Contracts · Consideration

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MBE Contracts: Consideration

Explore the foundational principles of consideration in contract law crucial for success on the MBE.

Overview

Consideration is a fundamental concept in contract law, representing the value exchanged between parties that renders a contract enforceable. It can take the form of a benefit to one party or a detriment to another, thus establishing the mutuality of obligation essential for contract formation. The MBE tests on consideration often examine the adequacy of consideration, its enforceability, and the exceptions such as past consideration or moral obligations.

Key issues include whether consideration has been exchanged, the sufficiency of the consideration (not its adequacy), and special scenarios where consideration may be deemed lacking or altered, such as in modifications of existing contracts or the enforceability of promises made under seal. It is critical for students to understand the delineation between enforceable promises that include valid consideration and mere gratuitous promises or offers lacking mutuality or commitment.

Key Rules
  1. Consideration must be something of value, which can be a promise, an act, or forbearance.
  2. Pre-existing duty rule: performance of a pre-existing duty is not valid consideration.
  3. Past consideration is generally not sufficient to support a new contract.
  4. The adequacy of consideration is not evaluated by courts, provided it is legally sufficient.
  5. A promise is enforceable if it is made in writing and signed, regardless of consideration, in some jurisdictions.
Common Question Patterns
  • Determining if a promise constitutes valid consideration.
  • Assessing whether modifications to a contract have legally sufficient consideration.
  • Evaluating scenarios involving past consideration or moral obligations.
Practice Questions

1. Jane promises to pay Bob $100 if Bob cleans her car. Bob cleans the car, but Jane refuses to pay. Can Bob enforce this promise?

A. A) Yes, because Bob provided consideration by cleaning the car.(Correct)

B. B) No, because Jane's promise was conditional on future performance.

C. C) Yes, because Jane's promise was a gift.

D. D) No, because Jane's promise is not written.

Explanation: Bob can enforce the promise because his act of cleaning the car constitutes valid consideration for Jane's promise.

2. Tom agrees to wash Sarah's car for $50. After he starts, Sarah tells Tom she will only pay him $30. Tom agrees. Is Sarah obligated to pay Tom $50?

A. A) Yes, because Tom originally had an agreement for $50.

B. B) No, because Sarah does not have to pay more than she agreed.

C. C) Yes, because Tom's performance is already considered as sufficient.

D. D) No, because Tom's agreement to accept less constitutes modification without consideration.(Correct)

Explanation: Sarah is not obligated to pay $50, as the modification of the agreement to $30 lacks new consideration.

3. A seller promises to sell a car to a buyer for $5,000. Later, the buyer decides they no longer want the car and asks to cancel the agreement. Can the seller enforce the contract?

A. A) Yes, because the buyer’s decision is irrelevant once the contract is formed.(Correct)

B. B) No, because the seller has not yet done anything in return.

C. C) Yes, because sellers can enforce contracts for the sale of goods.

D. D) No, because the contract is not in writing.

Explanation: The seller can enforce the contract because a binding contract was formed based on the offer and acceptance despite the buyer's later decision.

4. Mike receives a call from his friend Lisa, who says she will pay him $1,000 to help her move next weekend. Mike begins to prepare for the move. Is Lisa’s promise enforceable?

A. A) Yes, because Mike’s preparation constitutes consideration.(Correct)

B. B) No, because Lisa's promise is a mere gift.

C. C) Yes, because the promise involves a legal detriment to Mike.

D. D) No, because there wasn't a written contract.

Explanation: Lisa's promise is enforceable because Mike's preparation and commitment to help represent consideration.

5. A company promises its employee a bonus of $1,000 for meeting certain sales targets this year. The employee meets the targets. Can the employee enforce this promise for the bonus?

A. A) Yes, because the employee met the conditions of the promise.(Correct)

B. B) No, because bonuses are generally not enforceable.

C. C) Yes, but only if the promise was made in writing.

D. D) No, because employers can retract promises unconditionally.

Explanation: The employee can enforce the promise because they fulfilled the condition set by the company, securing the bonus.

Test-Taking Tips
  • Carefully analyze whether consideration is present; remember that both parties must incur a legal detriment or benefit.
  • Be cautious of different forms of consideration, including conditional promises and modifications of existing contracts.
  • Practice recognizing when past consideration or moral obligations do not create enforceable contracts.

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