54. Can the creditor recover the $2,000 from the buyer?

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. 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.

The traditional rule is that a promise based on moral or past consideration is an unenforceable donative promise. However, there are three major exceptions to the traditional rule. The first exception involves a promise to pay a debt barred by a statute of limitations. A promise to pay a debt barred by the statute of limitations is enforceable even if no new consideration is given. In such cases, the promise is considered a new promise and so only the terms of the new promise are enforceable.

A third-party beneficiary is considered «intended» and can sue to enforce his interest in a contract if performance is supposed to run directly from a contracting party to that third party.

C is correct. The agreement between the debtor and the buyer for the sale of the car imposed a legal obligation on the buyer to remit payment of the $2,000 to the creditor. First, the contract was supported by consideration because a promise to pay a past debt that is barred by the statute of limitations is nevertheless supported by consideration (a widely-accepted exception to the pre-existing duty rule). Second, the creditor was an intended third-party beneficiary of the agreement between the debtor and buyer because performance was to run directly to the creditor. As such, the creditor will be able to recover the $2,000 from the buyer.

A is incorrect. Although the statute of limitations had run as to the debtor's debt to the creditor, the agreement between the debtor and the buyer created a new legal obligation for the buyer to pay the $2,000 to the creditor, which may be enforced despite the statute of limitations having run, as stated above.

B is incorrect. Although an intended third-party beneficiary who has been assigned rights (the creditor) will generally «stand in the shoes» of the assignor (the buyer), this rule of law is irrelevant here because there are no defenses that exist between the buyer and the debtor in the agreement that may be used against the creditor.

D is incorrect. This answer reaches the correct answer with the wrong reasoning. The creditor will recover, but not because the buyer's promise to pay «revived» the uncollectible debt. Rather, the buyer's promise to pay the $2,000 to the creditor was a new and enforceable promise, irrespective of the previous debt.