Part 3- Contracts, Chapter 12: Consideration, Doc 2 - Edubirdie

University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

264

Pages:

1
Author:

bratrochanter

In the Margeson v. Artis case, the Iowa Supreme Court examined the enforceability of a modified sales agreement between the Margesons and Artis. Originally, the Margesons agreed to sell their business for $125,000, but they later signed an addendum that raised the price to $155,000. Artis, however, challenged this addendum, claiming it lacked sufficient consideration—essentially, that she received nothing additional in return for agreeing to pay more. Key Legal Concepts: 1. Consideration Requirement: For a contract modification to be enforceable, each party must provide new, independent consideration. In other words, both sides must receive something they didn’t have under the original agreement. Without new consideration, a contract modification (like the addendum) may be deemed unenforceable. 2. Preexisting Duty Rule: This rule states that if a party is already legally obligated to perform a duty (e.g., sell the business for $125,000), agreeing to fulfill that duty cannot serve as consideration for a new promise (e.g., paying $30,000 more). A modification must involve an additional promise or concession from each party to be valid. 3. Independent Consideration in Modifications: In this case, the court examined whether the new financing terms (installment payments on the extra $30,000) represented sufficient new consideration. The court found that these terms did not affect the original $125,000 payment but only applied to the added amount in the addendum, meaning they did not constitute new consideration for the contract as a whole. Court’s Decision: The Iowa Supreme Court ruled in favor of Artis, finding that the addendum was unenforceable because the Margesons did not provide additional consideration for Artis’s promise to pay the extra $30,000. Since the financing terms in the addendum only pertained to the extra amount and did not alter the original $125,000 payment, they did not create enforceable new obligations for the Margesons. Key Takeaway: For a contract modification to be enforceable under the common law, each party must provide something additional beyond what was promised in the original contract. Here, the court concluded that without independent consideration from the Margesons, the addendum was a “unilateral price hike” rather than a valid modification supported by mutual obligation.

Related Documents

Part 3- Contracts, Chapter 12: Consideration, Doc 2

Part 3- Contracts, Chapter 12: Consideration, Doc 2 - Page 1

of 1

Recommended Documents

Part 11- Regulation of Business, Chapter 49: Antitrust The Sherman Act, Note 6

Part 11- Regulation of Business, Chapter 49: Antitrust The Sherman Act, Note 6

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 2- Crimes and Torts, Chapter 5: Criminal Law and Procedure, Doc 6

Part 2- Crimes and Torts, Chapter 5: Criminal Law and Procedure, Doc 6

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 5- Property, Chapter 26: Estates and Trusts, Doc 1

Part 5- Property, Chapter 26: Estates and Trusts, Doc 1

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 11- Appendix B: Uniform Commercial Code, Note 10

Part 11- Appendix B: Uniform Commercial Code, Note 10

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 11- Appendix A: The Constitution of the United States of America, Note 3

Part 11- Appendix A: The Constitution of the United States of America, Note 3

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 11- Regulation of Business, Chapter 48: The Federal Trade Commission Act and Consumer Protection Laws, Note 6

Part 11- Regulation of Business, Chapter 48: The Federal Trade Commission Act and Consumer Protection Laws, Note 6

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 3- Contracts, Chapter 9: Intellectual Property and Unfair Competition, Doc 4

Part 3- Contracts, Chapter 9: Intellectual Property and Unfair Competition, Doc 4

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 2- Crimes and Torts, Chapter 5: Criminal Law and Procedure, Doc 10

Part 2- Crimes and Torts, Chapter 5: Criminal Law and Procedure, Doc 10

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 10- Corporations, Chapter 46: Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals, Doc 4

Part 10- Corporations, Chapter 46: Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals, Doc 4

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 4- Sales, Chapter 20: Product Liability, Doc 13

Part 4- Sales, Chapter 20: Product Liability, Doc 13

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 10- Corporations, Chapter 44: Shareholders’ Rights and Liabilities, Doc 3

Part 10- Corporations, Chapter 44: Shareholders’ Rights and Liabilities, Doc 3

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Part 11- Regulation of Business, Chapter 49: Antitrust The Sherman Act, Note 1

Part 11- Regulation of Business, Chapter 49: Antitrust The Sherman Act, Note 1

Indiana University Bloomington Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

New Documents from this Course

Chapter 16: Serial Problem

Chapter 16: Serial Problem

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 7: Exercises

Chapter 7: Exercises

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 25: Exercises

Chapter 25: Exercises

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 25: Future Value of a Single Amount

Chapter 25: Future Value of a Single Amount

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 11: Summary Cheat Sheet

Chapter 11: Summary Cheat Sheet

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 13: Exercises

Chapter 13: Exercises

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 9: Quick Study

Chapter 9: Quick Study

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 25: Equity Investments Significant Influence, 20% to 50%

Chapter 25: Equity Investments Significant Influence, 20% to 50%

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 12: Serial Problem

Chapter 12: Serial Problem

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 5: Appendix 2

Chapter 5: Appendix 2

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 6: Control of Cash 2

Chapter 6: Control of Cash 2

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary

Chapter 11: Dividends

Chapter 11: Dividends

Grand Rapids Community College Financial and Managerial Accounting: Information for Decisions - John J. Wild

Summary