illusory.

Question 12

In order to meet the consideration requirement,the legal detriment suffered by each party must have been given in exchange for that of the other party.

Question 13

Forbearance in the form of refraining from drinking or using tobacco for a specified time period cannot be consideration to uphold a contract.

Question 14

Money is a common form of consideration to support a contract.

Question 15

The presumption that contracts are supported by consideration may be overcome by sufficient evidence.

Question 16

A contract in which the seller agrees to sell all of its production to a single buyer is known as an "output contract."

Question 17

The imposition of a best efforts clause is generally viewed as sufficient consideration.

Question 18

A preexisting duty can arise from a person's job or position,or it can arise out of an existing contract.

Question 19

A cash payment of $1 given to support a gift promise cannot support a contract.

Question 20

An agreement where a party gives up the right to sue for injuries in exchange for the right to take part in an activity is insufficient to constitute consideration.

Question 21

The nonperformance of an accord is called satisfaction by the debtor party.

Question 22

When a seller promises a buyer to sell to he/she all of an item that it produces,this results in:

A) an unenforceable illusory contract
B) an enforceable requirements contract
C) an enforceable output contract
D) an enforceable accord and satisfaction
E) an enforceable contract with an option to cancel

Question 23

Which of the following constitutes legal consideration?

A) a promise to make a gift
B) a promise based upon a change in duties and payments
C) a promise based upon a moral obligation
D) a promise based upon past consideration
E) a promise based upon a preexisting duty

Question 24

A compromise agreement is referred to as an accord.

Question 25

To meet the contractual requirement,consideration must be:

A) fair and reasonable according to the reasonable person standard
B) approximately equal in overall value
C) such that each party receives a benefit
D) bargained-for and involve a legal detriment to each party
E) recorded in writing in the contract

Question 26

Consideration can best be described as:

A) something of legal value
B) what is received in a contract
C) a promise
D) a counteroffer
E) a signature on a contract

Question 27

An agreement that is lacking consideration:

A) is void as against public policy
B) is not enforceable,and thus cannot be performed
C) is enforceable only if in writing
D) will be enforced only against the party who gave consideration
E) is not enforceable,but can be voluntarily performed

Question 28

Which of the following can be considered consideration?

A) a promise to perform a service in the future
B) payment of cash
C) actual performance of a service
D) B and C only
E) A,B,and C

Question 29

The doctrine of promissory estoppel holds that most gift promises can be enforced.

Question 30

The requirement that consideration be bargained-for means that:

A) the consideration in a contract must be exchanged simultaneously
B) the values of the consideration cannot be greatly different between parties
C) the inducement for each party to give consideration was the consideration of the other party
D) one party determines the consideration to be given by each party

Question 31

A promise to refrain from underage drinking in exchange for $10,000:

A) is just as enforceable as any other promise
B) is enforceable under a promissory estoppel theory
C) is not enforceable,as the consideration is illegal
D) may be enforceable if the recipient is a child

Question 32

An illusory promise is:

A) never sufficient to be consideration because it is considered fraudulent
B) supported by consideration if the acceptance is also illusory
C) usually considered to be sufficient consideration,although some states will consider it to not meet the consideration requirement if the amount and circumstances "shock the conscience" of the court
D) one that a party has to perform if he or she chooses to do so

Question 33

For the doctrine of promissory estoppel (detrimental reliance)to apply,there still must be a contract with adequate consideration.

Question 34

A promise to deliver merchandise in the future:

A) is not consideration because the merchandise has not yet been delivered
B) is not consideration because the person delivering the goods does not necessarily receive a benefit for doing so
C) is consideration because it involves a new legal duty
D) is consideration so long as the party to deliver the goods received payment before they were delivered

Question 35

Most courts hold that a liquidated debt cannot be compromised without new consideration.

Question 36

A party who promises to complete a job according to the terms of a contract signed in the past has not given consideration due to past consideration.

Question 37

Which of the following most likely constitutes legal consideration?

