Contract Law For Doctrine Of Consideration

Essentials of a Valid Contract

Discuss about the Contract Law for Doctrine of Consideration.

A lawfully binding exchange of promises from one person to another has been defined as a contract which would be enforced by the law. Also, contract law has been observed to be founded on the phrase pacta sunt servanda. It specifically means that ‘promises must be kept’. But in order to create a valid contract there have to be four main essentials that must be present which includes an offer, acceptance, consideration, intention to create lawful relations and capacity.[1]

If any one of the above mentioned essentials would not be present then a valid contract could not be formed. So, it has been clearly stated that consideration has been one of the most significant constituent of a lawful agreement.

In creating a valid contract the first step was to make an offer which must be made by one person to another. Acceptance would be regarded as when the individual who receives the proposal accepts the terms of the offer which was made. Consideration has been regarded as same as the intention to create lawful relations.[2]

Agreements which do not include a price which has to be paid for the promises were unenforceable if not they have been carried out by a legal document under seal. The elements of Intention to make lawful relationships have been descriptive constituents of a contract. The final element of a valid agreement was the capacity of the parties. It was whether an individual has the freedom to enter into an agreement or not.

The below mentioned essay would spotlight on the constituents of a price in an agreement and more particularly it would dispute that price must be sufficient but need not to be adequate.

Not every promise which was made would be enforceable in law by the tribunals, as doing so would be specifically being impractical. As it has been observed clearly that a promise which would be backed up by consideration would grant a reason for enforcement.

It has been clearly observed that the Doctrine of Consideration has been one of the five major indispensable ingredients of a valid agreement. In an agreement, if consideration would not be instituted as a part of an agreement then it would determine whether it was enforceable or not unless it was integrated into a deed under a seal.

Consideration has been defined as the price that was asked by the person who made an offer in exchange for their promise. As per the requirement of common law, in order to make a contract to be binding the person to whom the promise was made must grant a price for the promise.

Importance of Consideration

Consideration has been regarded as prone to much condemnation as it was stated to have a very slight extent as a meaning with a number of suggestions stating that the slightness of the doctrine displays was is now more about refuting the lawful effect in most of the promises.[3]

The thoughts behind this disparagement were that a number of tribunals bring consideration into the matters without thinking twice and utilize it as a tool to direct their verdicts. This then show the way to it which was open to many more possibilities. As in the case of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989] EWCA Civ 5[4], it was stated that a practical assistance attained by an individual could be calculated as a sufficient consideration. This would then lead to unauthorized assertions as never before which states that such consideration has been brought into a case containing a pre-existing contract.

In the case of Currie v Misa (1875) LR 10 Ex 153[5], it has been concluded that consideration could be defined as “some privilege, interest, profit accrued to an individual who was the party or some loss or harm undertaken by another”.

So, in order to rotate an otherwise unenforceable promise which was made by an individual into a lawfully binding contract a person to whom such promise was made must in return grant to the person who initiated a promise a price.[6]

The meaning of what comprise of a price which was paid for such promise was distinctively found in the matter of Dunlop v Selfridge [1915] AC 847[7]. In this case it was concluded that price i.e. something of value could be defined as an act of tolerance of the guarantee. So, it was defined as the value for which such guarantee of the other was bought, and the promise thus would grant for worth would be enforceable.

There was numerous numbers of rules which were made in regard to the procedure of consideration that could also be found in the matter of:

Tweddle v Atkinson (1861) 121 ER 762[8] as in this case it was stated that the price paid for a promise must be send from a person who accepted the offer; or

In Re McArdle [1951] Ch 669[9], where it was held that the price paid must not be paid in ‘past’;

In Thomas v Thomas (1842) 2 QB 851[10] it was concluded that such consideration must be sufficient, but require not be adequate but must have something of value.

Definition of Consideration

This value which was paid for the promise should be more than merely financial.

In the matter of Ward v Byham [1956] 1 WLR 496[11] promises which were made to take care for an individual have been concluded to be sufficient.

