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“The law has outgrown its primitive stage of formalism when the precise word
was the sovereign talisman, and every slip was fatal. It takes a broader view today. A
promise may be lacking, and yet the whole writing may be “instinct with an obligation,”
imperfectly expressed.”
Justice Cardozo
I. Teacher to Teacher Dialogue
classes did not require consideration because a man’s word was his bond. A noble’s family seal
evidenced that bond. The seal was affixed to the contract by way of pressing the signatorius
annulus (signet ring) against melted wax onto the contract. Not everyone was a member of
nobility, but all wanted their contracts to be binding. Thus, the concept of looking to bargained-
promises to do something he or she has no obligation to do but for the contract; and negative
detriment, where a person abstains from doing something he or she has a legal right to do but for
the contract. Consideration is usually what is bargained for. It is what is given up by one party to
induce a similar action by the other. Value means nothing.
public policy. For example, the U.S. Bankruptcy Code allows for court-approved reaffirmation of
debts that have already been discharged. Another example is found in many state statutes that
provide protection to charitable organizations making pledges as enforceable contracts even
though the donors may not be getting any consideration in return for their gifts.
CONSIDERATION AND
PROMISSORY ESTOPPEL
11
Chapter 11
II. Chapter Objectives
1. Define consideration and describe the requirements of consideration.
2. Define gift promise and identify whether gift promises are enforceable.
4. Define accord and satisfaction of a disputed claim.
5. Define and apply the equitable doctrine of promissory estoppel.
III. Key Question Checklist
What is a consideration?
Are gift promises enforceable?
IV. Text Materials
Consideration
Consideration is something of value given in exchange for a promise. It may be tangible or
Requirements of Consideration – Consideration requires that something of legal value be given.
This includes situations in which the promise suffers a legal detriment or the promisor receives a
Gift Promise
Gratuitous promises are unenforceable because they lack consideration. A completed gift
promise cannot be rescinded for lack of consideration.
Critical Legal Thinking – The law does not know how to measure moral obligation and seems
to simply punt on the issue rather than address it.
Case 11.1 Gifts and Gift Promises: Cooper v. Smith
800 N.E.2d 372, 2003 Ohio App. Lexis 5446 (2003), Court of Appeals of Ohio
Facts: Lester Cooper was hospitalized as a result of serious injuries. Julie Smith visited him
Cooper’s case, and the trial court affirmed the dismissal of the case. Cooper appealed.
Issue: Can Cooper recover the gifts or the value of the gifts he gave to Julie and Janet Smith?
Consideration and Promissory Estoppel
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because his engagement with Julie ended.
Ethics Questions: Was this just a “con” job to get Cooper’s money? Was there really a
relationship? If the first, then the women acted unethically; if the latter, Cooper did. Engagement
Promises that Lack Consideration
Illusory Promises – If one or more parties to a contract can opt not to perform their obligations,
the contract lacks consideration, and is considered illusory contracts.
Moral Obligations – Promises made due to moral obligations are generally not enforceable as
moral consideration is not a legal consideration.
perform it, the promise lacks consideration.
Past Consideration – Promises for prior actions are not supportable as consideration.
Case 11.2 Lack of Consideration: Noohi v. Toll Brothers, Inc.
Circuit
Facts: Toll Brothers had a deposit on a house, which it had not yet started to build. The
homebuyer could not get a mortgage to move forward with the project. Toll Brothers refused to
return the deposit though it had not started any construction. An arbitration clause ran against the
homebuyer as to this house contract. The plaintiffs (Mehdi Noohi and Soheyla Bolouri, husband
situation. Both are edgy business practices.
Special Business Contracts
Output Contracts – The seller agrees to sell all of his production to a single buyer, assuring the
Requirements Contract – The buyer contracts to purchase all of its requirements from a single
source, assuring the buyer a uniform supply and the seller, reduced expenses.
Best-Efforts Contracts – These require that one or both parties use their best efforts to obtain the
objective of the contract.
Settlement of Claims
Chapter 11
satisfaction, or a compromise.
Equity: Promissory Estoppel
The doctrine of detrimental reliance protects people from the injustice of the promisor revoking
Critical Legal Thinking – I think the standards are not hard to apply. This concept protects
V. Key Terms and Concepts
satisfaction of the original contract.
Accord and satisfaction—A settlement involving accord is called accord and satisfaction.
Bargained-for exchange—Exchange that parties engage in that leads to an enforceable
contract.
Best-efforts contract—A contract which contains a clause that requires one or both of the
irrevocable.
Illegal consideration—A promise to refrain from doing an illegal act. Such a promise will not
support a contract.
Illusory promise—A contract into which parties enter, but one or both of the parties can
choose not to perform their contractual obligations. Thus, the contract lacks consideration.
buyer.
Past consideration—A prior act or performance. Past consideration (e.g., prior acts) will not
support a new contract. New consideration must be given.
Preexisting duty—A promise lacks consideration if a person promises to perform an act or do
something he or she is already under an obligation to do.
reliance on the offer.
Requirements contract—A contract in which a buyer agrees to purchase all of its
requirements for an item from one seller.
Satisfaction—The performance of an accord.
Consideration and Promissory Estoppel
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the Unified Contract Law (UCL).