A) a promise to make a gift
B) a promise to refrain from doing an illegal act
C) a promise to buy all that the promisor needs of an item with specifying a minimum quantity
D) a promise based upon past consideration
E) a promise based upon a preexisting duty

Question 38

"Legal detriment" in the context of consideration means:

A) giving up an existing legal right
B) taking on a new legal duty
C) giving up an existing legal right or taking on a new legal duty
D) being found guilty in a criminal case
E) getting the short end of the deal in a contract

Question 39

Promissory estoppel is an equitable doctrine that prevents the withdrawal of a promise by the promissor if it will adversely affect a promissee who has changed his or her position in justifiable reliance on the promise.

Question 40

In a two-party contract,which is true about consideration?

A) Only one party must suffer a legal detriment.
B) Both parties must receive a benefit.
C) Each party must suffer a legal detriment.
D) Each party must either receive a benefit or suffer a legal detriment.

Question 41

Mrs.Potter tells a neighbor child,"Since you have been so good as to mow my lawn this summer without my asking,I am going to give you some money." By fall,she still hadn't paid up.The neighbor child files a breach of contract claim against Mrs.Potter.What will be the result?

A) Mrs. Potter will have to pay the money because the child mowed the lawn.
B) Mrs. Potter will have to pay the money because the contract is only voidable by the minor.
C) Mrs. Potter will not have to pay the money because the promise is illusory.
D) Mrs. Potter will not have to pay the money because the promise is based upon past consideration.

Question 42

Lisa enters into a contract with Acme Groceries,Inc.,in which she promises to purchase groceries "as she determines appropriate in the future" from Acme,and Acme promises to sell such groceries to Lisa.This is an example of:

A) adequate consideration; a promise for a promise
B) an illusory promise by Lisa
C) an output contract
D) an option contract
E) a requirements contract

Question 43

Cheryl hired Golden Construction Co.to build a house for her.The plans for the house were complex,and expert workmanship was required.After the house was completed,Cheryl liked it so much that she promised to pay Golden a $4,000 bonus.Later,Golden demanded the money,but Cheryl refused to pay it.Golden sues.What is the most probable result?

A) Golden wins; the promise was used to entice Golden to do an outstanding job,which is adequate consideration.
B) Cheryl wins; the promise is based on past consideration.
C) Golden wins; the promise is based on past consideration,which is legally sufficient.
D) Golden wins; the promise is based on changed circumstances which makes it enforceable.

Question 44

Lode Mines enters into a contract with Ajax Photo Labs,whereby Ajax agrees to purchase all its requirements of silver needed for photo finishing during the next year,from Lode,at $4.00 ounce.Over the last 4 years,Ajax has used an average of 10,000 ounces of silver per year.Lode only produces about 15,000 ounces of silver per year.About 2 months into the contract,the price of silver skyrockets to $50 per ounce.Ajax immediately orders an additional 50,000 ounces from Lode.Lode refuses to deliver,and Ajax sues.What is the most likely outcome?

A) Lode wins; requirements contracts are not enforceable because they do not contain a quantity.
B) Ajax wins; requirements contracts are enforceable.
C) Lode wins; even if requirements contracts are enforceable,the parties must act in "good faith," and Ajax is acting in bad faith.
D) Ajax wins; they are acting in "good faith," and this was a risk that Lode assumed.

Question 45

Frieda is at a Denver Broncos Football game,and she is being bothered by several extremely drunk spectators in nearby seats.She asks a security officer to do something,but the security officer refuses.She then offers the security officer $100 if he'll stop the problem.He agrees,then warns the drunk spectators,after which the problem stops.Frieda refuses to pay the security officer.Is there sufficient consideration in this agreement?

A) Yes,because the detriment of paying $100 was bargained for.
B) Yes,because there was one party who suffered a detriment.
C) No,because this agreement violates public policy.
D) No,because one of the parties did not suffer legal detriment.
E) Yes,so long as $100 is a fair price for the services of the security officer.