But at first instance, it seems that the rule of consideration is anything wrong with terms. For most non-specialists “sufficient” means the same as “adequate.” However, the rule makes sense, because it means that although consideration should be sufficient to maintain the contract (i.e. it must have some value in terms of law), it may not necessarily be appropriate in the sense to be of the same value as and consideration other.[12]

In order to consider that the price paid for the promise was valid it could be done so by stating that such price need not to be adequate but must be sufficient. This statement could be meant that the price does not have to reveal the value of the promise to be adequate. But at the same time such promise must be lawfully sufficient that means to say that it must be somewhat that the law gazes at as been competent of concluding to a valid price.[13]

This has been a controversial problem as many feel that it has been an inequitable method of shaping a verdict but such decision which was brought to limelight in the matter of Chappell v. Nestle [1960] AC 87[14]. In this case it was clearly concluded by the majority of the judges that the wrappers of the chocolate were considered as a element of price even though they were of small monetary price which was frightened away by the respondents on delivery.[15]

In another case of Thomas v Thomas (1842), 2 QB 851[16] it was held that the motive of the husband was the only reason for the contract and a reason could not amount to price. Though, the promise which was made by the applicant to pay £1 and keep the house in good way was considered to be a sufficient consideration.

Although it has been observed that the terms Adequacy and sufficiency in the common language have similar meaning as they were considered to be synonyms to each other. Though under law adequacy have been described to be such situations where the money which an individual has paid for something was inconsistent with the cost of what an individual obtains in return.

Criticism of Consideration

It was the only privilege that the tribunals do not take into account whether an agreement which was initiated contains adequate consideration, as it would be unfeasible and away from the means of the tribunal to ascertain. Consequently, a person must fix a price for all of the goods and services that were enclosed in the agreements which were put forward before the tribunal.

In a Canadian case of Zecevic v The Russian Orthodox Christ the Saviour Cathedral [1988]O.J. No. 1282[17], it was held that there was no intention to create legal relations from both the individuals who were the parties to the contract. Also, there had been no payment of money which was promised which clearly implies that there had been an inadequate consideration in the contract.

So, it could be stated that for a consideration to be measured as satisfactory enough to sustain a easy agreement under law it must be have certain monetary worth. In addition to the fact that it must contain a monetary value, such price must also be of such a type which was recognized by law as lawful.

On the other hand, there have been a number of examples that were measured to be insufficient consideration in the eyes of the lawful authorities such as natural love and affection, moral obligation and prayers were but to name a few. For instance, where an individual makes a guarantee to do something, which, they were previously bound by law to do it then this does not amount to satisfactory price in the construction of an agreement. This would merely be recurring as a duty which the person to whom such offer was made was already compelled to do so in other they were promising to do nothing at all. It was then the law stated and founded price to be an deficient consideration if the applicant carries out an obligation which he already owed.[18]

There have been two main forms of considerations which could be considered as insufficient such as:

Past consideration: It has been regarded as something which was granted unreasonably or in connection to other as it would not be regarded as a ground which would be sufficient in relation to a new promise. In the case of Stewart v Casey [1892] 1 Ch. 104[19] it has been stated that an exception to the past consideration rule subsists in connection to promises which were made to pay for services. It has also been stated that where it would be implied that the performance of services would be paid for then the performance of those services would be a good consideration.[20]

Rules of Consideration

Existing of Lawful duties: This rule was most likely to take place where the contractual duties were varied or

An innovative agreement was completed and an innovative agreement was substituted by replacing it.

Also for the above declarations which were made in relation to the rules of consideration in persistence to the fact that there were certain exceptions to the instance which was granted in relation to past consideration. But in order to create simplicity and lucidity, there has exceptions to the rules of consideration which were defined above.

