Consideration is the benefit which is enjoyed by both the parties or what they expect to get from the contractual relation they enter in. For a contract to be valid in the promise so made there must be a consideration present, or may be payment of some kind to the promisor for the promise so made. In our example here Jane offers to give Lotus Sports Car to Jack but here Jane hasn’t asked Jack any amount in return. So, it will be an act of gift as there is no consideration from the promise to the promisor.
Suppose if a friend offers a gift to another without asking any in return- the arrangement so made will not be termed as a contract because the friend did not ask something or a pay in return for the promise so made. Similarly, in our case Jane offered the car whereas she didn’t ask any money in return for the car. Here there is no consideration that is moving from Jack to Jane . A contract is based on exchange of promises but here the promise is moving from only one side . Here one party will get the benefit but the other party will not be in a detriment position. So this is a case of gift and law does not see gift as a contract unless it is made under a deed. So the contract is not enforceable by law because by the law of contract there is no bilateral contract and no return consideration from the promisee to promisor. For example , if my uncle promoises to give me money to buy a house , without anything in return , then it is a promise to make a gift. And I cannot force or sue my uncle to enforce the contract as the contract is without consideration and not enforceable by law.
The law states that it is not necessary for a contract to be adequate but it has to be sufficient. It means that the consideration should be of some value, whether it is appropriate or not to complete the contract. The court will see in the matter whether there is exchange of value and will term it as adequate only when they have agreed to enter into the contract readily and without any force. The court is not affected by whether the parties have received equal value or not. We will see an example case of White v Bluett, where Bluett sued his father’s will for an outstanding debt of his father and he claimed that he was promised by his father that it would be returned to his son. In exchange his father asked his son to stop complaining. Here the Court held that the consideration was not real as it didn’t have any economic value in return for the promise and regarded the son still liable for the debt. The exchange of promise must be tangible for the contract to be legally enforceable.
In the case of Thomas v Thomas(1842) , here the case was to give a house on rent for Euro 1 p.a and also to keep the premise in good condition. Hence it was seen by the court that the payment and promise to keep the house in a good condition was considered to be a consideration for the contract and made it legally binding. Though the payment was not adequate but it was still sufficient for the binding contract.
It is not necessary that there must be full return.Even in our case Jane offered to sell his Lotus sports car 7 for $2500 instead of $25000. This contract was considered to be legal though the amount was not adequate. In such situatuion the contract is enforceable by law because though the amount is not adequate but there is some monetary value in returm. And also, they case may be that such amount might be sufficient for the party. Here the court is not responsible to see if the parties made a good or a bad bargain or whether they received equal value or not. Hence, the contract is valid and enforceable by law.
Consideration is the price which the promisor asks from the promise in exchange for the promise made by them.In every valid contract there is a change in the position of both the party – one party receives a benefit and the other suffers a detriment. The consideration must move from the promisee to the promisor at the request of the promisor. In our case, Jane offers to sell her Lotus sports car 7 to Jack at the value of $25000. Also, the market value is same. Hence, it is a valid consideration.The consideration needs not be past ,but it can be present or future. In our case the consideration is present . The consideration has to be real and not illusionary. For example, A promised to pay $200 extra to a doctor if he operates his son succesfully. This consideration is illusionary and not real as the doctor is already bound to perform his duty. In our case we see that all the legalities of the consideration exist in this offer and thereby we see that it is a valid contract.
The consideration has to move from the promisee’s end to the promisor. We will see the case of Tweddle vs Atkinson (1861) – a couple got married. The father of the groom and the bride’s father made a contract that they will both pay a sum of money to the couple as a blessing from their end. First, the bride’s father died and after some day when the groom’s father thought os suing he also died and therefore could not sue for the contract made.Then, the groom made a claim against the will’s executor. Here the final verdict was that the groom was not entitle to enforce the contract as neither he was a party to the agreement nor he made the contract and also the consideration did not move from his end. In our case the consideration will move from Jack to Jane thereby satisfying the essentiality of the validity of contract.
