Contracts: Consideration & Defenses

What are the two essential elements of consideration in contract law?

The two essential elements of consideration are a bargained-for exchange and legal detriment to the promisee (or legal benefit to the promisor).

How do courts generally treat the adequacy of consideration (the "peppercorn" theory)?

Courts generally do not inquire into the adequacy of consideration, meaning even a mere "peppercorn" is sufficient, as long as it was bargained for and not a sham.

Why is "past consideration" generally not valid consideration for a new contract?

Past consideration is not valid because the act was already performed before the promise was made, meaning it lacks the required bargained-for exchange.

How does the preexisting duty rule apply to contract modifications under the common law versus the UCC?

Under the common law, modifying a contract requires new consideration due to the preexisting duty rule. Under the UCC, contract modifications do not require new consideration if made in good faith.

What are the elements required to establish promissory estoppel as a substitute for consideration?

The elements of promissory estoppel are: (1) a clear and definite promise, (2) the promisor should reasonably expect reliance, (3) actual and justifiable reliance by the promisee, and (4) injustice can only be avoided by enforcing the promise.

What is the difference between a mutual mistake and a unilateral mistake in contract law?

A mutual mistake occurs when both parties are mistaken about a basic assumption of the contract, making it voidable. A unilateral mistake involves only one party and generally does not void the contract unless the other party knew or should have known of the mistake.

What legal principle regarding mutual mistake was established in the classic case Sherwood v. Walker (the barren cow case)?

Sherwood v. Walker established that a contract is voidable if there is a mutual mistake regarding the essential nature or character of the subject matter, rather than just its value.

What elements must a party prove to void a contract based on fraudulent misrepresentation?

To void a contract for fraudulent misrepresentation, a party must prove a false representation of a material fact, made with scienter (knowledge of falsity or reckless disregard), intent to induce reliance, and justifiable reliance by the injured party.

What constitutes the defense of duress in contract formation?

Duress occurs when one party is forced to enter into a contract by a wrongful threat (such as physical violence or severe economic harm) that precludes the exercise of free will.

How does undue influence differ from duress as a contract defense?

Undue influence involves unfair persuasion by a dominant party over a subservient party, often exploiting a confidential or fiduciary relationship, whereas duress relies on coercion through wrongful threats.