Question 46

Two friends,Ann and Mary,are having margaritas at happy hour.There had been no discussion of who would pay for the drinks.After the third round of drinks,Ann said,"I will pay for everything tonight including your drinks." A couple of minutes later,Ann says,"I've changed my mind.I just remembered that they might be having layoffs at my job tomorrow." Mary wants to force Ann to perform on her promise and threatens to sue.In this circumstance,a court would:

A) not require Ann to follow through on the promise because it was a gratuitous promise
B) require Ann to follow through on the promise under the doctrine of promissory estoppel
C) require Ann to follow through on the promise if Mary had previously paid a comparable amount for food or drinks consumed by Ann
D) require Ann to follow through on the promise if it would be a hardship for Mary to pay for her own drinks
E) not require Ann to follow through on the promise because it would encourage Mary to drink

Question 47

An agreement to settle an earlier contract that was in dispute is:

A) an illusory promise
B) a putout contract
C) a novation
D) the exercise of an option to cancel
E) an accord and satisfaction

Question 48

Frank is a loyal employee who has spent much time above and beyond the call of duty promoting his employer's company on weekends.Frank's boss says to him,"Because of all this extra work you have done,you'll get a $1,000 bonus next month." Because of this statement,which of the following is true?

A) The company is not obligated to pay him because the consideration is past consideration.
B) The company is not obligated to pay because there was a preexisting duty.
C) The company is obligated to pay because Frank has performed the extra work.
D) The company is obligated to pay because there is an implied-in-law contract.

Question 49

Mary promises to give her car to her friend.The friend sells his current car for a fairly low price because he is expecting to get a nearly new car from his rich and generous friend,Mary.Mary changes her mind and decides to keep the car.If the friend sues Mary,the court most likely will:

A) require Mary to give her friend the car because his sale of his car was consideration
B) require Mary to give her friend the car because Mary made an illusory promise
C) not require Mary to do anything because this was a gift promise
D) require Mary to pay damages to the friend for any loss he incurred in connection with Mary not keeping her promise

Question 50

In which of the following situations have both parties given consideration to support a contract?

A) Pat,an accounting professor,agrees to tutor one of her students in the study of French for $10 per hour.
B) Pat,a police officer,agrees to patrol someone's neighborhood while on duty for $100 a week.
C) Pat,because of the great job that a contractor did in building an addition onto her house last year,promises to give the contractor an extra $1,000.
D) Pat promises to give her mother $100 per month for the next 10 years for all the work that her mother did in raising Pat.

Question 51

Buyer executes a requirements contract with seller for the next year.Which statement is true?

A) Seller must sell all product produced to Buyer,and Buyer must buy it all.
B) Seller must sell all product produced to Buyer and no one else.
C) Buyer must purchase all product needed from Seller.
D) Buyer must purchase the entire product that the Seller can produce.

Question 52

Caterer agrees with Bride to cater Bride's wedding reception for $12 per plate.On the wedding day,Caterer calls Bride saying that some things have come up,and she will have to charge $16 a plate in order to do the catering.Bride agrees.Which is true?

A) The $16 is not enforceable because the $12 per plate was past consideration.
B) The $16 is not enforceable because of a preexisting duty.
C) The $16 is enforceable if the reason for it was beyond Caterer's control.
D) The $16 is not enforceable because it means the $12 was an illusory promise.
E) The $16 is enforceable if Bride could have found another caterer before the wedding.

Question 53

Seasonal Selections,Inc.enters into a contract with Arthur's Tree Farm to purchase all of the balsam fir tree boughs that it will need to make Christmas wreaths for the Christmas season.This contract is:

A) an illusory contract
B) an outputs contract
C) a requirements contract
D) a void contract based on illegal consideration
E) based on a promise that lacks consideration

Question 54

Shirley promised Jill that she would give her $50,000 if she won the lottery.Shirley later won the lottery and gave Jill $50,000.Shirley later changed her mind and demanded the money back.What happened?

