Jane went overseas and while going she offered her Lotus Super 7 to Jack. The market value of the car in good condition is 25000 dollars. Jack accepted the offer. Relying on the facts stated, the issue that arises here is, whether an enforceable agreement exists between Jane and Jack or not?
For existence of a valid contract, it is important that the necessary elements of a legal contract be fulfilled. Of all the existing elements of a valid contract, consideration is one of the most important elements that should be fulfilled (Deakin and Morris 2012). Consideration is the benefit that one of the parties to the contract receives in exchange of a deal. For example, A offers B a computer at 500 dollars. B accepts. In this case, A is the offeror and B is the offeree. B being the offeree shall pay the amount of consideration to A at the time of buying the computer. A contract without consideration is no contract at all (Furmston, Cheshire and Fifoot 2012). This means that a contract in which consideration is absent is a non-enforceable contract in the eyes of law. A contract in which consideration is absent is sometimes referred to as gratuitous consideration or gift and the contract becomes non-enforceable in Court. A gratuitous consideration is a consideration that cannot be recovered on any injury, loss or inconvenience to the other party (Appleman et al. 2015). In the case of, Thomas v. Thomas, it was held that a contract between two people in which consideration is gratuitous in nature then such a contract is not enforceable. Thus, it can be held that the contract that existed between Jane and Jack is not enforceable as the consideration in their contract is gratuitous in nature (Hudson 2012).
Jane offered Jack her Lotus Super 7 for 25000 dollars. The market value of the car in good condition is 25000 dollars. Jack accepted the offer. Based on the facts, the issue that arises here is, whether an enforceable agreement exists between Jane and Jack or not?
To make a contract legal, enforceable and binding in the eyes of law, it is important that the legal formalities be fulfilled. The following are the requisites to make a contract legally binding and enforceable in the eyes of law:
Offer means an offer or a promise that is made by the offeror in return for consideration of the promise made. Acceptance means agreeing to the consideration to be paid to the offeror by the offeree and also agreeing for the promise that is to be paid by the offeree (Burrows 2016). Consideration means price paid by the offeree to the offeror in return of some promise or service (Burrows, Todd and Finn 2012).
In the given case study, Jane was the offeror and Jack was the offeree. Jane makes the offer to Jack to sell his car for 25000 dollars as consideration price. Hence, it may be held that the legal formality of offer, acceptance and consideration was completed as part of the formation of contract. The case study shows no reflection of the fact that the contract was induced by coercion or fraud. Thus, it may be concluded that a legal, enforceable and valid contract existed between Jane and Jack. In case of breach of contract, any of the parties may file a suit against the other for enforcing the contractual rights as stated in the terms and conditions of the contract.
Jane offers to sell Jack her Lotus Super 7 sports car for 2500 dollars. However, the market value of the car is 25000 dollars. Jack accepted the offer of Jane. Based on the facts, the issue that arises here is, whether the consideration on which the contract is based is sufficient or not?
The contract law lays no restriction on the parties to the contract as long as all the necessary requisites of the valid contract are fulfilled. As per the general rule, the offeror calculates the amount of consideration and demands the price from the promise based on feasible and understandable calculation (Swain 2013). The reason why the promisor does the calculation is that he shall receive the price that is paid in return of the goods or services that is offered. The offeree or the promisee does not have the power and authority to decide the amount of consideration; however, he may bargain the price of consideration if he thinks that the price is not sufficient (McKendrick 2014). Sufficient consideration is a consideration that is deemed by law to be of value in to support a normal contract between parties (Davies 2016).
In the landmark judgement decided by Lord Somervell, in the year 1959, in the case of Chappel v. Nestle it was held that even a “peppercorn” could be regarded as a valuable and and valid consideration as it sufficient enough if the promisor or the offeror has measured it and agreed for the same (Swain 2015). Thus, if a consideration is a stipulation of the promisor it shall be regarded as valid unless the consideration is not unlawful. Moreover, it is important that the consideration should be of some value in the eyes of law. It is often seen that a good consideration is illusionary in nature and it should not be a mere illusion it should be good in reality (Hoeben, Hayes and Domingos 2014).
Similarly, in the given case study, it may held that consideration offered by Jane to Jack was valid and valuable in the eyes of law as Jane herself calculated the amount of consideration and per se the amount of consideration was not unlawful. Thus, a valid and enforceable contract existed between Jane and Jack.
A contract was formed between the shipbuilder and the buyer for building a tanker for North Ocean Tankers. The consideration of the contract was in US dollars and it contained no provisions regarding issues pertaining to currency changes. While the builder was halfway on its construction, the US dollars devalued by 10 percent. Since the builder realized that he was making a loss in the contract, it demanded for the lag in the amount of consideration and stated it would not proceed with the construction of the work. The buyer at that time agreed to pay extra. However, the buyer commenced an action against the builder only after nine months of the delivery of the tanker.
Depending on the facts stated in the case study above, the issue that arises here is whether, the buyer will be successful in recovering the excess or not?
