1(a): The first question, the issue is on the basis of the fact that Jane had offered to give her sports car to Jack as she’s going abroad. Although the market value of the car is nearly $25,000 but Jane had not mentioned any consideration for the car. As the offer made by Jane has been accepted by Jack, the issue is if the promise made by Jane is legally enforceable and if this promise can be enforced by Jack.
Under the contract law, there are certain necessary elements that have to be present due to which any given becomes legally enforceable. These elements include offer and acceptance. Similarly, one such element is consideration. The law of contract provides that they should be consideration present to support the promise made by the other party. In this regard the law provides that consideration can be in the form of money and similarly can also be a promise to do or not to a particular thing (Atiyah, 2000). According to the law, past consideration is not treated as valid (Re McArdle, 1951). In this case also, Jack has not supplied any consideration in return of the promise made by Jane to give her sports car. The result is that Jack does not have an enforceable agreement.
(b): Jane has made a promise according to which she is going to sell her sports car to Jack and in return, Jack is going to pay the price of $25,000. This offer has been accepted by Jack. Therefore, it has to be considered in this question if Jack has an enforceable promise against Jane. In other words, if a contract has been created between Jane and Jack? In order to decide this issue, the basic requirements that are necessary in a legally enforceable contract are present in this case. A valid contract is not only an agreement created between the parties. For creating a valid contract, the law requires that six necessary elements should be present in the agreement due to which it becomes legally enforceable or a valid contract. Therefore, one party should make an offer and the other party should accept it (Beatson, Burrows and Cartwright, 2010). They should be consideration present and at the same time, it should be the intention of the parties to create a legal relationship and the party should also have the capacity to do so. In the present case, all the necessary elements are present. Jane had made an offer at the same as been accepted by Jack. The consideration of $25,000 is also present. This is also the estimated market value of the car. The result is that in this case Jack has an enforceable agreement with Jane.
(c) The issue with this case deals with the adequacy of consideration. An offer has been made by Jane according to which, she is going to sell her sports car at a price of $2500. However in reality, the market value of the car is around $25,000. In view of these facts, it needs to be decided if the agreement created between Jane and Jack can be termed as legally enforceable, especially in view of the fact that the parties have mentioned very low price for the car. Therefore it becomes significant to consider if the consideration supplied by the parties is adequate or if due to the lack of adequate consideration, the contract cannot be enforced (Collins, 2003).
For dealing with such a case, the law contract is clearly mentioned that the adequacy of consideration does not affect the validity of the agreement. In this regard, the traditional rule provides that while it is necessary that sufficient consideration should be present but it is not necessary that adequate consideration should also be supplied. It is not required under the law contract that the consideration present in the agreement should be whether the market value of the goods or services provided under the contract. For this purpose, the law of contract requires that the consideration it be something real. Therefore consideration should be something that has some value (Chappell v Nestle, 1960). Even if it has been decided by the parties that in the return of a large house, a price of one dollar will be paid, it will be considered as sufficient consideration although it may not be an adequate consideration. It is not for the courts to decide if the parties had a good or a bad bargain under the contract.
Although in common language, adequacy and sufficiency are the terms that are used interchangeably but in case of the law of contract, adequacy is used for mentioning the circumstances where the price paid in return is not equal in value to the thing that was received by the other party. However, the decision has to be made by the parties to the contract what can be an adequate consideration in return of the promise made under the agreement. Therefore, even if adequate consideration is not present, the validity of the contract is not affected by it (McKendrick, 2009). Consequently a bona fide consideration has been supplied by the parties under the contract, the court will not go into the question if there is full and ample consideration present in the contract. According to the general rule, adequate consideration is not necessary for the formation of a valid contract and the only requirement is of sufficient consideration. Any consideration having some value is considered as sufficient. Therefore, the law provides that morality and natural love and affection are not treated as sufficient consideration and therefore cannot support a promise made under an agreement.
How in the present case, sufficient consideration has been supplied by Jack, although the consideration is not adequate. However this fact does not affect the validity of the contract created between Jane and Jack. Therefore an enforceable agreement is present.
2: According to the issue that has to be decided in this case, it needs to be considered if the they promised that was made by the fire for paying additional US $3 million to the shipbuilder can be legally enforced or if this amount can be recovered by the buyer from the shipbuilder. In order to deal with the, the contract law rules related with consideration need to be applied. Under the contract law, consideration is the exchange of a thing for the purpose of forming a legally enforceable contract. In all valid contracts, consideration should be present. As a result, gratuitous promises are not considered as being legally enforceable (Peel and Treitel, 2011). In this regard, the traditional role of the contract law was that performing an existing duty was not treated as a good consideration to support a new promise for paying an additional benefit. However, there have been certain changes made to the general rule. The existing duty rule provides that by performing a pre-existing duty, it cannot be said that a good consideration has been supplied for any variation in the terms of the contract, according to which an additional benefit has to be provided. When the promisee has only performed their legal duty imposed by a pre-existing contract, the performance is not treated as a good consideration. Therefore when the parties to the contract have already agreed regarding something in accordance with the contract, according to the law, the terms of such a contract cannot be varied if a new consideration is not provided for it. Therefore, the legal position is that when there is already a contractual duty imposed on the promisee for doing something, the law does not allow the promisee to demand any extra benefit under the contract.
