1. Was VAAF contractually obligated to pay Chad for refraining from smoking?

2. Was there consideration to support its promise to pay $500?

3. Are there other facts you need to know to make that determination?

4. Is Chad entitled to receive the entire $500 or only $250?

5. Was VAAF ethically required to pay the entire $500?

CHAPTER 12 Consideration Page. 11-1 The Valley Area AntiSmoking :oundation {VAAFJ offered to pay any Valley Area residents $500 each ifthey would refrain from smoking for one year. Chad. a Valley Area resident. decided to accept this offer. He quit smoking immediately and did not smoke for a whole year. When Chacl contacted VAAF to inform it of his success and collect his $500, VAAF informed him that it was able to pay only $250 because so many Valley Area residents had taken advantage of its offer. Chad reluctantly agreed to accept $250 instead of S500. . Was VAAF contractually obligated to pay Chad for refraining from smoking? . Was there consideration to support its promise to pay $500? . Are there other facts you need to know to make that determination? . ls Chad entitled to receive the entire $500 or only $250? . Was VAAF ethically required to pay the entire 5500? Til: LEARNING OBJECTIVES After studying this chapter, you should be able to: 12-1 Define the concept of consideration and describe its significance in the formation of a valid contract. 12-2 Explain the elements of consideration. 12-3 Explain why illusory promises, past consideration, and promises to perform preexisting obligations are not consideration. 12-4 Determine what is required to create a valid modification of a contract under both the common law of contracts andthe UCC. Elements of Consideration A common definition of consideration is legal value, bargained for and given in exchange for an act or a promise. Thus, a promise generally cannot be enforced against the person who made it (the promisor) unless the person to whom the promise was made (the promisee) has given up something of legal value in exchange for the promise. In effect, the requirement of consideration means that a promisee must pay the price that the promisor asked to gain the right to enforce the promisor's promise. So, if the promisor did not ask for anything in exchange for making a promise or if what the promisor asked for did not have legal value (e.g., because it was something to which she was already entitled), the promise is not enforceable against the promisor because it is not supported by consideration. Consider the early case of Thorne v. Deas, in which the part owner of a sailing ship named the Sea Nymph promised his co-owners that he would insure the ship for an upcoming voyage. He failed to do so, and when the ship was lost at sea, the court found that he was not liable to his co-owners for breaching his promise to insure the ship. Why? Because his promise was purely gratuitous; he had neither asked for nor received anything in exchange for making it. Therefore, it was unenforceable because it was not supported by consideration. This early example illustrates two important aspects of the consideration requirement. First, the requirement tended to limit the scope of a promisor's liability for his promises by insulating him from liability for gratuitous promises and by protecting him against liability for reliance on such promises. Second, the mechanical application of the requirement often produced unfair results. This potential for unfairness has produced considerable dissatisfaction with the consideration concept. As the rest of this chapter indicates, the relative importance of consideration in modern contract law has been somewhat eroded by numerous exceptions to the consideration requirement and by judicial applications of consideration principles designed to produce fair results.Legal Value Consideration can be an act in the case of a unilateral contract or a promise in the case of a bilateral contract. An act or a promise can have legal value in one oftwo ways. If. in exchange for the promisor's promise. the promisee does. or agrees to do. something he had no prior legal dutyto do. that provides legal value. If. in exchange for the promisor's promise. the promisee refrains from doing. or agrees not to do. something she has a legal right to do. that also provides legal value. This form ofconsideration is known as "forbearance." Though valid consideration can result from forbearance from all sorts of otherwise legal activities. later in this chapter we discuss a specic type of forbearance common in commercial settings. namely. forbearance to sue someone else when you have a good-faith belief that you have a valid claim to do so. Note that this definition does not require that an act or a promise have monetaly (economic) value to amount to consideration. Thus. in a famous IS'Ih-centurycase. Harrier 1-. Elan-at} an uncle's promise to pay his nephetv$i000 if he refrained from using tobacco. drinking. swearing. and playing cards or billiards for money until his 2|st birthday was held to be supported