Solution Manual For Business Law With Ucc Applications 15th Edition Paul Sukys

Solution Manual for Business Law with UCC
Applications, 15th Edition Paul Sukys
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Solution Manual for Business Law with UCC Applications, 15th Edition Paul Sukys
1
Chapter 09 - Consideration and Cyber-Payments
Chapter 9
Consideration and Cyber-Payments
Key Terms
Accord (p. 273)

Accord and satisfaction (p. 273)
Bargained-for exchange (p. 266)
Consideration (p. 265)
Cryptocurrency (p. 271)
Disputed amount (p. 272)
Estoppel (p. 274)
EU Data Protection Directive (p. 279)
EU E-Privacy Directive (p. 279)
Firm offer (p. 275)
Forbearance (p. 265)
Illusory promise (p. 276)
Irrevocable offer (p. 275)
Legal detriment (p. 265)
Locus sigilli (p. 273)
Option (p. 275)
Past consideration (p. 276)
Preexisting duties (p. 276)
Promissory estoppel (p. 274)
Release (p. 270)
Safe Harbor Principles (p. 279)
Satisfaction (p. 273)
Seal (p. 273)
Statutes of limitations (p. 274)
Unconscionable (p. 267)
Learning Objectives
After reading this chapter, students should be able to accomplish the following objectives:
1. Define consideration.
2. Identify the different types of detriment
3. Explain the characteristics necessary for valid consideration.
4. Define unconscionable.
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5. Explain whether a promise not to sue can be consideration.

6. Explain whether a charitable pledge can be consideration.
7. Define accord and satisfaction.
8. Identify those enforceable contracts that lack consideration.
9. Explain promissory estoppel.
10. Describe the issues involved in cyber-payments
Major Concepts
9-1 Requirements of Consideration
The fifth element necessary to any valid contract is consideration. Consideration is the
mutual exchange or promise to exchange benefits and sacrifices between contracting
parties. Consideration has three requirements: (1) promises made during bargaining depend
on the consideration to be received, (2) the consideration must involve something of value,
and (3) the benefits and detriments promised must be legal.
9-2 Types of Consideration
Generally, consideration takes the form of money, property, or services. There are certain
special kinds of agreements and promises to which the benefits and sacrifices are unique.
Among these are promises not to sue and charitable pledges.
9-3 Problems with Consideration
Problems sometimes arise when the consideration involved in a contract is money and the
parties do not agree on the amount of money owed. If there is a genuine dispute, a creditor
can accept an amount as full payment even though it is less than the amount claimed. Once
the creditor has accepted the lesser amount, the dispute is settled by an act of accord and
satisfaction. If the dispute is not genuine, accord and satisfaction do not apply. As a general
rule, contracts are not enforceable without consideration; however, some states eliminate
the need for consideration in some agreements. These agreements include promises bearing
a seal, promises after discharge in bankruptcy, debts barred by the statute of limitations,
promises enforced by promissory estoppel, and options governed by the UCC. Other
agreements that seem to involve consideration but that the courts will not enforce involve
preexisting duties, past consideration, illusory promises, and gifts.
9-4 Cyber-Payment Tactics and Concerns
The measurement of consideration has become an issue when consumers buy and sell
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online. Consumers can comparison shop online using shopping search engines, patronizing
user-friendly industries, and shopping with companies that provide price comparisons on
their websites. Cyber-shopping hidden costs include Internet access fees and shipping and
handling costs. Some illegal practices involved in online shopping include discriminatory
price-setting, credit card fraud, and bait-and-switch schemes. Online consumers can choose
from several payment methods including credit cards, debit cards, smart cards, and
alternative cyber-payment systems such as PayPal. Privacy protection and security,
however, are limited.
Chapter Outline
I. Requirements of Consideration
A. The Nature of Consideration
• Consideration consists of a mutual exchange of gains and losses between contracting

parties.
• The legal term used to designate the gain that each party experiences is that party’s legal
benefit.
• The legal term used to describe the sacrifice that each party must experience is that
party’s legal detriment.
• The term “forbearance” is used to reference the type of legal detriment that involves
refraining from doing something (or promising not to do something) that one has a legal
right to do.
B. The Characteristic of Consideration
• Consideration has three characteristics.

