Contract Law : Payment Of Consideration

Based on the facts, the issue that takes place here is, whether an enforceable agreement exists with the giving of Lotus Super 7 or not?

For existence of valid contract between the parties, it is important that the element of consideration is present (Durrant, 2013). A contract that does not fulfill the requirement of consideration, the contract is deemed to void.  Consideration means payment of the price by the promisee to the promisor in return of service or fulfillment of the promise made between them. Gratuitous promises are not enforceable in the court of law (Garg, 2014). Thus, promise that is made without the involvement of consideration is not enforceable and it is simply considered a “Nudum pactum (McKendrick, 2014).

Roscorla v.Thomas is a famous case law in relation to payment of consideration. This case took place in the year 1842 wherein Thomas bought a horse on the promise that it shall be a well behaved and a mannered horse (Hillman, 2012). However, later it was noted by Thomas that the horse was ferocious by nature. The contract that existed between Roscorla and Thomas was not an enforceable contract as there was lack of consideration between the parties to the contract (Puil & Weele, 2014).

In the given case study, the contract that existed between Jane and Jack is not enforceable as there is lack of consideration and can only be considered as a gratuitous promise between them.

Hence, due to lack of consideration the contract can be declared as unenforceable.

• Based on the facts, the issue that takes place here is whether the contract that existed between Jane and Jack is enforceable or not?

For a contract to be legally valid, it is important that the valid requisites be fulfilled such as offer, acceptance, competency, consideration and absence of undue influence or coercion.  Additionally, intention of creating a legal relationship should also be present (Landa, 2014). If the mentioned requisites are fulfilled appropriately, a contract can be deemed as valid and enforceable in the court of law.

In the given case study, the contract that existed between Jane and Jack is enforceable and legally binding on both the parties to the contract. In this case, Jane is the offeror and Jack is the offeree. Jack accepts the offer that is made to him by Jane. Hence, the legal formality of offer and acceptance is completed at this stage of the contract. Additionally, the contract that existed between Jane and Jack involves presence of 25000 dollars as consideration, which Jack has to pay to Jane. This means that the legal formality of presence of consideration to make a contract valid is also completed between them.

Thus, all the necessary requites of a valid contract existed between Jack and Jane making the contract enforceable.

• Based on the facts, the issue that takes place here is, whether the consideration offered is sufficient or not?

The law of contract imposes no restriction on the parties to the contract in association to consideration of contract, as long as the consideration is sufficient. The promisor does the calculation of the feasible amount of consideration, as he is the one who will receive the amount of consideration in exchange of some service or product (Ayres & Schwartz, 2014). The offeree does not have the authority to quantify the amount of consideration. However, he may be allowed to bargain with the price as long the consideration is sufficient (Niu, 2015).

In the year 1959, Lord Somervell decided a famous in relation to sufficiency of consideration. In the case of Chappel v. Nestle, He opined that a “peppercorn” could be considered as a valid consideration as it is valuable and if the promisor has measured the same (Andrews, 2016).

As already stated, if the consideration is a stipulation of the promisor or the offeror that it shall be considered as valid unless the stipulation is not against law. However, it is important that the consideration is in existence and holds some value in the eyes of law. A good consideration should not be illusionary in nature (Chen-Wishart, 2012).

In the given case study, it can be held that the consideration offered by Jane was valid and valuable in the eyes of law even if less than the market value of the car.

Since Jane, being the offeror herself calculated the amount of the car the consideration can be regarded as valuable and sufficient.

A shipbuilder formed an agreement with the builder to build a tanker for North Ocean Tankers. The consideration of the contract was decided in US dollars and did not have any conditions of currency changes.  While the project was in its halfway, the price of currency of the United States devalued by 10 percent. The shipbuilder demanded for extra 3 million dollars or it would stop work. The buyer agreed to pay the excess the amount until nine months of delivery.

Based on the facts, the issue that takes place here is, whether the buyer would be successful in the claim for the amount that has been obtained in excess by North Ocean Tankers or not?

According to the common law, consideration is regarded as a special element that should be considered for formation of contract.  In the case of Universe Tankships Inc. of Monrovia v International Transport Workers Federation, it was held that plaintiffs could recover the amount that is paid by them as that time the defendant was giving unreasonable threat that they would not release the ship if the amount were not paid to them reasonably. The plaintiffs paid the price to the defendants at that moment, however later on they filed a suit against the defendants for recovery of the amount that was paid (Reid,  2015).

In the landmark case of  Williams v Roffey Bros & Nicholls (Contractors) Ltd, a contract existed between the principal contractor and the sub contractor for doing work related to carpentry. The initial consideration of the contract was 20,000 pounds, however, on a later date it was seen that the price was underestimated. The principal contractor got worried as to whether the work that he allotted to the sub contractor would be completed within the stipulated time or not. The principal contractor was afraid of the penalty that he might have to pay due to delay in the work of the sub contractor. Consequently, the principal contractor paid about 10,300 pounds to the sub contractor. However, later the amount was not paid to the principal contractor by the sub contractor. The principal contractor filed a suit against the sub contractor for recovery of the amount that was paid to him in excess of the original contract amount. The Court held that the sub contractor liable for payment of the extra amount as the contract that was entered between them was in lieu of the payment that he had stipulated (Houh, 2014).

Likewise, in the case of the Universe Senitel, a ship that would operate in Liberia became “black listed” by the trade association. Resultantly, no “tug boats” were accessible so the ship could not said and thus it followed devastating results. The trade union forced for payment of their wellbeing fund as a stipulation to eliminate the name from the blacklist. The proprietor of the ship paid the money to the Union but then the plaintiff won the case for recovery of the money as the case involved influence under the doctrine of economic duress (Durrant, 2013).

In the given case study, since there was a likelihood that the North Ocean Tankers might suffer a loss if the shipbuilder refused to complete the building of the tanker hence the doctrine of consideration can be invoked in this case. It would be regarded that there are two contracts in existence, one that was an initial contract having original terms and conditions between the shipbuilder and the North Ocean Tankers and the second contract that was to pay the lack of funds for completion of the allotted work. Thus, the doctrine of consideration shall be applicable. In the case of Universe Tankship, there was presence of economic duress. Likewise, in the given case study as well there is presence of economic duress. Economic duress means using threat to cause damage to a person’s financial interest. The doctrine of economic duress first evolved in the case of the Siboen.  It was held by the Privy Council in this case that the use of economic duress shall make a contract void and the doctrine of consideration in the given case shall not become active.

Similarly, in the given case study, as well, the use of economic duress was involved and thus the second contract was not valid allowing the shipbuilder to recover the amount that he paid in excess (Garg, 2014).

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Durrant, C. W. (2013). To benefit or not to benefit: mutually induced consideration as a test for the legality of unpaid internships. University of Pennsylvania Law Review, 162(169).

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