Discuss about the Contract Law and Materials and Text Catherine.
Under the contract law, it has been provided that certain elements should be present in an agreement so that the agreement can be termed as an agreement enforceable by law or in other words, a valid contract. Therefore, in a valid contract, one party should make an offer, such offer should be accepted by the party to whom the offer was made, it should be supported by lawful consideration. Another requirement is that at the time of entering into the agreement, it should be the intention of the parties to create a legal relationship. This means that the parties should have the intention that the demand created by them should be enforceable by law. It is also necessary in this case for the parties to have the capacity to produce a valid contract. According to the first requirement, an offer has to be made (Atiyah, 1990). In this context, it is worth mentioning that an offer is different from a mere invitation to treat. Whereas if accepted, the outcome of offer is a valid contract, provided the other elements are present, an invitation to treat this merely made for the purpose of inviting offers from the other parties. The law of contract also requires that the offeree should accept the offer exactly in the same way. Hence, the law requires that the acceptance should be the major image of the offer. But if, while accepting the offer, the party has introduced new terms, the acceptance is not valid. In such a case, it is considered as a counter offer. In the same way, one such element is consideration that should be present in every valid contract. Due to this reason, a contract cannot be enforced by the law if consideration is not present. But in this context, it has been stated that it is not necessary that the consideration should be adequate or commercially realistic and similarly does not necessary to be expressed in monetary terms, the only requirement is that the consideration should be “sufficient”. In the present research paper, it will be evaluated if the above statement is true. For this purpose, the relevant cases will also be explored and similarly the difference that exists between adequacy and sufficiency in terms of consideration will also be evaluated (Craswell and Schwartz, eds 1994).
Before proceeding further it becomes important to discuss the meaning of the term consideration under the contract law. As mentioned above, consideration is essential in every lawful contract. This requirement has been introduced by the law contract for two purposes. The first purpose concerns the evidence for establishing the occurrence of a lawful contract among the parties. Hence, the requirement of consideration helps in evading the frauds that would otherwise happen if it becomes difficult to enforce oral promises. The other reason behind the need for consideration in a contract plays a deliberative role (McKendrick, 2009). Without this requirement, even informal statements made in routine life will also be enforceable under the law. Therefore, the need for the presence of consideration in a contract helps in establishing a distinction amid the informal statements and the statements that public intended to be enforceable by the law. Hence, this requirement helps in making sure that the people are not overly defensive while they are dealing with routine matters (Beale, ed. 2002). Similarly, the need for the presence of consideration also helps in making sure that the courts do not have to face a large number of unsubstantial cases related with the law contract. In this context, according to the law contract, the consideration can be mentioned as the act of the forbearance or the price that needs to be paid by one party to the other in lieu of the promise made by such a party (Carter and Harland, 2002).
It is worth mentioning at this point that the lock onto it provides that consideration can be executed or executory but under the law, passed consideration is not treated as valid. The law requires that the promisee should supply the consideration but it is not necessary that the consideration also move in favor of the promisor. Consequently, it is necessary that one party should supply the consideration but it is not required that the consideration should be provided to the other. The result is that the consideration that has been provided to third parties also valid. Another important principle that is related with consideration provides that while it is necessary that the consideration ought to be sufficient but it is not required under the law contract that it should also be adequate (Collins, 2003).
In order to evaluate the accuracy of the above-mentioned statement regarding consideration, the next step is to discuss the meaning of the term adequacy of consideration. It is worth mentioning at this point that generally adequacy and sufficiency of consideration are treated to be having the same meaning. The result is that these two terms are generally used interchangeably. It is generally believed that the terms adequate consideration and sufficient consideration have the same meaning. However, the law of contract provides that the terms adequate consideration and sufficient consideration have different meanings under the law of contract (Peel and Treitel, 2011). Usually adequate consideration concerns the circumstances where the person had paid the price for the subject matter of the contract by surprise is not in proportion to the value of the object. For instance if A had entered into a contract with B according to which, B is going to sell this car to A for one dollar only, it cannot be said that adequate consideration is present. However in such cases, the contract law provides that they were the predicate consideration has not been supplied by a party to the contract, such a position does not have any impact on the validity of the contract. There are only certain circumstances where a party may plead the inadequacy of consideration for establishing that the contract was the result of force/fraud/duress (Elliot and Quinn, 2005). It is clear that even if adequate consideration is not present, it will not affect the validity of the contract. It has been stated by Manners LC in Grogan v Cooke (1812) that if a fair and bona fide consideration is present, the court will not look into the consideration minutely for seeing if full and ample consideration has been supplied or not.
It appears that the decision of the courts that they will not evaluate the issue of the adequacy of consideration is correct. The first reason is that it is nearly impractical that the courts will have to examine adequacy of consideration. Similarly it will also be outside the resources of the courts to find if adequate consideration has been supplied by the parties in each and every contract. A difference is present between adequate consideration and sufficient consideration. The courts have considered that sufficient consideration has been supplied if the consideration has some economic value. Other than this condition of some economic value, it is also necessary that the consideration ought to be something that is recognized by law. In this way only a lawful consideration is treated as a valid consideration under the law. There are several cases in which the courts have arrived at the conclusion that the consideration was insufficient because in these cases, there was no economic value of the consideration. Consequently, things like moral duty, natural love and affection etc. are not treated by the law as having some economic value. Hence these are not treated as sufficient consideration.
