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Exam 15: Consideration

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Question 31

Multiple Choice

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Nina, an experienced pool contractor, and Charlie, a homeowner, agree on a price for Nina to build a pool in Charlie's backyard. While the area is not known for rocks, Nina unexpectedly encounters a significant problem with solid rock in the backyard when she starts to dig. She tells Charlie that unless she receives an extra $5,000, she cannot complete the job. Charlie agrees, thinking to himself that he has a way out. When Nina finishes the pool, Charlie refuses to pay the additional $5,000. Which of the following is the most likely result of their dispute?

A) Charlie will be required to pay because a typical, unilateral contract is involved, and he got the benefit of his bargain.
B) Charlie will be required to pay because a typical, bilateral contract is involved, and he got the benefit of his bargain.
C) Charlie will be required to pay because unforeseen circumstances are an exception to the preexisting duty rule.
D) Charlie will not be required to pay because he provided no additional consideration, and the preexisting duty rule applies.
E) Charlie will only be required to pay ½ of the agreed upon amounts because of the calculations involved under the preexisting duty rule.

F) A) and B)
G) C) and D)

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Question 32

Multiple Choice

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Which of the following is true regarding the effect of a debtor offering to pay a different type of payment, for example, goods instead of money, on a debt for which there is not a dispute over the amount or existence of the debt, and the creditor agrees?

A) A liquidated debt is involved, and there is an accord and satisfaction.
B) A liquidated debt is involved, and there is an accord but no satisfaction.
C) A liquidated debt is involved, and there is not a satisfaction or an accord.
D) An unliquidated debt is involved, and there is an accord and satisfaction.
E) An unliquidated debt is involved, and there is an accord but not satisfaction.

F) A) and D)
G) All of the above

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Question 33

Multiple Choice

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Which statement is true regarding illusory promises?

Genny and Luke contract for Luke to build a home for Genny. Luke promises to build the house for $100,000 but a neighboring forest fire destroys the framing during construction. Luke must reframe the house. Does the preexisting duty rule prevent Luke from enforcing a contract in which he charges additional money to Genny?

Explain why a court does not look at the adequacy of consideration. Is there ever a time that the courts look at adequacy of consideration? Explain?

Promissory estoppel is an exception to the rule requiring consideration.

[Debt Trouble] Isabella has significant credit card debt following a semester abroad in Italy. Her tuition and living expenses had ended up costing more than she had anticipated. Isabella recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local Italian university for tuition and book expenses. Isabella is in negotiations with the university over the amount owed because one of the classes she had originally enrolled in was cancelled halfway through the semester. While the cancellation of that class did not significantly affect her academic career, Isabella thought that she should get at least some deduction on the overall tuition bill. Isabella called Credit Card Company A and told them that she was a student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Isabella just to pay $50, and that would be considered payment in full. The representative sent Isabella an e-mail to that effect. Isabella was very pleased and immediately quit her job at the campus bookstore, believing that with the reduction from Credit Card Company A, she would have a sufficient amount of extra money. Isabella then called Credit Card Company B and once again pled her case as a student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Transfer details regarding the car were worked out through e-mail. Finally, Isabella sent the university a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the university did indeed cash the check. Isabella, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950, Credit Card Company B sent her a bill for $3,000, and the university sent her a check for $1,000 along with a bill for $2,000. Faced with all these claims, Isabella decided to look for work, and ended up finding work she enjoyed as a translator. Assume all credit card company representatives had authority to make the agreements at issue. -Which of the following should be the result in regard to Isabella's obligation to Credit Card Company B?

In a bilateral contract, consideration for a promise is a return promise.

Barbara promises to stop running her dog grooming business. This is not valid consideration.

When an accord and satisfaction is at issue, what is the new agreement to pay less than the creditor claims is owed called?

What are two exceptions to the rule requiring consideration?

