To find the presence of consideration to enact an enforceable agreement for Jack as per the information provided.
Law/Rule
An agreement can be termed as legally enforceable, only if both the persons are involved in the valid consideration for the enactment of the contract. There are two essential components which are needed in the formation of a valid agreement i.e. valid offer and valid acceptance. The process for the enactment of the agreement starts with the offer made by the offeror with the other party known as offeree (Latimer, 2005). After receiving the offer, the offeree must respond to the offeror in terms of the acceptance towards the offer. The offer becomes valid, when it received by the offeree and the acceptance becomes valid, when it is successfully accepted by the original offeror without conditions. If the offeree sends the acceptance with some conditions, then this is called counteroffer. When the two parties complete this offer and acceptance process, then the offer becomes legally valid and is called lawful agreement (Lindgren, 2011).
In the enactment of enforceable agreement, the promisor makes promise with the other party (promisee), when the promisee provides a significant valid consideration to the promisor and promisor accepts the consideration. Only then, the enactment of the agreement becomes legal under common law (Harvey, 2009). Therefore, the contract becomes enforceable for the promisee and must be binding on the promisor. According to the norms of the common law, if promises do not have consideration, they will be termed as gratuitous promises and will not be liable for the enactment of the valid agreement (Pathinayake, 2014). Hence, it is specifically required that the promisor must not give any gratuitous promise to the promisee, otherwise an enforceable contract would not be formed due to the lack of consideration. Adequacy or equality of the consideration does not affect the enactment of the agreement or contract. The only important aspect is that consideration should be adequate in the opinion of the parties which are actually enacting the agreement (Davenport & Parker, 2014).
The critical issue in this case is basically related to the presence of the lawful consideration. If Jane provides a valid consideration to Jack, then only the enforceable agreement is binding on Jane. In the first scenario, Jane is going overseas and hence, she willingly offers her Lotus Super 7 Sports car to Jack. The market cost of same type of the vehicle is around $25,000. As per the highlighted part of the contract law, any agreement can be treated as lawful enforceable agreement, only if the valid consideration is present between both the parties. The presence of the consideration can be found with some value, which is offered by the promisor to the promisee. This value of the consideration will be the imperative parameter to determine that whether the agreement is legally enforceable for promisee. In present case, Jane has not offered any kind of consideration to Jack and also Jack has accepted the offer without any further counteroffer. Hence, there is lack of consideration in the part of Jane as she has not mentioned any consideration value, irrespective of the market price of the car. Therefore, according to the rules of gratuitous promises, the lack of consideration will result the agreement to not be legally enforced by Jack in any circumstances.
In this case, Jane has made an offer to sell her Lotus Super 7 Sports car to Jack with the amount of $25,000. This offered amount is same as the market worth of the car which is $25,000.
Jack has accepted the offer from Jane and ready to pay her $25,000 for the car. This case is having all the requisite measures that needed for the enactment of the valid agreement as
Valid offer made by Jane
Lawful consideration is present as Jane clearly states the amount of consideration of $25,000
Valid acceptance made by Jack without counter offer with the acceptance of the consideration value of $25,000
Therefore, in this case, both the parties are willingly involved in the enactment of the contract with the valid offer, acceptance and also with the legally valid consideration, hence the agreement created between the parties is legally enforceable for Jack. Also the contract is enforceable binding on the promisor (Jane).
In this case, Jane has offered to sell her Lotus Sport 7 Sports car to Jack with a cost of $2,500. However, she knows that the market price of the same type of car is $25,000 still she offers the car with vey less consideration value. In this case also, Jack has accepted the consideration value with no counteroffer. Here, rule of consideration of adequacy is applicable which says that for the enactment of any agreement, valid consideration is required, the value of the consideration either more, less or hundred % adequacy is not important. A case can be considered to explain the adequacy of the consideration that in the heighted part of the judgement of the Chappell v Nestle (1960) case that adequacy is not required for the enactment of the contract even a blank wrappers of a chocolate can be treated as valid consideration (Carter, 2012). Hence, same in this case, the amount of $2,500 is treated as a valid consideration and results the enforceable agreement for Jack irrespective of the actual market worth of the car.
The discussion above clearly indicates that there is no enforceable agreement when Jane offers the car for free, however, in the other cases as consideration is present, hence enforceable agreement exists.