o The agreement must involve a bargained-for-exchange.
o The contract must involve adequate consideration.
o The benefits and detriments promised must themselves be legal.
• In general, the courts do not look into the adequacy of consideration.
• A court may refuse to enforce a contract or any clause of a contract if it considers the
contract or clause unconscionable.
• Consideration requires that the benefits and sacrifices promised between the parties be
legal.
II. Types of Consideration
A. Money as Consideration
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• The shift from a barter to a cash economy occurred when transporting goods to the
market became difficult and hazardous
o This shift to a cash economy was also accelerated by the need for credit.
• Today the people are once again in an era of change where they move from a cash/credit
economy to one based almost totally on electronic transfer
o When electronic transfers are involved, people still tend to think in terms of cash.
B. Property and Services as Consideration
• Before money in the form of cash was accepted as a medium of exchange, consideration
consisted of property and services.
• The courts have held that Barter agreements contain valid consideration.
C. Promises Not to Sue
• A promise not to sue, when there is the right or at least the apparent right, to sue, is
enforceable when it is supported by consideration.
• A promise not to sue in exchange for an amount of money is a customary way to settle
or prevent a pending lawsuit.
• A promise not to sue is commonly called a release.
D. Charitable Pledges
• Under traditional rules, charitable pledges are not enforceable as contractual obligations
because they are not supported by consideration to enforce charitable pledges as though
they were contractual obligations.
• There are three ways that the courts can seek to uphold charitable pledges:
o The first way involves actual consideration which occurs when charitable
contributions are made on the condition that the promisor be remembered for the
gift by having his or her name inscribed in some way on a memorial associated
with the project.
▪ Some courts see this promise to install a memorial to the pledgor as
consideration.
o A more contemporary approach is to use either promissory estoppel or public
policy to support the claim.
o When there is no promise to carry out a specific project, the courts have held that
each pledge made is supported by the pledges of all others who have made similar
pledges.
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E. Bitcoin and the Cryptocurrency Revolution
• The most familiar means of buying and selling is through the use of money.
• Recently, a new form of consideration has become part of our global economy.
o This new form of consideration is referred to as bitcoin.
o Bitcoin, however, is actually a subset of cryptocurrency, which is a digital form
of consideration that employs cryptography to make certain that contracts using
bitcoin as consideration are secure, controlled, and verified.
o One big advantage of bitcoin, as well as all other forms of cryptocurrency, is that
it does not involve fees that might be attached to a transaction using conventional
currency controlled by a banking institution.
o Another advantage is that bitcoin transactions are verified and secured by bitcoin
miners who are paid in bitcoin to effect verification and maintain the security of
bitcoin transfers.
III. Problems with Consideration
A. Accord and Satisfaction
• A disputed amount is one on which the parties never reached mutual agreement.
• If a creditor accepts as full payment an amount that is less than the amount due, the
dispute has been settled by an accord and satisfaction.
• An accord and satisfaction is a new agreement resulting from a bona fide dispute
between the parties as to the terms of their original agreement.
o The mutual agreement to the new terms is the accord; performance of the accord
is the satisfaction—thus, accord and satisfaction.
B. Enforceable Agreements
• Some states eliminate the requirement of consideration in specific types of agreements.

