Business Law Essay Example

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    Law
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    High School
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Consideration 13

Consideration

Synopsis

This document is an exploration into one of the most disturbing aspects of a contract. This aspect is the sufficiency clause that makes a contract enforceable. The past cases have been relied upon heavily to provide some illustrations on the applicability of that clause. Moreover, as an extension, the issue of nominal consideration has also been elaborated. This surely makes it a bit comprehensive for stakeholders to understand when brokering contracts.

Introduction

A consideration has been defined quite differently by different law experts. Nevertheless, the underlying meaning of a consideration is any act that is done by an individual in exchange of another1. This is quite open and it may not impose any legal liability. In order to provide a solid definition, the clause of sufficiency is introduced. Therefore, sufficiency explains what is able to stand the public policy requirement. The nature of considerations in the law of contract is likened to a zero-sum game. This is where the amount of gain for one individual is equivalent to the amount of loss by the other individual/party2. Therefore, in the law of contract, the enforceability of the contract is determined by the legality of the consideration3. The specific provisions that have been made in relation to a consideration clearly spell out why it is different from a gift.

In as much most of the considerations are made in monetary form, consideration does not necessarily need to be in monetary form. The consideration merely entails giving away something of value by the promisee. This may take the form of loss of freedom. The specifics of a contract are the conditions that pave way to the determination of a consideration that will meet the sufficiency criteria.4 Furthermore, while the consideration moves from the promisee, it does not necessarily need to be given to the promisor. This consideration can be paid to a third party, but it will be still legally binding5.

Sufficiency of a Consideration

The adequacy clause of the consideration has been rendered not binding in the recent past. The determining factor is the fact that all the parties involved have reached a consensus. A good example to illustrate this is a situation where X promises to give Y a car valued at the market value of $25000 and Y promises to pay X $1000 in exchange. In this particular case, the value of the consideration is $1000. Nevertheless, the market value of the asset being exchanged is much higher than the amount being paid. In real sense, the amount may not be considered adequate, but it is sufficient6. It is sufficient in the sense that the parties in the contract agreed to abide by the provisions of the contract. Therefore, when X later on feels manipulated and seeks remedy from a court of law, his will may not be granted as long as he voluntarily accepted to abide by the terms of the contract. The court does not have the mandate to investigate the adequacy of the contract. This is because the law of contract involves two parties and what they have agreed is assumed to be adequate based on the agreement between the participants7. What the court is interested in is to ensure that the contract has some value in the name of a consideration8. The constituents of the contract do not entail the adequacy clause. Instead, it consists of the consideration regardless of its commercial worth especially in relation to the market value of the consideration9.

In understanding the sufficiency clause in the law of contract as it relates to a consideration, it is good dig deeper into what is recognized in law. The basic required thing is that the consideration ought to have some value which can be quantified in the current economic conditions. Whether it is a service or a product, the most important thing is if some value can be placed on it. The fact that the consideration ought to have some economic value eliminates some promises as considerations. One of the things that cannot be considered sufficient consideration is natural affection towards somebody or something. When love has been provided as a consideration in an agreement, it is unenforceable under law10. This is because there is no scale that can be used to quantify the value of such affection. Therefore, performance or non-performance cannot be fully proven under any circumstances.

In essence, while it is not mandatory for it to be in monetary form, its value must be able to be evaluated in monetary terms11. For instance, if an individual offers to sell his jet for $5, it is legally enforceable. In contrary, if someone is willing to exchange his pen with his friend for free, it is unenforceable. It does not have the legal grounds since it lacks a consideration. Therefore, it is regarded as a gift. This rule has been well illustrated in the case of Thomas vs. Thomas as well as Chappell vs. Nestle Co. Ltd. All these cases have been used to illustrate the nature of contracts. Contracts have been treated as private engagement and parties involved have unprecedented freedom12. They make choices on what they feel is best for the involved persons. The court has no business trying to find out what two individuals agreed13. Therefore, the fairness of the price or value of the contract is not important at all.

The case of William v Roffey Bros & Nicholls

This was a case between a contractor and a subcontractor. In this case, the contractor brokered an agreement with the subcontractor at a cost that could hardly suffice the completion of the contract, leave alone the interest14. The subcontractor failed to complete the execution of the contract based on financial difficulties. Upon realization, the contractor entered another agreement with the subcontractor to pay more for the remaining work15. The contractor again failed to honor the promise and resorted to hiring a different subcontractor when the first one stopped16. It was decided that the case could not fail for lack of consideration. Williams was awarded $3500.