by consideration. Indeed. the nephew had refrained from doing any ofthese acts. even though he may have beneted from so refraining. He had a legal right to indulge in such activities. yet he had refrained from doing so at his uncle's request and in exchange for his uncle's promise. This was all that was required for consideration. Adequacy of Consideration The point that the legal value requirement is not concerned with actual value is further borne out by the fact that the courts generally will not concern themselves with questions regarding the adequacy of the consideration that the promisee gave. This means that as long as the promisee's act or promise satisfies the legal value test, the courts do not ask whether that act or promise was worth what the promisor gave, or promised to give, in return for it. This rule on adequacy of consideration reflects the laissez-faire assumptions underlying classical contract law. Freedom of contract includes the freedom to make bad bargains as well as good ones, so promisors' promises are enforceable if they got what they asked for in exchange for making their promises, even if what they asked for was not nearly so valuable in worldly terms as what they promised in return. Also, a court taking a hands-off stance concerning private contracts would be reluctant to step in and second-guess the parties by setting aside a transaction that both parties at one time considered satisfactory. Finally, the rule against judging the adequacy of consideration can promote certainty and predictability in commercial transactions by denying legal effect to what would otherwise be a possible basis for challenging the enforceability of a contract-the inequality of the exchange. Several qualifications must be made concerning the general rule on adequacy of consideration. First, if the inadequacy of consideration is apparent on the face of the agreement, most courts conclude that the agreement was a disguised gift rather than an enforceable bargain. Thus, an agreement calling for an unequal exchange of money (e.g., $500 for $1,000) or identical goods (20 business law textbooks for 40 identical business law textbooks) and containing no other terms would probably be unenforceable. Gross inadequacy of consideration may also give rise to an inference of fraud, duress,* lack of capacity," unconscionablety," or some other independent basis for setting aside a contract. However, inadequacy of consideration, standing alone, is never sufficient to prove lack of true consent or contractual capacity. Although gross inadequacy of consideration is not, by itself, ordinarily a sufficient reason to set aside a contract, the courts may refuse to grant specific performance or other equitable remedies to persons seeking to enforce unfair bargains. Finally, some agreements recite "$1," or "$1 and other valuable consideration," or some other small amount as consideration for Page 12-3 a promise. If no other consideration is actually exchanged, this is called nominal consideration. Often, such agreements are attempts to make gratuitous promises look like true bargains by reciting a nonexistent consideration. Most courts refuse to enforce such agreements unless they find that the stated consideration was truly bargained for.Bargained-For Exchange Up to this point, we have focused on the legal value component of our consideration definition. But the fact that a promisee's act or promise provides legal value is not, in itself, a sufficient basis for finding that it amounted to consideration. In addition, the promisee's act or promise must have been bargained for and given in exchange for the promisor's promise. In effect, it must be the price that the promisor asked for in exchange for making his promise. Over a hundred years ago, Oliver Wendell Holmes, one of our most renowned jurists, expressed this idea when he said, "It is the essence of a consideration that, by the terms of the agreement, it is given and accepted as the motive or inducement of the promise."Illusory Promises For a promise to serve as consideration in a bilateral contract, the promisee must have promised to do, or to refrain from doing, something at the promisor's request. It seems obvious, therefore, that if the promisee's promise is illusory because it really does not bind the promisee to do or refrain from doing anything, such a promise could not serve as consideration. Such agreements are often said to lack the mutuality of obligation required for an agreement to be enforceable. So, a promisee's promise to buy "all the sugar that I want" or to "paint your house if I feel like it" would not be sufficient consideration for a promisor's return promise to sell sugar or hire a painter. In neither case has the promisee given the promisor anything of legal value in exchange for the promisor's promise. Remember, though: So long as the promisee has given legal value, the agreement will be enforceable even though what the promisee gave is worth substantially less than what the promisor promised in return. Effect of