38. In this suit, which of the following arguments best supports the bank's claim for immediate payment?

A promise is supported by consideration if two things are true: (i) the promisee is giving up something of value or circumscribes his liberty in some way to suffer a legal detriment; and (ii) the promisor makes his promise as part of a bargained-for exchange for the promisee's legal detriment. The «legal detriment» aspect is mainly important where it is not clear that one party has really given anything up in the bargain. The «bargain» aspect is dispositive in situations that do not involve business dealings, such as a promise to make a gift.

One of the principal purposes of the bargain requirement is to prevent the enforcement of promises that, in reality, are just promises to make gifts. A promise to make a gift fails to be enforceable for lack of consideration not only because the promise is not part of the bargain, but also because no legal detriment is suffered by the promisee. Even in a business context, a promise can be unenforceable because of a lack of the requisite bargaining. A promise to make a gift may apply in business situations, especially promises to allow tenants to renew leases or any other quasi-option contract scenario.

The pre-existing duty rule means that if parties to an existing contract agree to modify the contract for the sole benefit of one of them, the modification will usually be unenforceable at common law, for lack of consideration.

The Statute of Frauds is a legal concept that requires certain types of contracts to be executed in writing, including: (i) any promises made in connection with marriage; (ii) contracts that cannot be completed in less than one year; (iii) contracts for the sale of land; (iv) promises to pay an estate's debt from the personal funds of the executor; (v) contracts for the sale of goods above $500; and (vi) a contract in which one person promises to pay the debt of another person is considered a «surety.»

A novation is an agreement in which one party is substituted for another and the other is released from an obligation. So, for example, if A owes B, a novation could be executed between A, B, and C wherein C will take over the obligation to B, and B will agree that A is released from any duties previously owed to B.

C is correct. There was no consideration for the bank's promise to allow installment payments on the debt owed by the dealer. Had the dealer assigned to the bank the right to receive the buyer's payments, the bank would have benefitted from obtaining an additional obligor. However, there was no assignment, just an instruction by the dealer to the buyer to redirect payments to the bank. Absent consideration for the installment agreement, the bank retained the right to demand immediate payment from the dealer.

A is incorrect. The Statute of Frauds does not require an agreement such as the one between the bank and the dealer to be in writing. Had there been consideration supporting this oral agreement, it would have been enforceable, as stated above.

B is incorrect. The dealer was not attempting to delegate the duty to pay under the contract. Instead, the dealer simply asked the buyer to make payments directly to the bank rather than to the dealer. The better argument is that the bank may reinstate the due date despite its earlier waiver because there was no consideration given by the dealer, as explained previously.

D is incorrect. There was no attempted novation here. No official three-way agreement was reached, it was just a directive by the dealer for the buyer to pay the bank directly.