In this particular case, the amount given may meet the sufficiency criteria, but it is just a nominal amount. In other words, though it is legally binding in the court of law, the amount provided is too low to execute the work required17. In essence, the subcontractor would have been required to add his own money to make up for the completion of the work required18. This is not equitable. Therefore, a nominal consideration is not legally binding19. Though such a consideration may meet the sufficiency clause, it is a nominal consideration. Such contracts make it very difficult for the involved parties to execute their obligations as expected20. This usually takes place because one of the parties to the contract takes advantage of having prior knowledge concerning the provisions of the contract21. Therefore, he uses such information maliciously to manipulate the other parties thereof into accepting terms of a contract which may later prove to be very difficult to be executed22. The nominal clause of the contract enables the judges to ascertain whether the amount paid is reasonable in relation to the required job23 .

Australian Law of Contract on Sufficiency Clause

Many questions have been asked in relation to this clause. Indeed much has been discussed and more is yet to be discussed. It has been quite challenging to explain in definite terms what is referred to as sufficient. I appreciate all that has been done with the aim of expounding on this subject. The various cases that I dealt with that relate to the issue of sufficiency have laid a good ground for understanding the need for a consideration to be sufficient24 . This on several times has been put to weighing scales with the adequacy clause. That a consideration does not need necessarily be adequate, but it must be sufficient. This has highly emphasized on the need for the contract to be a companied by a consideration that can be quantified in monetary terms25. When the issue of nominal consideration comes into question, it seems more complicated than before26 . The truth is that the Australian law lacks specificity when it comes to explaining the issue of sufficiency. The issue needs to be illustrated further in order to make it easy for interpretation in different circumstances. It will be of great significance for those parties brokering contracts of different kinds27.

Conclusion

The issue of consideration is an important element of a contract. Without a consideration, a contract is not enforceable under the Australian law. The discussion of various facets of the consideration in this paper is very critical. This is because these items ideally determine the enforceability of the contract. The most important of all happens to be the issue of sufficiency of the consideration. The issue of sufficiency aligns with the fact that a contract is an agreement between two parties or more. The parties involved undertake that under private engagement and whatsoever the parties agree, as long as it has a consideration that can be quantified in monetary terms, it is enforceable. It is not the obligation of the court to find out if the agreed consideration meets the adequacy criteria. Whatever was agreed by the involved parties shall be deemed adequate to them. The cases that have been cited in this study have provided a lot of information that has facilitated the understanding of this subject. Nevertheless, more light ought to be shed on this subject by the country’s legal body in order to increase the level of understandability.

References

Ames, J.B 1899, Two Theories of Considerations, Harvard Law Review, vol. 12, no. 8, pp. 515- 531.

Ashley, C 1913, The Doctrine of Consideration, Harvard Law Review, vol. 26, no. 5, pp. 429- 436.

Ashley, C 1910, Offers Calling for A Consideration Other Than A Counter Promise, Harvard Law Review, vol. 23, no. 3, pp. 159-168.

Ballantine, H 1914, Mutuality and Consideration, Harvard Law Review, vol. 28, no. 2, pp. 1-14.

Beale, J. & Joseph, H 1903, Notes on Considerations, Harvard Law Review, vol. 17, no. 2, pp. 71-82.

Benett, E 1895, Considerations Moving to Third Persons, Harvard Law Review, vol. 9, no. 4, pp. 233-241.

Benson, P 2011, The Idea of Consideration, University of Toronto Law Journal, vol. 61, no. 2, pp. 241-278.

Chan, E. & Tse, R.Y 2003, Cultural Considerations in International Construction Contracts, Journal of Construction Engineering & Management, vol. 129, no. 4, pp. 375.

Dawson, F 2011, Contracts as Assumption and Consideration Theory: A Reassurance of Williams v Roffey Bros, Victoria University of Wellington Law Review, vol. 42, no. 1, p. 135-158.

Dranias, N 2008, Consideration as Contract: A Secular Natural Law of Contracts, Texas Review

Dudas, A 2008, Enforceability of Future Promises at Common Law- Formation of Doctrine of Consideration, Proceedings of Novi Sad Faculty of Law, vol. 42, no. 3, pp. 349-362.

Gamage, D. & Kadem, A 2006, Commodification and Contract Formation: Placing the Consideration Doctrine on Stronger Foundations, University of Chicago Law Review, vol. 73, no. 4, pp. 1299-1367.

Hope, E 1919, Ignorance of Impossibility as Affecting Consideration, Harvard Law Review, vol. 32, no. 6, pp. 679-688.

Hyidahl, R. & Richardson, B 2011, Key Considerations for Using No-Harm Contracts with Clients Who Self-Injure, Journal Counseling and Development, vol. 89, no. 1, pp. 121- 127.

