Consideration (bargained-for exchange) - Next Generation Bar Exam

1. What saves a requirements contract from being illusory?

   The buyer's obligation to purchase in good faith all the goods it actually requires. The good-faith limit means the buyer has given up the freedom to buy elsewhere.

2. What constitutes consideration under the bargained-for exchange test?

   A performance or return promise that the promisor seeks in exchange for its promise and that is given in exchange for it. The test focuses on reciprocal inducement, not on benefit to the promisor or detriment to the promisee alone.

3. A promises to pay B $500 'because you rescued my dog last month.' Why is the promise unenforceable under the traditional rule?

   The rescue was past consideration, not given in exchange for the promise. A benefit conferred before the promise was made cannot have been bargained for.

4. What is the preexisting duty rule?

   Performing or promising to perform an existing legal duty is not consideration. A promise to pay more for the same performance the promisee already owed is unenforceable under the traditional rule.

5. How does the Restatement (Second) treat a recital of nominal consideration that was not actually bargained for?

   As not consideration, except in option contracts and guaranties. A sham recital does not convert a gratuitous promise into a bargain.

6. What is the consideration for a promise in a unilateral contract?

   The performance the offer requests. The offeree gives consideration by performing, not by promising.

7. What makes a promise illusory?

   The promisor reserves unlimited discretion whether to perform. An illusory promise commits the promisor to nothing and so cannot serve as consideration.

8. An uncle promises his nephew $5,000 if the nephew refrains from smoking until age 21, and the nephew complies. What supplies consideration?

   The nephew's bargained-for forbearance from a legal right. Giving up conduct one is legally entitled to engage in is consideration, even if it benefits the promisee.

9. What distinguishes a bargained-for condition from a condition on a gift?

   Whether the promisor sought the condition as the price of the promise rather than as a step to receiving a gift. A promise to give a coat if the promisee walks to the store to get it is a conditional gift, not a bargain.

10. When is forbearance from asserting a claim consideration even if the claim proves invalid?

    When the claimant honestly believes the claim may be valid. Good-faith surrender of a doubtful claim is bargained-for, whether or not the claim would have succeeded.

11. What role does the adequacy of consideration play in determining whether a promise is enforceable?

    It plays no role, absent fraud, duress, or unconscionability. Courts do not weigh the relative value of what each party gave, though gross inadequacy may evidence another defense.

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