A) Shirley had to give the money to Jill because she promised it in certain terms and Jill was willing to accept.
B) Shirley did not have to give the money,but once she did,Jill did not have to return it.
C) Shirley had to give the money,but Jill had to return it when Shirley asked that she do so.
D) Shirley did not have to give Jill the money,and Jill had to return it.

Question 55

In which of the following situations is there adequate consideration on the part of the promisor to support enforcement of a contract?

A) Bob,a police officer,promises to drive by your house and check on it during his off-duty time.
B) Sam,a first-grade teacher,promises to make sure your child learns his lessons in class for $500.
C) LBM Corporation,at Fred's retirement dinner,promises to pay Fred $2,000 a month during his retirement because of his years of dedication to the company.
D) I promise to buy a bike from you for $400 if I decide I'm going to get a new bike this year.
E) Billy,because of all that his mother did in raising him,promises her that he will buy her a new car.

Question 56

There is an existing contract calling for Seller to deliver 1,000 widgets to Buyer.Buyer says to Seller,"I would like to buy 100 additional units at the same price." Seller responds,"We promise to sell you the 100 extra units if we decide not to sell them to other customers." Regarding only the sale of the extra 100 units,which of the following is true?

A) There is no consideration due to an illusory promise.
B) There is no consideration due to a preexisting duty.
C) There is no consideration due to a past consideration.
D) There is consideration due to promissory estoppel.
E) There is consideration due to a legal detriment on both sides.

Question 57

Jean had just received a promotion and substantial raise.Jean felt her raise would give her much more spending money,thus she planned to buy a new sports car.Jean felt she did not need to worry about receiving the best price for her old car,which she thought was worth about $3,000.She sold the car for $500.In fact,the car was worth $5,000,and Jean had not taken into account the additional taxes on her extra income.Jean also decided that for a single mother a sports car would not be very practical.Jean wanted to return the $500 to the purchaser and get her car back.Assuming that Jean will return the $500 to the buyer,Jean can:

A) get her car back if the buyer knew that Jean should not have planned to get a sports car
B) get her car back if Jean can prove that the buyer knew the car was worth many times what he paid for it
C) not get her car back because the court would not inquire into the difference in the value of the consideration
D) get the car back based solely on the disparity in the price and value
E) not get the car back if the buyer had relied on getting a bargain price,but if the buyer could not prove that,Jean could get the car back

Question 58

Worldwide Motor Company promised to buy all its needs,"taking into account tires purchased from other tire companies," for automobile tires from Good Tire Co.,and Good promised to sell these tires.The contract also provided that Worldwide could cancel the contract at any time,without penalty,and could buy tires from other manufacturers if it so desired.This contract is:

A) valid and fully enforceable
B) unenforceable,because requirement contracts are generally unenforceable
C) unenforceable,because Worldwide's promise is illusory and there is no mutuality of obligation
D) unenforceable,because output contracts are generally unenforceable

Question 59

Ricky signs a 2-year contract to play basketball for the Jolters,for $100,000 per game.Right before a big game,Ricky goes to the owner and says that he will not play unless the owner pays him an additional $5,000 per game.The owner,being desperate,agrees.Now that the season is over,Ricky demands his additional compensation,but the owner refuses to pay.Ricky sues.Which of the following is most likely?

A) Ricky wins; this is a valid modification of an earlier contract.
B) Owner wins; contracts can never be modified.
C) Ricky wins; this is a modification under the UCC which needs no new consideration to be enforceable.
D) Owner wins; Ricky was under a prior duty to play basketball,so Ricky's new promise is not supported by consideration.
E) Ricky wins; this is a case of a modification due to unforeseen circumstances,and the modification is enforceable.