Consideration is a benefit that they expect to receive when two parties enter into a contract or the benefits they enjoy by entering into such contracts. The law states that the promisee must provide some consideration to the promisor for the promise made and for the agreement to be binding. Past consideration is not enforceable by law. If an act has already been performed then by the reference to that act any subsequent payment will not be enforceable as per the law. If a person has an obligation to do an act in question then the promise of doing it or actually doing it will not be regarded as consideration for an additional payment.
Economic Duress -Duress is a situation when one party exerts illegitimate pressure on another party which is in a weaker position to enter into an contract. To prove that there is an economic duress a party has to prove three points which are :
There was a continuous ongoing contract between both the parties.
1. The defendant threatened to terminate the pre existent contract and which would duly affect the plaintiff position.
2. Under the duress by the defendant the weaker party has agreed to enter the contract with the changed terms and conditions.
There are two elements by which duress is easily identified:
1. Absence of choice
2. Illegitimate pressure.
We will refer to one more case to understand economic duress – the case of Occidental Worldwide Investment v Skibs(The Sibeon & the Sibotre)
In this case the defendant was to buy two charters from the plaintiff. The defendant falsely told the other party that they were about to become insolvent if the other party did not lower the cost of the charter. This was an untrue statement. The claimant already owed a huge amount of money from the other party and they thought that if they did not lower the cost then the company would become insolvent and they would lose their money. So they renegotiated the contract and lowered the price according to the defendant. However, later on they decided to to set aside the contract.
The judgement in this case was that though the contract would be voidable due to economic duress but this was not in this case Here there was no coercion to enter into the contract and also the commercial pressure was not present in this case.
We will see one more example where there was economic duress and the plaintiff had the right to rescind the contract – Universe Tankships vs International transport Workers Federation, The universe Sentinel. The ITWF blacked a ship to prevent it from leaving the port and made huge demands for the pay and also asked for huge sum of money to pay to the Seafarers International Welfare Funds. The ship owners agreed under that that the ship could leave the port and so that they did not make any further loss. And they thought that they will later on recover the amount from the welfare fund. The judgement in this case was that The money was extracted by the ITWF was under economic duress and it could be recovered by the plaintiff. It made the contract voidable at the option of the party. Here as the party had no other choice but to submit and pay the money demanded by them so there was a lack of choice by the plaintiff and therefore economic duress existed and the payment was refunded to the plaintiff party.
Whenever there exist a duress while entering into contract then the law permits the party to escape their contractual obligation by rendering the contact voidable
Our case relates to the famous case North Ocean Shipping Co. Ltd v Hyundai Construction Co Ltd (1979).
In our case North Ocean Shipping enter in a contract with Hyundai Construction Co. in which Hyundai Construction Co. agreed to build a tanker and the price to be paid was fixed in US Dollars. The payment was to be made in five equal installments But after the contract was entered and after the first installment was paid the US Dollar was devalued by 10% and therefore the Hyundai Construction asked for an additional 10% increase in payment in all the remaining four installments without any legality. Hyundai Constructions made it very clear that without the increase in the payment Hyundai Construction Co. would not construct the tankers any further. North Ocean Shipping already had a client available with whom they expected good profits and who were ready to take the ship but only if the ship was ready on the stipulated time. North Ocean Shipping wanted to maintain an amicable relation and therefore with the fear of losing the client they agreed to pay an additional amount. But later after 9 months they filed a case to recover the excess amount paid to Hyundai constructions Co.
Here was a case of economic duress because the Hyundai construction was very adamant that it would only accept the excess price without any legal justification to it. That time due to economic duress as the shipping company continued to stay in the contract as a threat that it would affect its economic interest or well being.
The contract here was not void but it was voidable at the option of the party which has suffered the duress. And after the contract has been finished and the party didn’t act yet then it will be taken as affirmation of the party to the contract and the party will lose the right to take any serious legal action. Even in our case here as there was a lapse of 9 month and the contract was only voidable so, the North Ocean Shipping company lost the right to recover any excess damage paid by them
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