Question 1

Consideration is the inducement to make a promise enforceable.

Accepted Answer

Consideration is a value (such as an act, forbearance, or return promise) bargained for and received by a promisor from a promisee. It is the essential reason for a party entering into a contract, making the promise enforceable in law.

Question 2

An output contract is a special form of an illusory contract.

Accepted Answer

An output contract is not an illusory contract; it is a binding agreement where the seller agrees to sell all of its production to a single buyer, who agrees to buy it, providing real obligations for both parties.

Question 3

If Marguarite promises to pay Neal $300 not to defame her, the promise is unenforceable because tort law imposes a preexisting obligation on Neal to refrain from such an act.

Accepted Answer

Under tort law, individuals already have a duty not to commit defamation against others. Therefore, a promise to pay someone for not doing something they are already legally obligated not to do (such as committing defamation) does not constitute a valid consideration for a contract, making the promise unenforceable.

Question 4

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

Accepted Answer

In certain jurisdictions, a contract that is formalized with a seal (referred to as a "contract under seal") is considered valid and enforceable even without consideration, which is a departure from the general rule that consideration is required for a contract to be binding.

Question 5

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

Accepted Answer

This is known as contract novation, where the parties agree to replace the original contract with a new one that includes different terms or parties without requiring any additional consideration.

Question 6

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

Accepted Answer

Under the common law, modifications to an existing contract must be supported by mutual consideration to be enforceable. This means that both parties must give something new in exchange for the modification of the contract. Without mutual consideration, a modification may be considered void and unenforceable.

Question 7

Darren owes Carl a past-due undisputed debt of $600. Darren sees Carl in a restaurant and pays him $500. Carl then says to Darren , "Forget about the other $100 you owe me. I'm glad to get the $500." Carl 's promise to discharge the remainder of the debt is binding.

Accepted Answer

Carl's promise to discharge the remainder of the debt is not binding because there is no consideration for Carl's promise to forgive the $100. In a situation involving a past-due undisputed debt, payment of a lesser sum (here, $500 of the $600) does not discharge the debtor from the full amount unless there is some new consideration or a written agreement to that effect.

Question 8

A promisee's consideration is effective only if given directly to the promisor by the promisee.

Accepted Answer

Consideration can be provided to the promisor either directly by the promisee or indirectly through another party, as long as there is a benefit to the promisor or a detriment to the promisee that is bargained for in exchange for the promise.

Question 9

Nathan entered a contract while he was seventeen. If, upon reaching the age of majority, he has not avoided the contract and promises to perform those contractual obligations, new consideration is required for the contract to be enforceable.

Accepted Answer

Upon reaching the age of majority, if Nathan affirms the contract either by action (such as continuing to abide by the contract's terms) or explicitly states his intention to fulfill the contractual obligations, the contract becomes enforceable without the need for new consideration. This is because his affirmation or ratification of the contract upon reaching the age of majority is treated as acceptance of the contract's terms as an adult.

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.

Accepted Answer

The agreement only states that Abbot will sell its entire production to Baker, it does not include any clause about increasing production and requiring Baker to buy all of the increased amount. Therefore, Abbot cannot unilaterally impose this condition on Baker.

Question 11

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

Accepted Answer

In a bilateral contract, both parties are mutually obligated to perform certain actions. If one party is not legally bound to their obligations, the contract lacks the necessary mutuality of obligation, thus neither party is bound to perform.

Question 12

James promises to pay Brooke $2,500 if she does not sue him for negligently injuring her in a bicycle accident. If Brooke does not sue, James's promise to pay is binding because it is supported by consideration.

Accepted Answer

Brooke's agreement not to sue James constitutes consideration because she is giving up a legal right, which provides value to James, thus making his promise to pay binding.

Question 13

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

Accepted Answer

This is a basic element of contract law, known as Consideration. Consideration means each party must give something of legal value to the other party in order to create a binding agreement. In other words, if one party is giving up something of value (legal detriment), the other party must be receiving something of value (legal benefit) in exchange.

Question 14

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

Accepted Answer

In a unilateral contract, one party makes a promise in exchange for the other party's performance of an act or refraining from an act. The offeror is bound by the promise they made, but the offeree is not obligated to act unless they choose to accept the offer by performing the requested act.

Question 15

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

Accepted Answer

An illusory promise appears to be a promise but does not actually create a binding obligation. It lacks mutuality and leaves one party with no real duty to perform. Therefore, it is not enforceable as a contract.

Question 16

Bob promises to sell to Candy an automobile for $20,000, for which Candy promises $20,000. A unilateral contract exists.

Accepted Answer

This scenario describes a bilateral contract, not a unilateral contract, because both parties are making promises to each other. Bob promises to sell the automobile, and Candy promises to pay for it.

Question 17

Although such a gratuitous promise would be otherwise unenforceable, under the UCC, any claim arising out of an alleged breach of contract can be discharged by a written renunciation signed and delivered by the aggrieved party.

Accepted Answer

Under the Uniform Commercial Code (UCC) Section 1-107, a claim arising out of an alleged breach can indeed be discharged by a written waiver or renunciation signed and delivered by the aggrieved party, making such a gratuitous promise enforceable in this context.

Question 18

In a unilateral contract, a promise is exchanged from one party to another for a promise to forbear to act.

Accepted Answer

In a unilateral contract, a promise is exchanged for an act, not for another promise or a promise to forbear to act.

Question 19

Promises to perform prior unenforceable obligations  are enforceable even though they are not supported by consideration.

Accepted Answer

Promises to perform prior unenforceable obligations are enforceable under the doctrine of promissory estoppel, even though they are not supported by consideration.

Question 20

A modification of a preexisting contract occurs when the parties agree to change one or more of its terms.

Accepted Answer

A modification of a preexisting contract involves the parties agreeing to alter one or more terms of the contract, which can include changes to obligations, prices, timelines, or any other conditions initially agreed upon.

Quiz 12: Consideration