1L Contracts: Consideration Basic and Promissory Estoppel

Consideration-A bargained for exchange. An exchange is “bargained for” if it is what is sought by both parties as the reason or motivation for their exchange.

• (1) Consists of: (1-act, 2-forbearance of act,
• 3-promise)

(2) Not applicable to the UCC

• Benefit/Detriment Theory (Traditional View)
• Benefit to the promisor OR detriment to the promisee.

In general, a waiver of any legal right

Bargain for Exchange Theory (Modern View)-quid pro quo (MSPE)

• Promise induces the detriment and the detriment
• induces the promise

(a) Was there a promise made by the promisor? (Offer)

(b) Was there a promise or performance sought by promisor in exchange for the promise made?


(c) Was there a promise or performance by the promisee?

(i) Remember: Performance can be in the form of a forbearance.

• (d) Was it in exchange for the promise made
• by the promisor? (quid pro quo)

Mere language of value does not prove value--Needs to be something in exchange (applies to promissory notes,

Mere appearance of Consideration is Insufficient-

(a) Nominal- actual exchange of something small to appear as consideration (IE $1)

• (i) Exception: nominal
• consideration OK for an option contract

Sham- fake exchange; parties "say" there is consideration but not actually exchange anything.

• Giving someone something
• for nothing. The promise is
• unenforceable even if a detriment is incurred b/c promise is not in exchange for anything. Ex

Preexisting Legal Duties--then no consideration

Moral Obligation is NOT consideration—unless the moral duty is a legal one.

• Past Service/Act is
• NOT Consideration- not sufficient;
• must be PRESENT consideration. Something delivered/done before the promise is
• executed is not legal consideration

• A promise to do nothing. Appears to be a
• promise but is conditioned upon the promisor and no commitment is made. The
• offer is not definite so not consideration.

• (i) Not enforceable: Will not serve as
• consideration b/c performance entirely optional with the promisor and no
• commitment is made; Do not put any limitation on the freedom of the alleged
• promisor

(“if”)

• An act that must be completed before the
• acceptance of a contract.

• (i) *Remember: There can be consideration when
• there is a conditional gift…

• Sale of Goods: No consideration is needed. Covered under the
• UCC

• Fairness & Amount is not a question for the court: Courts will not weigh the consideration, or insist on a fair or even exchange. However, gross inadequacy of consideration may be relevant for other causes of action (IE: fraud,
• mistake, lack of capacity, duress or undue influence)

Offer + acceptance but lack of consideration

• Promissory Estoppel—Substitute
• for consideration; no consideration but unbargained detrimental reliance

• (a) A promise which the
• promisor should reasonably expect to induce action or forbearance of a definite
• and substantial character on the part of the promisee and which does induce
• such action or forbearance is binding if injustice can be avoided only by
• enforcement of the promise.

(a) Promise made

• (i) Promise (can also be a blunt offer)—an assurance that a thing will or
• will not be done

(ii) Future intent does not form a promise.

(iii) Promise can be implied by conduct or expressed by overt statement

• (b) Foreseeable reliance on the promise to induce
• action or forbearance

(c) Reasonable and substantial reliance on promise to the detriment of the promisee

• (d) Injustice would result w/ refusal
• to enforce promise; necessary to
• prevent injustice b/c detriment incurred in reliance to promise