In this case, Jane promised to give her car to Jack with no consideration. Jack agreed to take the car and accepted the offer. Here, no consideration is present between the parties and both the parties were knowingly made the agreement with the willingness and sound mind, irrespective of the actual market value of the car which was $ 25,000. Therefore, the nature of the promise by Jane becomes gratuitous promise and no valid agreement is formed. Hence, the offer made by Jane cannot be legally enforceable by Jack and no legal action can be taken against Jane in case she decides to not give the car to Jack.
As described earlier, a legal valid agreement needs a set of elements i.e. lawful offer, lawful acceptance, valid consideration and legal intention of the offeror and offeree to enter into agreement. An agreement can be made on the basis of the legal offer and acceptance but an agreement would be termed as legal enforceable agreement only if the valid consideration is present. In this regards, consideration works as a benefit between the parties, also any past consideration cannot be considered a reliable consideration (Re McArdle, 1951). It can be expressed in terms of a numeric value (McKendrick, 2003).
Here, Jane had promised to sell her car to Jack in $25,000. This specified value of the car indicates the presence of the consideration. This value of the consideration is equal to the real cost of the car. However, Jack accepted the offer and hence, confirmed the consideration value of $ 25,000 by accepting the offer to buy the car from Jane. Hence, it can be obtained from the above factors that a valid consideration is made between Jane and Jack. Valid offer and acceptance both are present in this case and also the valid consideration value of $ 25,000 clearly specified by Jane. Moreover, Jack agreed to pay this consideration amount to Jane.
As per the contract law, the concept of the consideration is linked with the negotiation of the agreement. It is believed that in case of the formation of an agreement, there is a swap of promises (White v Bluett (1853)) between parties. It can be said that each party should be termed as a promisor as well as promisee and also receives some value under the agreement at certain point of time (Lindgren, 2011). Therefore, in this specific case, all the necessary conditions are satisfied and also the presence of the valid consideration value supports the enactment of the enforceable agreement between the promisor Jane and promisee Jack.
Adequacy of the consideration is not the imperative requisite for the formation of a valid agreement. Under common law, court has clearly stated that adequacy is not required in the agreement. It is instead based on the willingness of the parties to decide the consideration value for the promise (Paterson, Robertson & Duke, 2015). Therefore, the only essential factor is the presence of the valid consideration as per the law. Adequate value of the consideration is not compulsory. The consideration can be anything starting from a more or less price to any object, but it must be a legal value or object. This norm can be described with the help of a leading case in this regard i.e. Chappell v Nestle (1960) case, in which the consideration value was the chocolate wrapper to enact an enforceable agreement (Taylor & Taylor, 2015).
The only key parameter in this regards is if both the parties give voluntary consent to enter into the contractual phase with some different value of the consideration, irrespective of the real worth then also there will not be any question regarding the satisfaction of parties in the court, unless any unconscionable activity is suspected (Latimer, 2005). In this case also, Jane wanted to sell her car to Jack with a price of $ 2,500, with the sound mind and willingness, while she knew that the cost of the car in the market is around $ 25,000. Jane was clearly offered a valid consideration amount of $ 2,500 which is not adequate when compared to the real value of the car. However, Jack had unconditionally accepted the offer and ready to purchase the car in $ 2,500. Hence, according to the adequacy of the consideration factor of the contract law, both Jane and Jack are entering into the enforceable agreement with the consideration amount of $ 2,500.
In this case, the contract is formed on the basis of the adequacy of the consideration. This is because the amount made for the car by Jane shows the presence of some consideration which is sufficient for Jane as she only made the offer with the amount. Hence, in this case also a lawful valid agreement is enforceable for Jack.
Issue
The situation here needs advice with regards to the possibility of success is a buyer claiming the extra payment ($ 3 million) that the seller had obtained through threat.
There are a host of factors that are required for the enactment of an enforceable legal contract. At the core of any contract, lies a voluntary acceptance which arises due to mutual consent from both the sides entering the contractual relation. The importance of consent as a key factor is not limited before the contract execution but continues to be of significance even after contract since many times, circumstances demand that some amendments be made (Harvey, 2009). Typically in this process, both parties should have enough consideration so as to enact the change. However, in absence of consideration for a given party, alteration may become difficult and cumbersome as the other party may not agree to the change. It is noteworthy that any alterations which are enacted unilaterally does not hold the test of legal principles and fails to be enforceable in nature (Gibson & Fraser, 2014).
