MODULE 23 CONTRACTS 129

EXAMPLE: C agrees to accept $700 for a $900 debt that D owes C. The amount is not disputed. D still owes
C the additional $200.
(a) But if debtor incurs a detriment in addition to paying, creditor's promise to accept lesser
sum will be binding
EXAMPLE: X owes Y $1,000. Yagrees to accept $500 and X will also install Y's new furnace at no ad-
ditional cost.
(b) Note that agreement to accept a lesser sum is enforceable if amount of debt is unliquidated
(disputed) because both parties give up right to more favorable sum
EXAMPLE: C claims that D owes him $1,000. D claims that the amount owed is $600. If C and D
agree to settle thisfor $700, the agreement is supported by consideration since C gave up right to at-
tempt to collect more than $700 and D gave up right to attempt settlement for a lesser sum.
(2) Promise to pay someone for refraining from doing something s/he has no right to do is unen-
forceable
(3) Promise to pay someone to do something s/he is already obligated to do is not enforceable.
EXAMPLE: Agreement to pay police officer $200 to recover stolen goods is unenforceable.
EXAMPLE: X promises to pay Y, ajockey, $50 to ride as hard as he can in the race. Y already owes his em-
ployer, Z, that duty so there is no consideration to enforce the agreement.
(a) Agreement to pay more to finish a job, such as building a house, is unenforceable unless
unforeseen difficulties are encountered (e.g., underground stream or marshy land
under a
house)
5. Past consideration (consideration for a prior act, forbearance, or agreement) is not sufficient for
new contract because it is not bargained for
6. Moral obligation is not consideration
(1) In majority of states these following need no consideration
(a) Promise to pay debt barred by statute of limitations.
(b) Promise to pay debt barred by bankruptcy. Promise must adhere to strict rules stated in
Bankruptcy Reform Act of 1978 concerning reaffirmations of dischargeable debts.
7. Consideration must be legally sufficient
(1) This does not refer to amount of consideration but refers to validity of consideration
EXAMPLE: C does not have a CPA license. For $1,000 he promises not to hire himself out as a CPA. This
promise is not supported by legally sufficient consideration because C has no right to hire' himself out as a
CPA.
8. Adequacy of consideration-courts generally do not look into amount of exchange as long as it is
legal consideration and bargained for
9. In majority of states, seals placed on contracts are not substitutes for consideration
10. Modifying existing contracts
(1) Modification of contract needs new consideration on both sides to be legally binding
EXAMPLE: S agrees in a written contract to sell a piece of land to P for $40,000. S later changes his mind
and demands $50,000 for the same piece of land. The original contract is enforceable (at $40,000) even if P
agrees to the increased price because although P has agreed to give more consideration, S has not given any
new consideration.
(2) Under UCC, a contract for sale of goods may be modified orally or in writing without consid-
eration if in good faith
EXAMPLE: S·agrees to sell P 300 pairs of socks for $1.00 each. Due to rapid price increases in S's costs, he
asks P if he will modify the price to $1.20 each. P agrees. The contract as modified is enforceable because it
is covered under the UCC and does not need new consideration on both sides.
11. Requirements contracts
(1) If one party agrees to supply what other party requires, agreement is supported by considera-
tion because supplying party gives up right to sell to another; purchasing party gives up right

to buy from another

(a) Cannot be required to sell amounts unreasonably disproportionate to no~al requirements
(b) Law requires good faith on performance of parti~s