44. Should the court grant the debtor's motion?

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 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 typically 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 just promise to make gifts. In the ordinary case of a promise to make a gift, the promise 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 also apply in business contexts, such as with promises to allow tenants to renew leases or any other quasi-option contract scenarios.

Under the pre-existing duty rule, if a party does or promises to do what he is already legally obligated to do, or if he forebears or promises to forebear from doing something which he is not legally entitled to do, he has not incurred the kind of legal detriment necessary to constitute consideration.

A common application of the pre-existing duty rule involves a creditor's agreement to accept payment by his debtor of lesser sum in satisfaction of the full debt. Since the debtor owes the full amount, paying a partial amount is not anything that he was not already legally obligated to do. Therefore, most courts hold that the creditor's promise not to require payment of the full amount is not binding for lack of consideration.

A is correct. The law supports the settlement of debts and claims. However, consideration is required for a settlement to be enforceable. Under the pre-existing duty rule, the creditor's promise to forbear from suing to collect was not supported by consideration from the debtor, because the amount due was liquidated and the debtor promised to do nothing more than he was already obligated to do. The creditor's promise was not supported by consideration from the debtor because it allowed for payment of an undisputed amount, $1,000, after the time for payment of the debt had passed.

B is incorrect. The creditor's promise to forbear from filing suit was sufficient consideration to support the debtor's promise. There was, however, no consideration from the debtor to support the creditor's promise because the debtor promised nothing more than to pay an undisputed debt long after it was due. Thus, the creditor's promise to forbear is not enforceable.

C is incorrect. This is an incorrect statement of the doctrine established in Foakes v. Beer and the pre-existing duty rule, which requires consideration to enforce a promise to allow a debtor to delay payment on an undisputed debt. Because the debtor provided no consideration for the creditor's promise to forbear from suing, that promise is not enforceable against the creditor.

D is incorrect. The debtor may have hoped that the creditor would forbear, but the debtor provided no consideration to support the creditor's forbearance. Thus, the creditor's promise to forbear is not enforceable.