Cancellation or Termination Clauses The fact that an agreement allows one or both of the parties to cancel or terminate their contractual obligations does not necessarily mean that the party (or parties) with the power to cancel has given an illusory promise. Such provisions are a common and necessary part of many business relationships. The central issue in such cases concerns whether a promise subject to cancellation or termination actually represents a binding obligation. A right to cancel or terminate at any time, for any reason, and without any notice would clearly render illusory any other promise by the party possessing such a right. However, limits on the circumstances under which cancellation may occur (such as a dealer's failure to live up to dealership obligations), or the time in which cancellation may occur (such as no cancellations for the first 90 days), or a requirement of advance notice of cancellation (such as a 30-day notice requirement) would all effectively remove a promise from the illusory category. This is so because in each case the party making such a promise has bound himself to do something in exchange for the other party's promise. A party's duty of good faith and fair dealing can also limit the right to terminate and prevent its promise from being considered illusory. The court in Day v. Fortune Hi-Tech Marketing, Inc., which follows, addresses the effect of a clause in a contract that gave one party the option to modify it at will.Effect of Output and Requirements Contracts Contracts in which one party to the agreement agrees to buy all of the other party's production of a particular commodity (output contracts) or to supply all of another party's needs for a particular commodity (requirements contracts) are common business transactions that serve legitimate business purposes. They can reduce a seller's selling costs and provide buyers with a secure source of supply. Prior to the enactment of the UCC, however, many common law courts refused to enforce such agreements on the ground that their failure to specify the quantity of goods to be produced or purchased rendered them illusory. The courts also feared that a party to such an agreement might be tempted to exploit the other party. For example, subsequent market conditions could make it profitable for the seller in an output contract or the buyer in a requirements contract to demand that the other party buy or provide more of the particular commodity than the other party had actually intended to buy or sell. The UCC legitimizes requirements and output contracts. It addresses the concern about the potential for exploitation by limiting a party's demands to those quantity needs that occur in good faith and are not unreasonably disproportionate to any quantity estimate contained in the contract, or to any normal prior output or requirements if no estimate is stated [2-306(1)]. [ Chapter 19 discusses this subject in greater detail. As the following Mid-American Salt case shows, however, parties must be careful to clearly indicate the nature of the contract is one of output or requirements. Otherwise, no obligations are contemplated, and there is no consideration to support the agreement, even under the UCC. Effect of Exclusive Dealing Contracts When a manufacturer of goods enters an agreement giving a distributor the exclusive right to sell the manufacturer's products in a particular territory, does such an agreement impose sufficient obligations on both parties to meet the legal value test? Put another way, does the distributor have any duty to sell the manufacturer's products and does the manufacturer have any duty to supply any particular number of products? Such agreements are commonly encountered in today's business world, and they can serve the legitimate interests of both parties. The UCC recognizes this fact by providing that, unless the parties agree to the contrary, an exclusive dealing contract imposes a duty on the distributor to use her best efforts to sell the goods and imposes a reciprocal duty on the manufacturer to use hisPreexisting Duties The legal value component of our consideration definition requires that promisees do, or promise to do, something that they had no prior legal duty to do in exchange for a promisor's promise. Thus, as a general rule, performing or agreeing to perform a preexisting duty is not consideration. This seems fair because the promisor in such a case has effectively made a gratuitous promise because she was already entitled to the promisee's performance. Preexisting Public Duties Every member of society has a duty to obey the law and refrain from committing crimes or torts. Therefore, a promisee's promise not to commit such an act can never be consideration. So. Thomas's promise to pay Brown $100 a year in exchange for Brown's promise not to burn Thomas's barn would not be enforceable against Thomas. Because Brown has a preexisting duty not to burn Thomas's barn, his promise lacks legal value. Similarly, public officials, by virtue of their offices, have a