o Some typical agreements falling into this category include promises under seal,
promises after discharge in bankruptcy, debts barred by the statute of limitations,
promises enforced by promissory estoppel, and options governed by the UCC
• A seal is a mark or an impression placed on a written contract indicating that the
instrument was executed and accepted in a formal manner.
• Today, a seal is usually indicated by the addition of the word seal or the letters “L.S.”
(locus sigilli, meaning “place of the seal”) following a party’s signature.
• Years ago, contracts under seal required no consideration.
• Most states have abolished the concept that contracts under seal require no
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consideration.
• The UCC has eliminated the use of the seal in all sale-of-goods contracts; however, a
few states still require the use of the seal in real property and certain other types of
transactions.
• Persons discharged from indebtedness through bankruptcy may reaffirm their
obligations, prompted perhaps by moral compulsion.
• The bankruptcy court must now hold a hearing when a reaffirmation is intended,
informing the debtor that reaffirmation is optional, not required, and of the legal
consequences of reactivating a debt.
o It is also up to the court to approve such reaffirmations.
• State laws, in most cases, provide that no new consideration need be provided in support
of reaffirmation.
• Statutes of limitations limit the time within which a party is allowed to bring suit.
• Debtors may revive and reaffirm debts barred by the statutes of limitations without the
necessity of new consideration.
• Affirmation will result from the part payment of the debt.
• The doctrine of estoppel denies rights to complaining parties that are shown to be the
cause of their own injury.
• Promissory estoppel is a legal doctrine that restricts a party from denying that a
promise was made under certain conditions, even though consideration has not been
exchanged to bind an agreement.
• An option is the giving of consideration to support an offeror’s promise to hold open an
offer for a stated or a reasonable length of time.
• In some cases, an offer in writing by a merchant, stating the time period during which
the offer will remain open, is enforceable without consideration.
o The offer, which is called a firm offer or an irrevocable offer, must be signed by
the offeror, and the time allowed for acceptance may not exceed three months.
C. Unenforceable Agreements
• The following are certain promises that the courts will not enforce because they lack
even the rudimentary qualities of valid consideration.
o Preexisting Duties
▪ A promise to do something that one is already obligated to do by law or by
some other promise or agreement cannot be made consideration in a new
contract
▪ Such obligations are called preexisting duties.
o Past Consideration
▪ A promise to give another something of value in return for goods or services
rendered and delivered in the past, without expectation or reward, is past
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consideration.
▪ Only when goods or services are provided as the result of bargained-for
present or future promises is an agreement enforceable.
o Illusory Promises
▪ An illusory promise is one that seems genuine but that on close
examination actually fails to obligate the promisor to do anything.
▪ Illusory promises fail to provide the mutuality of promises required in
establishing consideration.
o Future Gifts and Legacies
▪ The promise of a gift to be given at some future time or in a will is not
enforceable if no consideration is given for the promise.
▪ Illusory promises include promises to provide gratuitous services or to lend
one’s property without expectation of any benefits in return.
IV. Cyber-Payment Tactics and Concerns
A. Cyber-Price and Competition
• Consumers have a wide variety of ways to comparison shop when it comes to

