Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 10 Consideration
LESSON OVERVIEW
The previous chapters dealt with the various kinds of agreements. Chapter 9 discusses the nature and
essentials of consideration, and through the use of examples, depicts their relevance in real life
situations. Students will learn that consideration plays an indispensable role in a contract. Additionally,
we explore the essential ingredients that constitute consideration and the various facets of consideration
such as forbearance, promisor, promisee, pledge, general release, barren promise, preexisting duty,
gratuitous promise, moral consideration, and past consideration. Finally, students’ understanding of the
topics is evaluated through objective-type questions, discussion questions, and case scenarios. Students
are encouraged to conduct their own research through the use of the Internet and other sources.
CHAPTER OUTLINE
A. THE NATURE OF CONSIDERATION (p. 154)
B. CHARACTERISTICS OF VALID CONSIDERATION (p. 154)
1. Legality of Consideration (pp. 154-55)
2. Adequacy of Consideration (p. 155)
3. Possibility of Performance (p. 155)
C. KINDS OF VALID CONSIDERATION (p. 155)
1. A Promise for a Promise (p. 156)
2. A Promise of Forbearance (p. 156)
3. A Pledge or Subscription (pp. 156-179)
D. CONSIDERATION AND THE UNIFORM COMMERCIAL CODE (p. 157)
E. GENERAL RELEASE (pp. 157-158)
F. AGREEMENTS THAT LACK CONSIDERATION (p. 160)
1. Barren Promises (p. 158)
2. Gratuitous Promises (p. 159)
3. Illusory Promise (p. 159)
4. Agreements Supported by Moral Consideration (p. 159)
5. Agreements Supported by Past Consideration (pp. 159-160)
G. CHAPTER SUMMARY (p. 160)
H. CHAPTER ASSESSMENT (pp. 160-166)
1. Matching Key Terms (pp. 160-161)
2. True/False Quiz (pp. 161-162)
3. Discussion Questions (pp. 162-163)
4. Thinking Critically About the Law (pp. 163-164)
5. Case Questions (p. 164)
6. Case Analysis (pp. 165-166)
7. Legal Research (p. 166)
KEY TERMS
Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed
in bold in the copy. They are listed here for your quick reference.
§ forbearance (p. 154)
§ promisor (p. 154)
§ promisee (p. 154)
§ pledge (p. 156)
§ general release (p. 157-158)
§ barren promise (p. 158)
§ preexisting duty (p. 158)
§ gratuitous promise (p. 158)
§ illusory promise (p. 158)
§ moral consideration (p. 159)
§ past consideration (p. 159-160)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 10 when you begin the study of the chapter and discuss each Learning
Outcomes. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 10. The corresponding
text page numbers and PPT slides are listed next to each outcome. These slides should be used to
reinforce the main points of the lecture.
After completing this chapter, the students will be able to:
1. Explain consideration and define forbearance. (p. 154, PPT slide 2)
2. Identify and explain the three essential characteristics of valid consideration. (pp. 154-155, PPT
slide 3)
3. Describe the kinds of valid consideration, including (a) a promise for a promise, (b) a promise of
forbearance, and (c) a pledge or subscription. (pp. 155-157, PPT slides 4-9)
4. Discuss the situations in which the UCC dispenses with the requirement of consideration in
contracts to sell goods. (p. 157, PPT slide 10)
5. Define the term general release. (pp. 157-158, PPT slide 11)
6. Identify four kinds of agreements that lack consideration. (pp. 158-160, PPT slide 12-17)
LECTURE OUTLINE
A. The Nature of Consideration
Consideration means a promise made by each party to a contract either to give up something of value
that he or she has a legal right to keep, or to do something that he or she is not otherwise legally
required to do.The promise to refrain from doing something that a party has a legal right to do, or the
promise of inaction, is known as forbearance. A party who makes a promise, the promisor, may make
a promise to pay a sum of money to another party, the promisee, for the performance of a certain act.
B. Characteristics of Valid Consideration
There are three essential characteristics of valid consideration: (1) legality, (2) adequacy, and (3) the
possibility of performance.
1. Legality of consideration
A valid contract does not exist if the consideration is a promise to perform an illegal act,
or to avoid performing an act that is legally required to be performed.
2. Adequacy of consideration
The law assumes that, as long as no undue pressure was brought to bear, the parties were
free to reject a proposed unfair contract.
3. Possibility of performance
A legally enforceable contract cannot be based on a promise that is impossible to fulfill. A party who
promises to do something that is merely difficult to perform, or poses unforeseen expenses, is still
bound by the terms of the contract.
C. Kinds of Valid Consideration
Consideration required in an enforceable contract can take various forms such as exchange of promises,
forbearance, and pledges or subscriptions.
1. A Promise for a Promise
The most common form of valid consideration is the promise of money by one party for
the promise of an act by another. The mere promise to act is usually deemed valid
consideration.