preexisting legal duty to perform their public responsibilities. For example, Smith, the owner of a liquor store, promises to pay Fawcett, a police officer whose beat includes Smith's store, $50 a week to keep an eye on the store while walking her beat. Smith's promise is unenforceable because Fawcett has agreed to do something that she already has a duty to do.Preexisting Contractual Duties and Modifications of Contracts under the Common Law LO12-4 Determine what is required to create a valid modification of a contract under both the common law of contracts and the UCC. The most important preexisting duty cases are those involving preexisting contractual duties. These cases generally occur when the parties to an existing contract agree to modify that contract. The general common law rule on contract modifications holds that an agreement to modify an existing contract requires some new (independent) consideration to be binding. For example, Turner enters into a contract with Acme Construction Company for the construction of a new office building for $3,500,000. When the construction is partially completed, Acme tells Turner that due to rising labor and materials costs it will stop construction unless Turner agrees to pay an extra $500,000. Turner, having already entered into contracts to lease office space in the new building, promises to pay the extra amount. When the construction is finished, Turner refuses to pay more than $3,500,000. Is Turner's promise to pay the extra $500,000 enforceable against him? No. All Acme has done in exchange for Turner's promise to pay more is build the building, something that Acme had a preexisting contractual duty to do. Therefore, Acme's performance is not consideration for Turner's promise to pay more. Although the result in the preceding example seems fair (why should Turner have to pay $4,000,000 for something he had a right to receive for $3,500,000?) and is consistent with consideration theory, the application of the preexisting duty rule to contract modifications has generated a great deal of criticism. Plainly, the rule can protect a party to a contract such as Turner from being pressured into paying more because the other party to the contract is trying to take advantage of his situation by demanding an additional amount for performance. However, mechanical application of the rule could also produce unfair results when the parties have freely agreed to a fair modification of their contract. Some critics argue that the purpose of contract modification law should be to enforce freely made modifications of existing contracts and to deny enforcement to coerced modifications. Such critics commonly suggest that general principles such as good faith and unconscionablety, rather than technical consideration rules, should be used to police contract modifications. Other observers argue that most courts in fact apply the preexisting duty rule in a manner calculated to reach fair results because Page 12-9 several exceptions to the rule can be used to enforce a fair modification agreement. For example, any new consideration furnished by the promisee provides sufficient consideration to support a promise to modify an existing contract. So, if Acme had promised to finish construction a week before the completion date called for in the original contract, or had promised to make some change in the original contract specifications such as to install a better grade of carpet, Acme would have done something that it had no legal duty to do in exchange for Turner's new promise. Turner's promise to pay more would then be enforceable because it would be supported by new consideration.Many courts also enforce an agreement to modify an existing contract if the modification resulted from unforeseen circumstances that a party could not reasonably be expected to have foreseen and that made that party's performance far more difficult than the parties originally anticipated. For example, if Acme had requested the extra payment because abnormal subsurface rock formations made excavation on the construction site far more costly and time-consuming than could have been reasonably expected, many courts would enforce Turner's promise to pay more. Courts can also enforce fair modification agreements by holding that the parties mutually agreed to terminate their original contract and then entered a new one. Because contracts are created by the will of the parties, they can be terminated in the same fashion. Each party agrees to release the other party from his contractual obligations in exchange for the other party's promise to do the same. Because such a mutual agreement terminates all duties owed under the original agreement, any subsequent agreement by the parties would not be subject to the preexisting duty rule. A court is likely to take this approach, however, only when it is convinced that the modification agreement was fair and free from coercion. The following Welsh case illustrates the common law approach to modification of contracts.Preexisting Duty and Contract