As per the traditional definition of consideration, it means benefit that is obtained by the promisor at the detriment of the promise (Bagchi 2013). This is regarded as the best way to make a contract enforceable. A mere promise becomes illegal if it is not guided by consideration. In the case of Currie v. Misa, it was held that a consideration to be valuable it should consist of some right or interest for the advantage of one party causing detriment to the other party (Palmer 2013). However, this definition is not complete and sufficient on the grounds that it is not a complete definition.
In the case of Stilk v. Myrick, two sailors abandoned the ship during the voyage to London and the captain promised them to share their wages between the crew if they agreed to continue with the voyage. However, the Captain failed to keep up with his promise (Crawford 2015). The case of Stilk v. Myrick can be differentiated with the case of Hartley v. Ponsonby, wherein the Court held that a promise to pay extra could be made enforceable only if legal benefit is identified. In the landmark case of Universe Tankships Inc of Monrovia v. International Transport Workers Federation, the plaintiff filed a suit against the defendant for recovery of the amount that he paid in extra to the defendant at the time when he demanded for it. The defendant used duress and threatened the plaintiff that he would not release the ship unless the plaintiff agreed to pay the extra amount that the plaintiff demanded. At the time when the defendant demanded the money, he agreed to pay the same; however, later the plaintiff filed a suit for recovery and he won the case as the defendant used economic duress to get the amount of consideration from the plaintiff (Finch and Fafinski 2016). Similarly, in the case of Williams v. Roffey Bros and Nicholas (Contractors) Ltd, the issue was related to the use of economic duress and invocation of doctrine of consideration. In the given case, an agreement was formed between the principal contractor and the sub contractor. The initial amount of consideration of the contract was 20000 pounds. The contract was related to do some kind of carpentry work. On a later date, the sub contractor realized that the contract for consideration was not sufficient and he demanded the same from the plaintiff. The principal contractor agreed to pay the amount in excess, as he was afraid of the penalty that he may have to pay for causing delay in the work of the sub contractor. Later the principal contractor filed a suit against the sub contractor for recovery of the amount in excess. He succeeded as the Court held that the contract was induced with economic duress making the consideration void (McLauchlan 2015).
In the case study of North Ocean Waters as well, there was likelihood that the North Ocean Tankers might suffer a loss if the builder denied construction of the same. Thus, in this case the doctrine of economic duress and consideration was invoked. In this case, there was formation of two contracts, one contract was between the tanker and the builder containing the original price of consideration without having the provision of currency fluctuations and the second contract wherein the builder demanded extra amount of the consideration. Like it was held in the case of “Universe Tankships Inc. of Monrovia v International Transport Workers Federation and Williams v Roffey Bros & Nicholls (Contractors) Ltd” that a contract which has involvement of economic duress shall be deemed as void and plaintiff may recover the amount he paid in excess of the agreement. In the likewise manner, the plaintiff in this case may also file a suit for recovery of the amount he had to pay to the builder out of fear (Mitchell 2013).
Economic duress makes a contract void if it is proven that a party to the contract entered into the contract as he lacked in sufficient options for some other recourse. Economic duress means involvement of wrongful threat or an unlawful action forcing the other party to remain in the contractual obligation (Deakin and Morris 2012). An agreement can be declared void if the party is able to prove his innocence by providing substantial evidence that he was forced to form contract with some other party. The contract should be an outcome of induced threat and action. The case of Siboen led to formation of doctrine of economic duress. The Privy Council in this case held that if any contract is made under the influence of economic duress the contract should be deemed as void making the doctrine useless (Furmston, Cheshire and Fifoot 2012).
Conclusively, it may be stated that in the given case study as well, there was use of economic duress with the help of existence of two contracts. In the first contract, an initial amount of consideration was set while in the second contract there was existence of economic duress making the initial contract void. Thus, the buyer has all rights to file a suit for recovery of amount that he paid in excess to the shipbuilder.
Appleman, J.A., Appleman, J. and Holmes, E.M., 2015. Excuses for Nonpayment and Defenses to Actions for Premiums (Vol. 5). Appleman on Insurance Law and Practice.
Bagchi, A., 2013. Perspective of Law on Contract, The. Wash. L. Rev., 88, p.1227.
Burrows, A., 2016. A Restatement of the English Law of Contract. Oxford University Press.
Burrows, J.F., Todd, S.M. and Finn, J., 2012. Law of contract in New Zealand. LexisNexis NZ.
Crawford, B., 2015. Bank of Montreal v. Marcotte:” Exclusive” Federal Financial Consumer Protection Law and the Role of the Law of Contract.Banking & Finance Law Review, 30(2), p.345.
Davies, P.S., 2016. JC Smith’s the Law of Contract. Oxford University Press.
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McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
McLauchlan, D., 2015. The lingering confusion and uncertainty in the law of contract interpretation. Available at SSRN 2653500.
Mitchell, C., 2013. Contract Law and Contract Practice: Bridging the Gap Between Legal Reasoning and Commercial Expectation. Bloomsbury Publishing.
Palmer, T., 2013. UQ Library Guides: Contract Law: Get started.
Swain, W., 2013. Lawyers, merchants, and the law of contract in the long eighteenth century.
Swain, W., 2015. The Law of Contract 1670–1870. Cambridge University Press.
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