With regards to the doctrine of price i.e. consideration its exception was that of the person who made an offer who had formerly asked the other individual to grant goods or services. In the case of Lampleigh v Braithwait [1615] EWHC KB J 17[21] it was stated that a promise which was made after providing them would be treated as a legit. Though if it was known to be a trade deal then it must exhibit and perform in an unmistakable manner. In another matter of Re Casey’s Patent [1892] 1 Ch. 104[22] it was upheld that the payment of price must ensue for the good and services which were to be provided as it would then also be measured to be obligatory.

It has been the principle of promissory estoppels which was regarded as an impartial remedy that permits an individual from not turning back on a promise which was not sustained by the price paid under a contract. Estoppels could act as a guard but not as a weapon in relation to the point of consideration. So, it was simply about fairness to the other side of which may the person who made a offer could get benefit and so that the person to whom such promise was made does not violate the contract.

It was in the case of Hughes v Metropolitan Railway (1876-77) LR 2 App Cas 439[23] that the doctrine of consideration was established. But at the same time it was this doctrine of Consideration only which drew divergence of view as a doctrine such as the attack which was made by Lord Mansfield on consideration for not recognizing it as part of contract law.

In another matter of Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761[24], that the ‘modern version’ was enhanced by the court by confirming that the doctrine of promissory estoppel exists in contract law.

Sufficient vs Adequate Consideration

In Waltons v Maher [1988] HCA 7[25] it was concluded that where the development of the Doctrine of Promissory Estoppels, under which a promise that has been dependent upon to the detriment of the other person may be imposed by that other in spite of the fact that there was a lack of consideration.

Also, as a general rule of the part payment of a balance which was due was not a good consideration for the promise of the creditors to relinquish the balance. In the payment of a part of the balance which was due which was owed the person to whom an offer was made was observed to be doing a work which was no more than performing an existing contractual obligation which he owed.

Similarly, a promise which was made in relation to pay a part of a balance due could not represent price for a promise of the creditor in order to relinquish the balance. It was usually referred to as the ‘rule in Pinnel’s case’.

In the case of Penny v Cole which was known as the Pinnel’s Case [1602] 5 Co. Rep. 117a[26] it was stated that if a sum of money was owing to a creditor by a balance which was due or. And all those individuals enter into an ensuing contract that concluded that the creditor would accept a smaller sum in fulfillment of the entire amount. But the later sum of the contract would usually not be obligatory as the arrears which was due or has not granted price for the promise of the creditor in order to relinquish the balance which was due. Consequently, even if the balance which was due or acts on this contract by paying the smaller amount which was decided and the sum was established by the creditor which he would usually be able to take legal action against the balance which was due or for the arrears.

At last, in order to conclude the essay it could be stated that it has been of fundamental importance that consideration has been considered as required in the construction of agreements to make sure those only stringent contracts would be measured to be agreements and individuals would only enter into them deliberately. Also, it has been unreasonable for the tribunals to place a value on goods and services so consideration need not be satisfactory and it should be up to the individuals in an agreement to choose what charge them aspiration to put on goods or services. At last, the tribunals must only permit contracts that enclose price that has a monetary value to be an agreement. As it has revealed in cases, like Zecevic v The Russian Orthodox Christ the Saviour Cathedral [1988]O.J. No. 1282[27], that those contracts where price includes no monetary worth then it was unfeasible to put a worth on the promise made and thus becomes almost impracticable to control under law.

References

Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition, (Palgrave Macmillan, 2015).

W. Ryan, Equity And The Doctrine Of Consideration, The Adelaide Law Review.

Chappell v. Nestle [1960] AC 87.

Cuurrie v Misa (1875) LR 10 Ex 153.

Dunlop v Selfridge [1915] AC 847.

Hughes v Metropolitan Railway (1876-77) LR 2 App Cas 439.

Lampleigh v Braithwait [1615] EWHC KB J 17.

Pinnel’s Case [1602] 5 Co. Rep. 117a.

Re Casey’s Patent [1892] 1 Ch. 104.

Re McArdle [1951] Ch 669.

Stewart v Casey [1892] 1 Ch. 104.