Modification under the UCC LO12-4 Determine what is required to create a valid modification of a contract under both the common law of contracts and the UCC. The drafters of the UCC sought to avoid many of the problems caused by the consideration requirement by dispensing with it in two important situations: As discussed in ' Chapter 10, the UCC does not require consideration for firm offers [2-205]. The UCC also provides that an agreement to modify a contract for the sale of goods needs no consideration to be binding [2-209(1)]. For example, Electronics World orders 200 XYZ televisions at $150 per unit from XYZ Corp. Electronics World later seeks to cancel its order, but XYZ refuses to agree to cancellation. Instead, XYZ seeks to mollify a valued customer by offering to reduce the price to $100 per unit. Electronics World agrees, but when the televisions arrive, XYZ bills Electronics World for $150 per unit. Under classical contract principles, XYZ's promise to reduce the price of the goods would not be enforceable because Electronics World has furnished no new consideration in exchange for XYZ's promise. Under the UCC, no new consideration is necessary, and the agreement to modify the contract is enforceable. Several things should be made clear about the operation of this UCC rule. First, XYZ had no duty to agree to a modification and could have insisted on payment of $150 per unit. Second, modification agreements under the UCC are still subject to scrutiny under the general UCC principles of good faith and unconscionablety, so unfair agreements or agreements that are the product of coercion are unlikely to be enforced. Finally, the UCC contains two provisions to protect people from fictitious claims that an agreement has been modified. If the original agreement requires any modification to be in writing, an oral modification is unenforceable [2-209(2)]. Regardless of what the original agreement says, if the price of the goods in the modified contract is $500 or more, the modification is unenforceable unless the requirements of the UCC's statute of frauds section [2-201 ] are satisfied [2-209(3)]."Preexisting Duty and Agreements to Settle Debts One special variant ofthe preexisting duty rule that causes considerable confusion occurs when a debtor offers to pay a creditor a sum less than the creditor is demanding in exchange for the creditor's promise to accept the part payment as full payment of the debt. Ifthe creditor later sues for the balance of the debt. is the creditor's promise to take less enforceable? The answer depends on the nature of the debt and on the circumstances of the debtor's payment. Liquidated Debts Aquidated debt is a debt that is both due and certain: that is. the parties have no goodfaith dispute about Page 12'\" either the existence or the amount ofthe original debt. If a debtor does nothing more than pay less than an amount he clearly owes. how could this be consideration for a creditor's promise to take less'? Such a debtor has actually done less than he had a preexisting legal duty to donamely. to paythe full amount ofthe debt. For this reason. the creditor's promise to discharge a liquidated debt for part payment of the debt at or after its due date is anemia-emote for lack of consideration. For example. Connor borrows $10000 from Friendly Finance Company. payable in one year. On the day payment is due. Connor sends Friendly a check for $9.000 marked: "Payment in full for all claims Friendly Finance has against rue.\" Friendly cashes Connor's check. thus impliedly promising to accept it as full payment by cashing it. and later sues Connor for $1.000. Friendly is entitled to the 31000 because Connor has given no consideration to support Friendly's implied promise to accept $9.000 as full payment. However. had Connor done something he had no preexisting duty to do in exchange for Fr'iendly's promise to settle for part payment. he could enforce Friendly's promise and avoid paying the 3|.000. For example. if Connor had paid early. before the loan contract called for payment. or in a different medium of exchange from that called for in the loan contract (such as 84.000 in cash and a car worth 35.000). he would have given consideration for Friendly's promise to accept early or different payment as full payment. L'rrliquidated Debts A good-faith dispute about eitherthe existence or the amount of a debt makes the debt an :rrrlr'qrrr'dared debt. The settlement of an unliquidated debt is called an accord and sat'isfact"rrm.g When an accord and satisfaction has occurred. the creditor cannot maintain an action to recover the remainder of the debt that he alleges is due. For example. Computer Corner. a retailer. orders 50 laptop computers and associated software from Computeclr for 375.000. After receiving the goods. Computer Corner refuses to pay Cornputech the full $11000. arguing that some of the computers were defective and that some oftlre software it received did not conform to its order. Computer Corner sends C'omputech a check for $60000 marked: "Payment in full for all goods received from Computech." Acreditor in Computech's position obviously faces a real dilemma. If C'omputech cashes Computer C'orner's check. it will be held to have impliedly promised to accept $60000 as full payment. Computech's promise to accept part payment as full payment would be enforceable because Computer Corner has given consideration to support it: Computer Corner has given up its right to have a court determine the amount it owes Computech. This is something that Computer Corner had no dutyto do: by giving up this right and the 360.000 in exchange for Computech's implied promise. the consideration requirement is satised. The result in this case is supported not only by consideration theory but also by a strong public policy in favor of encouraging parties to settle their disputes out of court. Who would bother to settle disputed claims out of court if settlement agreements were unenforceable? Computech could refuse to accept Computer Corner's settlement offer and sue for the full $?S.000. but doing so involves several risks. A court may decide that Computer Corner's arguments are valid and award Computcch less than 860.000. Even if Computcch is successful. it may take years to resolve the case in the courts through the expensive and time-consuming litigation process. In addition. there is always the chance that Computer Corner may le for bankruptcy before anyjudgment can be collected. Faced with such risks. Computech may feel that it has no practical alternative other than to cash Computer C'orner's check.m Composition Agreements Composition agreements are agreements between a debtor and two or more creditors who agree to accept as full payment a stated percentage of their liquidated claims against the debtor at or after the date on which those claims are payable. Composition agreements are generally enforced bythe courts despite the fact that enforcement appears to be contrary to the general rule on part payment of liquidated debts. Many courts havejustied enforcing composition agreements on the ground that the cred itors' mutual agreement to accept less than the amount due them provides the necessary consideration. The main reason why creditors agree to compositions is that they fear that their failure to do so may force the debtor into bankruptcy proceedings. in which case they might ultimately recover a smaller percentage of their claims than that agreed to in the composition. Forbearance to Sue An agreement by a promisee to refrain. or forbear. from pursuing a legal claim against a promisorcan be valid consideration to support a return promiseusually to pay a sum of moneyby a promisor. The promisee has agreed not to le suit. something that she has a legal right to do. in exchange for the promisor's promise. The courts do not wish to sanction extortion by allowing people to threaten to le spurious claims against others in the hope that those threatened will agree to some payment to avoid the expense or embarrassment associated with defending a lawsuit. On the other hand. we have a strong public policy favoring private settlement of disputes. Therefore. it is generally said that the promisee must have a good-faith belief in the validity of his or her claim before forbearance amounts to consideration. Past Consideration Past considerationdespite its nameis not consideration at all. Past consideration is an act or other benet given in the past that was nor given in exchange for the promise in question. Because the past act was not given in exchange for the present promise. it cannot be consideration. Consider again the facts of the famous case ofHan-rcr' r. Sidn'm'. discussed earlier in this chapter. There. an uncle's promise to pay his nephew 85.000 for refraining from smoking. drinking. swearing. and other delightful pastimes until his 2|st birthday was supported byconsideration because the nephew had given legal value by refraining from participating in the prohibited activities. However. what ifthe uncle had said to his nephew on the eve of his 2|st birthday: \"Your mother tells me you've been a good lad and abstained from tobacco. hard drink. foul language. and gambling. Such goodness should be rewarded. Tomorrow. I'll give you a check for 35.000." Should the uncle's promise be enforceable against him? Clearly not. because although his nephew's behavior still passes the legal value test. in this case it was not bargained for and given in exchange for the uncle's promise. Moral Obligation As a general rule. promises made to satisfy a preexisting moral obligation are unenforceable for lack ofconsideration. The fact that a promisor or some member ofthe promisor's family. for example. has received some benet from the promisee in the past (e.g.. food and lodging. or emergency care) would not constitute consideration for a promisor's promise to pay forthat benet. clue to the absence ofthe bargain element. Some courts nd this result distressing and enforce such promises despite the absence of consideration. In addition. a few states have passed statutes making promises to pay for past benets enforceable if such a promise is contained in a writing that clearly expresses the promisor's intent to be bound. 