The basis for the rule was provided by the decision given by the court in Stilk v Myrick (1809). However this case only presents the traditional approach that was adopted under the contract law regarding the existing duty rule. The brief facts of this case are that Stilk, the plaintiff was an employee of the shipowner Myrick and had entered into a contract to work on the ship.
It was mentioned in this contract that Myrick will pay 5 pounds per month to Stilk during the period, the ship remained on the sea. During the voyage of the ship, two members of the crew deserted the ship and any replacement for these crew members was not found. Under these circumstances, Myrick made a promise to the rest of the members of the crew that the wages of the two crew members who had deserted the ship will be given to them if apart from fulfilling their own duties, the crew also perform the duties of the two deserters. But when the ship arrived at its home port, London Myrick refused to make this payment to the remaining crew members. As a result, Myrick was sued by Stilk for the recovery of this amount.
The issue before the court was if the remaining members of the crew of the ship can enforce this promise according to which, the wages of the two crew members who had deserted the ship will be given to them. It was argued by the plaintiff that this promise had been made by the dependent in return of the additional labor done by them. On the other hand, the argument of the defendant was that no fresh consideration has been provided by the rest of the members regarding the new promise to pay them the wages of the two deserters. The defendant also argued that the crew members already had argued the to make sure that the ship is brought to his home port as mentioned in the original contract. The defendant tried to rely on the pre-existing rule according to which, if the parties had entered into a contract for doing something, the terms of this contract cannot be changed without a fresh consideration. Under these circumstances, the decision of the court was that the rest of the crew members cannot enforce the promise and therefore, they cannot claim the wages of the two deserting crew members. Since the promise made by Myrick was not legally enforceable.
However there was a significant change as a result of the decision given in Williams v Roffey Bros (1990). The court had relied on the practical benefit rule in order to describe a few present in this case. Similarly, a new approach was adopted by the courts in context of the existing duty rule. In this case, an agreement was created between the building contractors and the house owner. According to this agreement, 37 flats had to be renovated. The building contractor entered into a subcontract with the carpenter Williams. This contract provided that the defendant building contractor will pay an amount of £20,000 for doing the carpentry work in the flats this amount was to be paid in installments. After some part of the work was completed, a sum of £16,200 was paid to Williams by the defendant. But at this point, William faced financial difficulties and was not in a position complete the work on time. The parties agreed that the price that has been decided in the original contract was too low. As a result, a promise was made by the defendant that an additional amount of £575 will be paid on the completion of carpentry work in each flat on time. According to the contract that was created between the building contractors in the house owners, there was a penalty clause applicable if there was any delay in completing the work. Therefore in order to avoid this penalty clause, the defendants agreed to pay additional amount to Williams. But when this work was completed, the defendant refused to make this payment. Consequently, the court had to decide if the performance of an existing duty can be treated as the valid consideration for the promise to pay additional money.
The court stated that the defendants were legally obliged to pay the extra money promised by them. In this case, the consideration has been provided by the practical benefits that were going to be achieved by the defendants as a result of the completion of the work on time, like the avoidance of the penalty clause present in the contract with the house owners.
In the present case also, the buyers had made a promise to pay additional amount of money for the completion of the tanker on time. The buyers already had a charter for the tanker. Therefore, by completion of the tanker on time, the buyer is going to achieve practical advantages. Under these circumstances, the promise made by the buyer to pay additional money to the shipbuilders is legally enforceable and therefore the one cannot recover the extra amount of US $3 million from the shipbuilders.
Atiyah, P.S. 2000 An Introduction to the Law of Contract, Clarendon
Beatson, J. Burrows A. and Cartwright, J. 2010 Anson’s Law of Contract, 29th edn OUP
Collins, H. 2003, Contract Law in Context 4th edn CUP
McKendrick, E. 2009 Contract Law 8th edn Palgrave
Peel E and Treitel, G.H. 2011, Treitel on the Law of Contract, 13th edn Sweet and Maxwell
Case Law
Chappell v Nestle [1960] AC 87
Pinnel’s Case [1602] 5 Co. Rep. 117
Re McArdle (1951) Ch 669
Stilk v Myrick [1809] EWHC KB J58
Williams v Roffey Bros and Nicholls Contractors) Ltd (1990) 1 All ER 512
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