Bus-115 (Business Law): Chapter 9 Guide
Contractual elements: Offer, acceptance, mutual assent and consideration
Learning Objectives
After reading this chapter, students should be able to accomplish the following objectives:
- Define consideration.
- Identify the different types of detriment
- Explain the characteristics necessary for valid consideration.
- Define unconscionable.
- Explain whether a promise not to sue can be consideration.
- Explain whether a charitable pledge can be consideration.
- Define accord and satisfaction.
- Identify those enforceable contracts that lack consideration.
- Explain promissory estoppel.
Describe the issues involved in cyber-payments
Major Concepts
9-1 Requirements of Consideration
The fifth element necessary to any valid contract is consideration. Consideration is the mutual exchange or promise to exchange benefits and sacrifices between contracting parties. Consideration has three requirements: (1) promises made during bargaining depend on the consideration to be received, (2) the consideration must involve something of value, and (3) the benefits and detriments promised must be legal.
9-2 Types of Consideration
Generally, consideration takes the form of money, property, or services. There are certain special kinds of agreements and promises to which the benefits and sacrifices are unique. Among these are promises not to sue and charitable pledges.
9-3 Problems with Consideration
Problems sometimes arise when the consideration involved in a contract is money and the parties do not agree on the amount of money owed. If there is a genuine dispute, a creditor can accept an amount as full payment even though it is less than the amount claimed. Once the creditor has accepted the lesser amount, the dispute is settled by an act of accord and satisfaction. If the dispute is not genuine, accord and satisfaction do not apply.
As a general rule, contracts are not enforceable without consideration; however, some states eliminate the need for consideration in some agreements. These agreements include promises bearing a seal, promises after discharge in bankruptcy, debts barred by the statute of limitations, promises enforced by promissory estoppel, and options governed by the UCC. Other agreements that seem to involve consideration but that the courts will not enforce involve preexisting duties, past consideration, illusory promises, and gifts.
9-4 Cyber-Payment Tactics and Concerns
The measurement of consideration has become an issue when consumers buy and sell online. Consumers can comparison shop online using shopping search engines, patronizing user-friendly industries, and shopping with companies that provide price comparisons on their websites. Cyber-shopping hidden costs include Internet access fees and shipping and handling costs.
Some illegal practices involved in online shopping include discriminatory price-setting, credit card fraud, and bait-and-switch schemes. Online consumers can choose from several payment methods including credit cards, debit cards, smart cards, and alternative cyber-payment systems such as PayPal. Privacy protection and security, however, are limited.