The given case deals with a contract for tanker placed by North Ocean Tankers (referred to as buyer) with a shipbuilder (referred to as seller). During execution of contract, there is currency devaluation of USD and this resulted in demand for incremental payment to the tune of $ 3 million from the buyer. The buyer initially protested as this payment was not legally derivable from the contract terms. However, the buyer only agreed at the threat of the seller indulging in breach of contract by stopping the building process. The buyer needed delivery of tanker on time due to prior commitment to a customer and therefore agreed for extra payment. However, after nine months after delivery, the buyer seeks to recover that money. The core issue is to comment on whether the buyer would be successful in the claim or not.
Law/Rule
Mutual consent is a key consideration for contract enactment. Essentially, in involves that the consent for particular terms and conditions stated in the contract should not be obtained through the use of any threat which would result in terming the resultant agreement as involuntary agreement. As per common law, the principle of mutual consent is sacrosanct not only at the execution of the original contract but also with regards to any subsequent changes in the contract clauses (Davenport & Parker, 2014).
Duress as a concept refers to involuntary consent obtained through the usage of threat as the main enabler. Duress is not the same as undue influence and distinguishing between the two is critical. Further, a critical condition which ought to be satisfied for extending duress as a defence is that the use of threat resulted in acceptance of any demand on promisor’s end which in the absence of threat would have been declined. Duress typically occurs when one of the parties is in a dominant position which leads the other party at the mercy of the dominant party (Carter, 2012). Duress typically may be physical or economic depending upon the underlying means used to threaten. For a long time, the purview of duress was limited only to the physical ambit but during the last some decades, the ambit has been modified to include the instances of economic power being abused to obtain involuntary consent (Edlin, 2007).
Thus, economic duress may be defined as the usage of economic threat by the promisee placed in an economically dominant position so as to force the promisor to give a promise that is unfavourable to the interests of the promisor (Andrews, 2011). In order to identify the presence the economic duress, there are certain elements that need to be present. The usage of economic threat has to be there which typically could in the form of contract breach with the intension of forcing the promisor into agreement. The promisor has no other option except agreement with the promisee’s demand. Also, the commitment provided by the promisor under threat paves way for the development of contractual relations between parties. As a result, the promisor experiences financial distress (Harvey, 2009).
If the above elements are indeed present, then it may be concluded that economic duress is indeed present. In presence of economic duress, the contract could be made null and void if the promisor desires so. However, the promisor should exercise this right during reasonable timeframe. Non-exercise of this right or filing legal claim for recovery of invalid concerns during reasonable time would lead to an implicit assumption that contract is acceptable to the promisor (Lindgren, 2011). This was the central theme of the North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 case which can act as a potent precedent in this case (Carter, 2012).
The above case was based on a commercial contract executed between a construction company and a buyer for construction of a ship. Post the enactment of contract, there was currency devaluation which put the construction company in financially unfavourable position. To recoup the potential losses, extra payment to the tune of adverse movement was demanded by the construction company which reluctantly was agreed to after the company threatened to drop the contract. The buyer had negotiated a contract with a customer for the ship and hence any delay in delivery could have caused losses. The buyer later made a claim to recover the payments made earlier (Latimer, 2005).
The claim of the buyer was disallowed despite the court advocating that the claimant was indeed subject to economic duress by the defendant or the construction company. The legal reasoning extended for the decision was that the claimant should have filed for the refund at a earlier time as this delay effectively amounts to the claimant agreeing with the excess payment made. No definition of reasonable time in this regard has been offered by the court and it essentially is driven by the underlying circumstances and the interpretation of the same by the court (Harvey, 2009).
Based on the case facts, it can be seen that without a doubt there are key elements of economic duress that are present here which clearly indicate that the buyer had the option to declare the contract void and hence recover the payment of $ 3 million that was forcefully collected using economic power by the shipbuilder. The buyer did not want to make the payment but then was threatened with stoppage of work which eventually coerced the buyer into making payment. Despite this fact, the buyer would not succeed in the claim of recovery as there is a large delay of nine months which amounts to contract being valid as indicated in the arguments made under North Ocean Shipping v Hyundai Construction (The Atlantic Baron case.
It is apparent that the buyer cannot claim the $ 3 million payment as it has delayed the claim filing beyond reasonable time.
Andrews, N 2011, Contract Law, 3rd eds., Cambridge University Press, Cambridge
Carter, J 2012, Contract Act in Australia, 3rd eds., LexisNexis Publications, Sydney
Davenport, S & Parker, D 2014, Business and Law in Australia, 2nd eds., LexisNexis Publications, Sydney
Edlin, D 2007, Common law theory, 4th eds., Cambridge University Press,Cambridge
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
Pathinayake, A 2014, Commercial and Corporations Law, 2nd eds., Thomson-Reuters, Sydney
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