establishing consideration in online contracts.
• Some online cyber-consumers now make regular use of electronic agents, referred to as
a bot (robot, shopping bot, cyber-bot, or e-bot) to comb the vast reaches of cyberspace
to find the lowest price available on an item or a service.
• A danger of cyber-shopping involves hidden costs.
o One hidden cost is the Internet access fees.
o Another “hidden” cost comes in the form of shipping and handling fees.
• Cyber-buyers and cyber-sellers must both be attuned to the difficulties lying in wait
when they enter the online cyber-commerce arena
o Sellers are especially vulnerable to credit card fraud and identity fraud.
• To protect consumers, Congress passed the Identity Theft and Assumption Deterrence
Act (ITADA).
• ITADA was amended by the Identity Theft Penalty Enhancement Act (ITPEA).
o The amendment adds a new crime, called aggravated identity theft, to the original
statute.
B. Cyber-Payments and Cyber-Contracts
• One of the most popular cyber-payment methods is by credit card or debit card.
• Many consumers are moving to a third option, the alternative payment systems, such as
PayPal.
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• The United States is not as up-to-date as the European Union in providing data and
privacy protection to its consumers.
• The EU Data Protection Directive along with the EU E-Privacy Directive guarantee the
rights of European citizens while, at the same time, ensuring the smooth exchange of
data among those nation-states that honor the privacy and data protection standards
themselves.
• U.S. corporations that are involved with EU corporations must demonstrate that, despite
the lack of legislation in the United States, the companies themselves will promise to
honor the same degree of protection to data and to privacy as guaranteed by the EU.
o These guarantees have been labeled the Safe Harbor Principles.
▪ They are enforced by the U.S. Department of Commerce.
o The U.S. consumers who deal with European companies or with U.S. companies
that follow the EU standards will have more security protection than those who
deal with purely U.S.
o The safe harbor dispensation is at risk of being destabilized by blowback from the
discovery of the U.S. PRISM program, a project run by the National Security
Agency that permitted the governments of the United States and the United
Kingdom to run an extensive Internet communication collection process that
compromised Google and other Internet corporations.
▪ In the wake of the PRISM revelation, the European Union has threatened to
make it even more difficult for non-European companies to qualify for safe
harbor exemptions.
Background Information
A. Cross-Cultural Notes
1. The Masai of East Africa have long used cattle as a medium of exchange, particularly as
dowries.
2. The United Nations Convention on Contracts for the International Sale of Goods
(CISG) treats the issue of consideration differently from what was traditionally thought
needed. There is no specific mention of consideration anywhere in the CISG. See
Christopher C. Kokoruda, The UN Convention on Contracts for the International Sale
of Goods—It’s Not Your Father’s Uniform Commercial Code, Vol. 85 Jun F.L B.J.
B. Historical Notes
1. Medieval English lawyers invented the verbs agreare (to agree) and barganizare (to
bargain) to describe the action of a contract, which previously had been described by the
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words covenant and contract. Later, the action of assumpsit was used, a promise by
which someone undertakes or assumes an obligation to someone else.
2. In early America, contract law was less enforced and more flexible than land law or
civil procedure. Consideration was regarded as an element that was not to be measured
by the court. For purposes of the law of contract, the price determined by parties was
proof of the market value. In actual practice, however, judges were often sympathetic to
the underdog in contract cases in which the uneducated or naive were manipulated by
those who were shrewder. As a result, rules of consideration were often bent.
C. State Variations
1. Traditionally, the seal took the place of consideration in Massachusetts. The case of
Knott v. Racicot, 442 Mass. 314, 812 N.E.2d 1207 (2004), however, abolishes the
presumption of consideration for option contracts executed under seal. This may bring
into question the use of the seal in relation to other purchase and sale agreements.
2. The statute of limitations for breach of a sales contract varies from state to state. For a
starting point on research on different statutes of limitations, see the Nolo website:
http://www.nolo.com/legal-encyclopedia/statute-of-limitations-state-laws-chart-
29941.html.
Terms
1. Another legal term for consideration is quid pro quo, which is Latin for “something in
return for something.”
2. Estoppel is a legal way to stop someone from making a claim or denial when previous
actions or words to the contrary have been made. The term estoppel comes from the French
word estoupail, which literally means “a stopper.”
Related Cases
1. In the case of Frey v. Sovine, 58 N.C. App. 731, 294 S.E.2d 748 (1982), Michael Sovine
wrote two bad checks to Robert Barrett. Barrett then had warrants issued for Sovine’s
arrest. Barrett also went to Sovine’s mother, threatening to have her son put in jail if he did
not pay his debts. Frightened by his threats, Mrs. Sovine signed a promissory note and a
deed of trust giving a security interest on her home to Barrett in exchange for his promise
not to pursue criminal charges against her son. The court held that the note and deed of
trust were void and unenforceable because they were executed as a result of coercion and
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duress. The court also ruled that the dismissal of the criminal warrants against her son was
not valid consideration because it was against public policy.
2. Danby guaranteed that the Osteopathic Association would receive credit for bank loans
totaling $55,000. The Association, a charity, was using the funds to build a hospital. After
the hospital had used $31,000 of the credit available, Danby became dissatisfied with the
construction of the hospital and attempted to withdraw his guarantee for the rest of the
promised funds. In Danby v. Osteopathic Hospital Association of Delaware, 34 Del. Ch.
427, 104 A.2d 903(Del.1954), the court ruled that, based on the doctrine of promissory
estoppel, the guarantee could not be withdrawn. The hospital relied on the promise—it
might never have agreed to a loan contract knowing funding might be withdrawn at any
point in the project.
3. A Porsche owner was experiencing problems with the automobile’s clutch system, so he
took the car in to be repaired. The new maintenance included a six-month warranty. When
the Porsche owner soon experienced the same problems, he took the car back to the shop,
where his chauffer was allegedly promised the repair would be covered by the warranty.
However, the repair shop later refused to pay for the repair, asserting that the repair was
due to driver abuse. The court ruled that the oral promise to repair allegedly made to the
chauffer was not supported by any new consideration and therefore did not constitute an
enforceable contract. Schupak v. Porsche Audi Manhattan, 541 N.Y.S.2d 412 (N.Y. 1989).
Teaching Tips and Additional Resources
1. Information from the Internal Revenue Service regarding bartering is available at