Question 60

If Sam,a high school senior,promises to go to school every day in exchange for an"A" in his history class,his promise will most likely:

A) be considered illusory
B) be found to lack consideration as he had a preexisting duty to attend school
C) be considered de facto
D) be upheld as entering into a unilateral contract

Question 61

Harry meets his friend,Handy,for a few drinks one Friday afternoon.After a while,the following conversation takes place:
Harry: You know I just bought all the lumber to build a deck on the back of my house.The two builders I've talked to want over $1,000 to build it.That's ridiculous!
Handy: No kidding! I could do it for less.
Harry: Really? Do you know how? How much would you charge?
Handy: I pretty much know how right now and could figure out the rest.I don't know how long it would take,so I don't want to give a fixed price.But I'd do it for $10 an hour.
Harry: That's OK,so long as it doesn't take over 80 hours.Otherwise,I might as well pay one of those guys I talked to.
Handy: OK.
Handy builds the deck while Harry is out of town.Harry sees the deck when he returns and is happy until he notices that the support posts are not placed in concrete as they are on most decks.He contacts Handy and they have the following conversation:
Harry: Those posts should have been placed in concrete!
Handy: Probably,but this will probably be good enough.
Harry: Well,I want them in concrete.
Handy: I'll redo it if you want me to.It will take another 20 hours.
Harry: I don't care! I want it done right.
Handy finishes the job and presents Harry with a bill for $900,$750 for the original 75 hours,and $150 for the time spent redoing the job.Harry wants to pay only the $750 but Handy claims he is entitled to the full amount.Discuss the arguments and strengths of each side's case if it should go to court.

Question 62

Henry had worked for a local medium-size manufacturer for over 30 years.A couple of weeks before he retired,the company director of human resources told Henry that the company would pay for health insurance for Henry and his wife for the remainder of his life,and for his wife's life if she were to survive him.He then received a letter from the company describing this.Henry had always known that the company provided this benefit to a few of its select employees.Henry didn't really expect that he would receive it,although he had secretly hoped so for some time.Four years after retirement Henry contracted cancer and incurred substantial medical bills under his insurance plan.Henry then received a letter from his former employer saying that the employer was discontinuing its payment of health insurance for those retirees who were receiving this benefit.Henry is considering suing the company to force it to live up to its agreement.Discuss the issues and likely resolution of Henry's case.

Question 63

Why does the law not enforce gratuitous promises? Are there some gratuitous promises which the courts should enforce? Which ones? Are there provisions in the law which take care of these situations?

Question 64

Discuss whether the agreements reached in each of the following situations is enforceable.
a.Mark is the owner of A-1 Construction.He agrees to construct an addition to a client's home for a total contract price of $45,000.When the addition is completed,the homeowner complains about the quality of the workmanship and refuses to pay the full contract price.Mark talks to the homeowner and Mark agrees to accept a payment of $43,000 rather than the $45,000 in the original contract.
b.Mark is the owner of A-1 Construction.He agrees to construct an addition to a client's home for a total contract price of $45,000.When the addition is completed,the homeowner says he is short of money and can only pay Mark $43,000 even though he is satisfied with the work.Mark agrees to accept the payment.

Question 65

John Dee,one of the richest people in the world,was walking down the street in New York City,where he saw a man in tattered clothes on a bench.He said to the man,"If you come around the corner with me to the clothing store,I'll buy you a nice suit." Having nothing else to do at the time,the man complied.However,when they got to the clothing store,Mr.Dee changed his mind.The man sued,alleging a unilateral contract had been formed: Mr.Dee had asked for an act,and the man had performed it.Discuss whether this was a unilateral contract or a gift.

Question 66

Most airline frequent flyer programs contain clauses allowing the airlines to change award levels (e.g.,requiring more miles to get a free ticket)or to even cancel the program and all earned benefits without any compensation to the passenger.Is there any problem with consideration here?

Question 67

Bigbyte is a manufacturer of personal computers.Bigbyte has agreed with Max Harddrives to purchase from Max "all the hard-disk drives we need if we determine that your hard drives will meet our needs in our manufacturing of computers." Bigbyte does testing of the Max drives and other drives of competitors.Bigbyte determines that the drives made by another manufacturer perform somewhat better.Bigbyte then sends a letter to Max stating that "unfortunately we have determined that your drives do not meet our needs and we have decided to purchase elsewhere." Max Harddrives wants to force Bigbyte to stop purchasing disk drives from other manufacturers.Discuss the legal issues.