At times, one of the parties may make an unreasonable demand which lies outside the contract terms and use threat to obtain forced consent from the other party. This situation in legal parlance is known as duress and may arise due to either economic power or physical power. Such contracts are devoid of voluntary agreement and thus can be made void if the party that is forced demands so at a later date (Taylor & Taylor, 2015). It is a common sight that the threatened party cites duress as a defence so as to recover the losses or value equivalent of the illegal favour that may be extended to the other party. However, one significant aspect to prove in this case is the fact that the threatened party complied with the unreasonable demand only under the influence of threat or else the same would not have been obeyed (Latimer, 2005).
In cases where incidence of duress is established, the contracts are not legally enforceable provided the party subject to threat wants so. It is noteworthy that the threat which is covered within duress may be of physical or economic nature. The concept of economic duress has been a late entrant with the pioneer case in this regard being Occidental Worldwide Investment Corporation v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293 case. For establishing a case for economic duress, a plaintiff needs to establish certain aspects mentioned below (Lindgren, 2011).
While assuring that the above aspects of duress are present is significant, but it is noteworthy that even in cases where economic duress is evident, the plaintiff must apply for relief ina timely manner. In this matter, the court has opined that if the plaintiff does not take legal recourse before the passage of reasonable time, then it indicates that the plaintiff has accepted the demand and hence the contract stands discharged. This is evident from the verdict of the court in the North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 case (Gibson & Fraser, 2014). The reasoning extended for the decision was that the party subject to economic duress has been given the right for redemption of damages or losses but the same does not extend till indefinite time and must be exhibited in a prompt manner. The excess payment made in the given case could not be claimed by the buyer as the court ruled that eight months was more than reasonable time and the claimant is assumed to have given voluntary acceptance to the unreasonable demand (Andrews, 2011).
The facts highlighted in the case describe a situation where a contract has been enacted for building of a tanker. While the building work is going on, there is devaluation in the currency of USA and the contract executed had no mechanism to deal with it. Since the shipbuilder or seller is adversely impacted by this change, hence it demands an extra payment of $ 3 million which the buyer does not want to make as there is no obligation on the basis of contract, However, due to threats from seller, the buyer agreed to make the payment as it did not want any delays in delivery. Nine months have elapsed since the tanker delivery and now the buyer wants to claim the payment of $ 3 million made earlier.
There is no denying the presence of duress of economic nature. It is evident that initially the buyer was reluctant about the $ 3 million payment. When the seller threatened to leave the contract unfinished, then only did the buyer make the payment as apparently it was cornered and had no real options as timely delivery was paramount. Hence, in reference to the above legal principles, the buyer did have the right to claim the payment of $ 3 million but the right was available only for a reasonable time. Keeping in mind the judgement given in a similar case i.e. North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979], it may be inferred that in this case also the judgement would go against the claimant as the silence of the claimant for nine months amounted to approval of the contract and the excess payment.
Hence, the excess payment of $ 3million is not recoverable by the buyer as a result of delay beyond reasonable time.
Andrews, N 2011, Contract Law, 3rd eds., Cambridge University Press, Cambridge
Edlin, D 2007, Common law theory, 4th eds., Cambridge University Press,Cambridge
Gibson, A & Fraser, D 2014, Business Law, 8th eds., Pearson Publications, Sydney
Harvey, C. 2009, Foundations of Australian law. 3rd eds., Tilde University Press, Prahran, Victoria
Latimer, P 2005. Australian business law, 24th eds., CCH Australia Ltd. Sydney
Lindgren, KE 2011, Vermeesch and Lindgren’s Business Law of Australia, 12th eds., LexisNexis Publications, Sydney
McKendrick, E 2003, Contract Law, 5th eds., Palgrave, Basingstoke
Paterson, J, Robertson, A & Duke, A 2015, Principles of Contract Law, 5th eds., Thomson Reuters, Sydney
Taylor, R & Taylor, D 2015, Contract Law, 5th eds., Oxford University Press, London
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