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Bartering-Tax-Center.
2. Additional information regarding Roman Emperor Justinian, referenced in the text, can be
found on the website of the Metropolitan Museum of Art:
http://www.metmuseum.org/toah/hd/just/hd_just.htm.
3. A timeline for philanthropy in the U.S. is available on the website of the National
Philanthropic Trust: http://www.nptrust.org/history-of-giving/timeline/2000s/.
4. The following link provides tips on online shopping:

https://www.consumer.ftc.gov/articles/0020-shopping-online.
5. Additional information regarding charitable giving may be found on the website of the
American Bar Association: https://www.americanbar.org/about_the_aba/charities/.
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6. Additional information regarding U.S. EU Safe Harbor Framework is available at

https://www.ftc.gov/tips-advice/business-center/privacy-and-security/u.s.-eu-safe-harbor-
framework.
7. Traditionally, charities have avoided litigation because it brings them bad publicity.
Recently, however, some nonprofit organizations, particularly museums, have begun to
pursue donors who have reneged on pledges. Some collectors are only willing to donate
partial interest in a work of art, which is a potential legal nightmare for museums because
heirs may not be willing to donate the remaining interests. Some museums usually accept
such arrangements only if donors sign an enforceable pledge to turn over the artwork at or
before their death. Information regarding a dispute between Ryan O’Neil and the
University of Texas regarding a drawing Andy Warhol did of Farah Fawcett is available at
https://www.dailymail.co.uk/usshowbiz/article-2565483/University-Texas-files-appeal-
Ryan-ONeals-win-multimillion-dollar-Warhol-portrait-Farrah-Fawcett.html.
8. Point out to students that a binding contract involves each party in suffering a detriment
and each in receiving a benefit. If you offer to sell your watch to a student for $25, you are
promising to give up your legal right to keep your watch (your detriment) in exchange for
the student’s legal right to keep the $25 (the student’s detriment). Your benefit is the
promise of the money; the student’s benefit is the promise of the watch.
9. Students may think that a bargained-for exchange must be verbally explicit or even
conducted orally. However, a bargained-for exchange may be implied by a price marked
on an item that a customer proves he or she is willing to pay by actually purchasing the
item. The merchant implies a promise that the item is worth its price, and the customer
implies a promise that the form of payment for the item is good.
10. Remind students of their study of ethics in Chapter 1. Have them propose what ethical
character traits might be applied in cases where the courts decide to refuse enforcement of
a contract because it is unconscionable.
11. Ask students to compare the bargaining practices involved in accord and satisfaction to
plea bargaining in criminal cases.
12. Remind students that the law cannot enforce moral obligations. Personal ethics may
motivate a debtor to reaffirm debts and renew obligations to creditors. However, the law
does not require it and has taken the position that it is more unethical for creditors to
pressure a debtor whose debts have legally been discharged through bankruptcy than it is
for the debtor to be unable to pay back debts.
Solution Manual for Business Law with UCC Applications, 15th Edition Paul Sukys
12
13. Direct pairs of students to create three proposals for contracts—two that are enforceable
and one that is unenforceable because it contains an illusory promise. Remind them that an
illusory promise of consideration is usually phrased in ambiguous terms or may seem to
mean something that it does not. Each pair of students can challenge another pair to
identify which of the three proposed contracts is the one with the illusory promise.
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Accord (p. 273)

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5. Explain whether a promise not to sue can be consideration.

9-1 Requirements of Consideration

9-2 Types of Consideration

9-3 Problems with Consideration

9-4 Cyber-Payment Tactics and Concerns

A. The Nature of Consideration

• Consideration consists of a mutual exchange of gains and losses between contracting

B. The Characteristic of Consideration

• Consideration has three characteristics.

II. Types of Consideration

B. Property and Services as Consideration

C. Promises Not to Sue

E. Bitcoin and the Cryptocurrency Revolution

III. Problems with Consideration

A. Accord and Satisfaction

• Some states eliminate the requirement of consideration in specific types of agreements.

IV. Cyber-Payment Tactics and Concerns

A. Cyber-Price and Competition

• Consumers have a wide variety of ways to comparison shop when it comes to

B. Cyber-Payments and Cyber-Contracts

Teaching Tips and Additional Resources

1. Information from the Internal Revenue Service regarding bartering is available at

4. The following link provides tips on online shopping:

6. Additional information regarding U.S. EU Safe Harbor Framework is available at

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