1n the following Doc case. the coult nds that even an organization like the Roman Catholic C'hurch has no legal obligation to fulll its moral obligations. Note. however. that had the Archdiocese's commitment to pay for Doe's therapy been negotiated to avoid the Does otherwise ling a valid lawsuit against it. the outcome likely would have been different. Promissory Estoppel As discussed in ' Chapter 9, the doctrine of promissory estoppel first emerged from attempts by courts around the turn of this century to reach just results in donative (gift) promise cases. Classical contract consideration principles did not recognize a promisee's reliance on a donative promise as a sufficient basis for enforcing the promise against the promisor. Instead, donative promises were unenforceable because they were not supported by consideration. In fact, the essence of a donative promise is that it does not seek or require any bargained-for exchange. Yet people continued to act in reliance on donative promises, often to their considerable disadvantage. Refer to the facts of Thorne v. Deas, discussed earlier in this chapter. The co-owners of the Sea Nymph clearly relied on their fellow co- owner's promise to get insurance for the ship. Some courts in the early 1900s began to protect such relying promisees by estopping promisors from raising the defense that their promises were not supported by consideration. In a wide variety of cases involving gratuitous agency promises (as in Thorne v. Deas), promises of bonuses or pensions made to employees, and promises of gifts of land, courts began to use a promisee's detrimental (harmful) reliance on a donative promise as, in effect, a substitute for consideration. In 1932, the first Restatement of Contracts legitimized these cases by expressly recognizing promissory estoppel in section 90. The elements of promissory estoppel were then essentially the same as they are today: a promise that the promisor should reasonably expect to induce reliance, reliance on the promise by the promisee, and injustice to the promisee as a result of that reliance. Promissory estoppel is now widely used as a consideration substitute, not only in donative promise cases but also in cases involving commercial promises contemplating a bargained-for exchange. The construction contract bid cases discussed in ( Chapter 10 are another example of this expansion of promissory estoppel's reach. In fact, promissory estoppel has expanded far beyond its initial role as a consideration substitute into other areas of contract law. In Mclellan v. Charly, the parties dispute whether there was sufficient consideration to support an option contract. In the absence of such consideration, the court must decide whether promissory estoppel applies to a promise made by an offeree to keep an offer open for a given period of time.Promises to Pay Debts Barred by Statutes of Limitations Statutes of limitations set an express statutory time limit on a person's ability to pursue any legal claim. A creditor who fails to file suit to collect a debt within the time prescribed by the appropriate statute of limitations loses the right to collect it. Many states, however, enforce a new promise by a debtor to pay such a debt, even though technically such promises are not supported by consideration because the creditor has given nothing in exchange for the new promise. Most states afford debtors some protection in such cases, however, by requiring that the new promise be in writing to be enforceable. Promises to Pay Debts Barred by Bankruptcy Discharge Once a bankrupt debtor is granted a discharge, creditors no longer have the legal right to collect discharged debts. Most states enforce a new promise by the debtor to pay (reaffirm) the debt regardless of whether the creditor has given any consideration to support it. To reduce creditor attempts to pressure debtors to reaffirm, the Bankruptcy Reform Act of 1978 made it much more difficult for debtors to reaffirm debts discharged in bankruptcy proceedings. The act requires that a reaffirmation promise be made prior to the date of the discharge and gives the debtor the right to revoke his promise within 30 days after it becomes enforceable. This act also requires the Bankruptcy Court to counsel individual (as opposed to corporate) debtors about the legal effects of reaffirmation and requires Bankruptcy Court approval of reaffirmations by individual debtors. In addition, a few states require reaffirmation promises to be in writing to be enforceable. Page 12-18 Charitable Subscriptions Promises to make gifts for charitable or educational purposes are often enforced, despite the absence of consideration, when the institution or organization to which the promise was made has acted in reliance on the promised gift. This result is usually justified on the basis of either promissory estoppel or public policy