Contracts and Sales Multistate Bar Practice Exam

In what situation can a preexisting legal duty serve as consideration under common law?

1. When it is changed via a new agreement

2. When it involves additional benefits for both parties

3. When there is a dispute regarding the duty

4. When the performance is overdue

The correct answer is: When there is a dispute regarding the duty

A preexisting legal duty typically does not serve as valid consideration to support a new contract because the party is already obligated to perform that duty, making it unworkable as consideration. However, there are certain circumstances where it can be considered valid, particularly in the context of a dispute regarding the duty. When there is a dispute about the performance of the duty—meaning both parties have differing interpretations of the obligations or terms involved—it may create a situation where the parties negotiate modifications to their agreement. This negotiation can bring new terms into play that may serve as consideration, as both parties give and receive something of value in the resolution of the dispute. This can clarify obligations, introduce new elements to the agreement, or renegotiate the terms under which the duty will be fulfilled. Other choices present scenarios that generally do not satisfy the consideration requirement under common law. Changing the terms via a new agreement or involving additional benefits might add layers to an existing agreement but often lack the requisite new consideration unless they address a bona fide dispute or significantly alter the duties involved. Performance that is overdue could indicate a breach rather than the provision of consideration, as it does not inherently change the nature of the obligations originally agreed upon. Thus, the context of a dispute regarding the duty aligns best