Question

Dan, President of BAZ Co., is happy with the extraordinary performance of Naomi, a BAZ Co. senior accountant. Dan informs Naomi that because of her superlative work in the past fiscal year, he is going to give her a 5 percent raise effective next month Naomi, who has never heard of anyone at BAZ Co. getting a raise, is thrilled and thanks Dan. Later that day, Dan realizes that giving Naomi this raise might cause all senior accountants to demand salary increases. Dan decides not to give Naomi a raise after all. He believes that his promise to give her a raise is not legally binding. Dan:

A. is correct because there was no bargained-for exchange for the raise.
B. is correct because of the "preexisting duty" rule.
C. is correct because past consideration is not an act or promise.
D. is correct because past consideration is not liquidated.

Answer 1

The answer is: A) is correct because there was no bargained-for exchange for the raise.

Step-by-step explanation:

Dan is correct since nothing was bargained here. For a contract to be binding, both parties must give or promise to give something in exchange, e.g. I will pay $5 and the restaurant will give me a hamburger.

In this case Naomi didn't give anything to Dan or didn't even promise to give anything to Dan.