The consideration is not treated by the courts as sufficient if the party that has provided the consideration was already under a legal obligation to do the act. In such cases also, the court will arrive at the conclusion that the consideration is not sufficient. In view of these rules regarding sufficiency of consideration, the consideration will be treated as insufficient if the party that has provided the consideration has only performed the duties that it was already under a legal obligation to perform. The law also provides that the consideration will not be sufficient when any public duty was imposed on the party that has provided such a consideration. An illustration of the situation can be given in Collins v Godefroy (1831). In this case, a party got a subpoena which required a party to appear in a civil case and provide evidence. Later on the other party made a promise to pay six guineas if the party appeared i in accordance with the subpoena. Accordingly, the party appeared but the other party declined to give six guineas. The issue before the court was to see if adequate consideration has been supplied in this case and therefore the promise to pay six guineas can be enforced against the other party. However the decision of the court was that the other party was already required by the law to give evidence as a result of the subpoena issued to it. Thus, as a result of the fact that the party was already required by the law to appear in the court and give evidence, this act was not considered by the court as sufficient consideration.
The issue regarding the sufficiency of consideration might also occur when a party is already required under an previous contract, concluded among the same parties, to perform certain duties. Consequently, in such cases, it needs to be decided if the promise made by the plaintiff, according to which the plaintiff agreed to fulfill the promise made in an earlier contract, can be treated as sufficient consideration. The cause is that in such cases also, the plaintiff is only trying to fulfill an obligation that was already enforced on the plaintiff.
The issue in Stilk v Myrick (1809) was if the sailors have provided sufficient consideration when they agreed to perform the duties of the two deserters. The reason was that the sailors were already bound by a contract with the owners of the ship which provided that they will do everything that needs to be done in an emergency to bring the ship to the port. The result was that even if a promise has been made by the captain of the ship to pay the wages of the two deserters to the rest of the crew members but the court stated that this promise was not unforeseeable. The reasoning of the court was that the rest of the crew members were already required by their contract with the ship owners to perform all the duties that have been mentioned in the original contract. Therefore, it was the opinion of the court that by performing the duties of the two deserters, it cannot be said that the other crew members have provided sufficient consideration. Therefore, the promise to give the wages of the two deserters to the crew members cannot be enforced by the law.
Williams v Roffey Bros & Nicholls (Contractors) Ltd.(1989) also provides an example of such a situation. In this case, Roffey Brothers had contracted with a housing society to refurbish 27 flats. For this purpose they made a contract with carpenters, Lester Williams. After some time, Williams faced financial problems as the price decided in the contract was too low. Roffey Brothers wanted that the flats should be completed on time as there was a penalty clause in their contract with the housing society. Under these circumstances, they agreed to pay extra amount to Williams but later on they refuse to pay this amount. The court stated that sufficient consideration was present because Roffey Bros have achieved a practical benefit to him from the completion of work on time.
Another significant example regarding sufficient consideration was provided in Chappell v Nestlé Co. Ltd. (1959). In this case it was reaffirmed that consideration should be sufficient even if it is not adequate. The court stated that even empty wrappers of chocolate bar can be treated as adequate consideration.
In view of the provisions of contract law related with consideration and the important decisions of the court regarding this matter, it can be stated that the statement is accurate that the consideration needs to be adequate even if it is not sufficient.
A court will not look into the matter of adequacy of consideration. Similarly, it is not for the court to determine if a fair price has been paid to the other party under a contract or not. This issue has to be decided by the parties themselves. The courts are only concerned with the fact if the consideration provided under the contract has some economic value or not.
References
Atiyah, P.S. (1990) Essays on Contract, Oxford University Press, New York
Beale, H. (ed.) (2002) Cases, Materials and Text on Contract Law (Hart Publishing, Oxford
Carter, J.W. and Harland, D.J. (2002) Contract Law in Australia, 4th Edition, (Butterworths, Australia
Collins, H. (2003) The Law of Contract, 4th Edition, Butterworths London
Craswell, R. and Schwartz, A. (eds) (1994) Foundations of Contract Law (Oxford University Press, Oxford
Elliot, Catherine and Frances Quinn, (2005) Contract Law, 5th Edition, Pearson Education Ltd.
McKendrick, E. 2009Contract Law8th edn Palgrave
Peel E and Treitel,G.H. 2011, Treitel on the Law of Contract,13th edn Sweet and Maxwell
Chappell&Co Ltd v Nestle Co Ltd [1959] UKHL 1
Collins v Godefroy (1831) 1 B & Ad 950
Grogan v. Cooke (1812) 2 Ball & B 230
Stilk v Myrick [1809] EWHC KB J58
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989] EWCA Civ 5
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