Assuming no exception applies, which of the following is true regarding the effect of a debtor offering to pay less money than is owed as full payment on a debt for which there is no dispute over the amount or existence of the debt, and the creditor agrees?

[Car Trouble] Jennifer wants to sell her car and Timmy agrees to purchase it. Jennifer and Timmy become involved in an over-the-phone negotiation and settle on a price of $1,000. Jennifer lives three hours from Timmy but agrees to deliver the car to him in his home state and take the bus back, provided Timmy promises to purchase the vehicle. She drives three hours. Upon arrival, Timmy says he will not purchase the vehicle unless Jennifer agrees to go to the dealer, get a second set of $500 SmartKeys, and mail the keys to Timmy within three weeks. Having driven all that way, Jennifer agrees. Timmy gives Jennifer the $1,000, using money he borrowed from Joe and promised to repay. Jennifer accepts the money and leaves. Jennifer never sends Timmy the second set of keys. Timmy later decides the car is worth only $500. He decides not to pay Joe and instead gives the vehicle to Joe, explaining his plan. Joe accepts the car and drives away, secretly planning to sue Timmy for the rest of the money. When Timmy is sued by Joe, he makes a claim against Jennifer and claims she should have to compensate him for losses because they never had a valid contract since the car was not worth the $1,000 Jennifer claimed it was. -Does Timmy have a breach of contract claim against Jennifer because Jennifer failed to send the second set of keys?

"Because you have worked so hard this year, I will give you a $2,500 Christmas bonus" would be consideration to support a contract.

An illusory promise can constitute consideration in some contracts.

Jeremy promises Gillian a job if she moves to California for the job. Gillian, excited for the new job, quits her current job and moves across the country to California in reliance on Jeremy's promise of the new job. Jeremy, however, tells Gillian once she gets to California, he has no job for her. Which doctrine might Gillian use to sue Jeremy?

A promise to do something that you are already obligated to do is generally a valid consideration.

[Debt Trouble] Isabella has significant credit card debt following a semester abroad in Italy. Her tuition and living expenses had ended up costing more than she had anticipated. Isabella recently took a business law class and thought that she might be able to find a way out of her troubles. She owed $2,000 to Credit Card Company A and $3,000 to Credit Card Company B. She also owed $2,000 to the local Italian university for tuition and book expenses. Isabella is in negotiations with the university over the amount owed because one of the classes she had originally enrolled in was cancelled halfway through the semester. While the cancellation of that class did not significantly affect her academic career, Isabella thought that she should get at least some deduction on the overall tuition bill. Isabella called Credit Card Company A and told them that she was a student and could not afford to pay the entire $3,000 she owed. The representative of Credit Card Company A, who was working her last day, told Isabella just to pay $50, and that would be considered payment in full. The representative sent Isabella an e-mail to that effect. Isabella was very pleased and immediately quit her job at the campus bookstore, believing that with the reduction from Credit Card Company A, she would have a sufficient amount of extra money. Isabella then called Credit Card Company B and once again pled her case as a student. She talked Credit Card Company B into taking a used car with a blown-up engine worth around $1,000 in exchange for the debt. Transfer details regarding the car were worked out through e-mail. Finally, Isabella sent the university a check for $1,000 marked "paid in full." Much to her surprise and pleasure, the university did indeed cash the check. Isabella, however, was distraught to find that within 30 days, Credit Card Company A sent her a bill for $1,950, Credit Card Company B sent her a bill for $3,000, and the university sent her a check for $1,000 along with a bill for $2,000. Faced with all these claims, Isabella decided to look for work, and ended up finding work she enjoyed as a translator. Assume all credit card company representatives had authority to make the agreements at issue. -What is Credit Card Company A's best argument in relation to enforcing Isabella's obligations?

Timmons promise to pay Carl $500 to come to his house to fix his computer's hard drive that crashed. Carl comes over and fixes the hard drive. This is what type of a contract?

When does a court weigh the adequacy of consideration?