2. A Promise of Forbearance
Valid consideration is not necessarily either the performance of an act or the payment of
money. One party to a contract may, for a variety of reasons, wish to exchange his or her
promise to pay money for a promise of inaction from the other party.
3. A Pledge or Subscription
Churches, temples, mosques, hospitals, colleges, cultural institutions, charitable
organizations, and other groups frequently raise money by asking for a pledge.
As pledges are usually for some worthy cause, the courts have held that they are
enforceable.
D. CONSIDERATION AND THE UNIFORM COMMERCIAL CODE
In some cases that involve contracts to sell goods, the Uniform Commercial Code dispenses with the
requirement of consideration in certain contracts that involve any of the following:
· A merchant’s written firm offer that provides that the contract is irrevocable
· A written discharge of a claim for an alleged breach of contract
· Modifications of existing contracts (UCC 2-209)
E. GENERAL RELEASE
The Uniform Commercial Code provides that “any claim or right arising out of an alleged breach can
be discharged in whole or in part without consideration by a written waiver or renunciation signed and
delivered by the aggrieved party.” Such a written agreement is called a general release.
F. AGREEMENTS THAT LACK CONSIDERATION
Certain agreements are not enforceable because they lack consideration.
1. Barren Promises
A promise to do something that one is already required to do either by law or by contract
represents no additional sacrifice and is not valid consideration. A promise to pay an
existing debt or to obey the law, or a similar promise, is called a barren promise; and
the obligation to perform acts already required is known as a preexisting duty.
2. Gratuitous Promises
A person who makes a promise without requiring some benefit in return has made a
gratuitous promise. Agreements based on such one-sided promises are generally not
enforceable.
3. Illusory Promise
An illusory promise consists of an indefinite, open-ended statement purporting to be an
agreement. An illusory promise is neither consideration nor an enforceable agreement. A
person who makes an illusory promise never commits to a specific or absolute act.
4. Agreements Supported by Moral Consideration
A person is not legally bound to do what he or she may feel obligated to do because of
love, friendship, honor, sympathy, conscience, or some other moral consideration.
5. Agreements Supported by Past Consideration
Past consideration is a promise to repay someone for a benefit after it has been
received. Such a promise is generally not valid consideration and is considered a
gratuitous promise, except in cases such as described in the discussion of moral
consideration.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 10. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Explain consideration and define forbearance.
Consideration is the promises exchanged by the parties to a contract: either to give up something of
value they have a legal right to keep; to do something they are not otherwise legally required to do; or
to refrain from an action. The promise to refrain from doing something that a party has a legal right to
do, or the promise of inaction, is known as forbearance.
Text Pages: 154
PowerPoint: Slide 2
Discussion Questions: 26
Think Critically About the Law: 35
Case Questions: 38
LO2. Identify and explain the three essential characteristics of valid consideration.
The three essential characteristics of valid consideration are (a) legality—a valid contract does not exist
if the consideration is a promise to perform an illegal act, or to avoid performing an act that is legally
required to be performed; (b) adequacy—many consumer statutes have now been passed and
unconscionable contracts and contracts of adhesion are no longer enforced; and (c) the possibility of
performance—a legally enforceable contract cannot be based on a promise that is impossible to fulfill.
Text Pages: 154-155
PowerPoint: Slide 3
Discussion Questions: 27, 28, 30
Thinking Critically About the Law: 33, 34, 35
Case Questions: 37, 38 39
Case Analysis: 41. 42
LO3. Describe the kinds of valid consideration, including (a) a promise for a promise, (b) a
promise of forbearance, and (c) a pledge or subscription.
Consideration can be based on a promise being exchanged for another promise. It also can be based on
forbearance, a party’s promise not to do something he or she has a legal right to do. A third kind of
valid consideration is a pledge, or subscription (a promise to make a donation).
Text Pages: 155-157
PowerPoint: Slides 4- 9
True/False Quiz 13
Thinking Critically About the Law: 34, 35
Case Questions: 39
Case Analysis: 41-43
LO4. Discuss the situations in which the UCC dispenses with the requirement of consideration in
contracts to sell goods.
The UCC dispenses with the requirement of consideration in contracts to sell goods in the following
situations: (a) a merchant’s written firm offer that provides that the contract is irrevocable, (b) a written
discharge of a claim for an alleged breach of contract, and (c) modifications of existing contracts.
Text Pages: 157
PowerPoint: Slide 10
LO5. Define the term general release.
A person who has a claim against another may give up, or release, his or her claim without an exchange
of consideration by making a written statement to that effect. An example of a general release appears
in Figure 9.1.
Text Pages: 157-158
PowerPoint: Slide 11
LO6. Identify four kinds of agreements that lack consideration.
Four kinds of agreements that lack consideration are (a) barren promises, (b) gratuitous promises, (c)
agreements supported by moral consideration, and (d) agreements supported by past consideration.
Text Pages: 158-1660
PowerPoint: Slides 12-17
Discussion Questions: 29