Langdell, C 1901, Mutual Promises as A Consideration for Each Other, Harvard Law Review, vol. 14, no. 7, pp. 496-508.

Numerof, R. &Morgan , M 2008, Considerations for Outsourcing, Applied Clinical Trials, vol. 17, pp. 12-14.

Pricopi, C 2012, Considerations regarding the legal interpretation of Contracts in private international law, Contemporary Reading in Law & Social Justice, vol. 4, no. 1, pp.232- 240.

Ricks, V 2012, Asset is not an Element of Contract Formation, Kansas Law Review, vol. 61, no. 3, pp. 591-556.

Sipruf, J 2003, The Peppercorn Reconsidered: Why A Promise To SELL Blackacre for Nominal Consideration is not Binding, But Should Be, Northwestern University Law Review, vol. 97, no. 4, pp. 1809-1851.

Smith, T 2011, The Current state of Contract Law in Australia and why it is important for rural managers to understand it, AFBM Journal, vol. 8, no. 2, pp. 67-71.

Whittier, C 2012, The Restatement of Contracts and Consideration, California Law Review, vol. 18, no. 6, pp. 611.

Williston, S 1914, Considerations in Bilateral Contracts, Harvard Law Review, vol. 27, no. 6, pp. 503-529.

1
Benson, P 2011, The Idea of Consideration, University of Toronto Law Journal, vol. 61, no. 2, pp. 241-278.

2
Ballantine, H 1914, Mutuality and Consideration, Harvard Law Review, vol. 28, no. 2, pp. 1-14.

3
Whittier, C 2012, The Restatement of Contracts and Consideration, California Law Review, vol.18, no. 6, pp. 611.

4
Ames, J.B 1899, Two Theories of Considerations, Harvard Law Review, vol. 12, no. 8, pp. 515-531.

5
Benett, E 1895, Considerations Moving to Third Persons, Harvard Law Review, vol. 9, no. 4, pp. 233-241.

6
Ashley, C 1910, Offers Calling for A Consideration Other Than A Counter Promise, Harvard Law Review, vol. 23, no. 3, pp. 159-168.

7
Ashley, C 1913, The Doctrine of Consideration, Harvard Law Review, vol. 26, no. 5, pp. 429-436.

8
Williston, S 1914, Considerations in Bilateral Contracts, Harvard Law Review, vol. 27, no. 6, pp. 503-529.

9
Chan, E. & Tse, R.Y 2003, Cultural Considerations in International Construction Contracts, Journal of Construction Engineering & Management, vol. 129, no. 4, pp. 375

10
Ashley, C 1913, The Doctrine of Consideration, Harvard Law Review, vol. 26, no. 5, pp. 429-436.

11
Gamage, D. & Kadem, A 2006, Commodification and Contract Formation: Placing the Consideration Doctrine on Stronger Foundations, University of Chicago Law Review, vol. 73, no. 4, pp. 1299-1367.

12
Dranias, N 2008, Consideration as Contract: A Secular Natural Law of Contracts, Texas Review

13
Hope, E 1919, Ignorance of Impossibility as Affecting Consideration, Harvard Law Review, vol. 32, no. 6, pp. 679-688.

14
Dawson, F 2011, Contracts as Assumption and Consideration Theory: A Reassurance of Williams v Roffey Bros, Victoria University of Wellington Law Review, vol. 42, no. 1, p. 135-158.

15
Hyidahl, R. & Richardson, B 2011, Key Considerations for Using No-Harm Contracts with Clients Who Self-Injure, Journal Counseling and Development, vol. 89, no. 1, pp. 121-127.

16
Smith, T 2011, The Current state of Contract Law in Australia and why it is important for rural managers to understand it, AFBM Journal, vol. 8, no. 2, pp. 67-71.

17
Benson, P 2011, The Idea of Consideration, University of Toronto Law Journal, vol. 61, no. 2, pp. 241-278.

18
Dudas, A 2008, Enforceability of Future Promises at Common Law- Formation of Doctrine of Consideration, Proceedings of Novi Sad Faculty of Law, vol. 42, no. 3, pp. 349-362.

20
Langdell, C 1901, Mutual Promises as A Consideration for Each Other, Harvard Law Review,vol. 14, no. 7, pp. 496-508.

21
Numerof, R. &Morgan , M 2008, Considerations for Outsourcing, Applied Clinical Trials, vol. 17, pp. 12-14.

22
Ricks, V 2012, Asset is not an Element of Contract Formation, Kansas Law Review, vol. 61, no. 3, pp. 591-556.

24
Sipruf, J 2003, The Peppercorn Reconsidered: Why A Promise To SELL Blackacre for Nominal Consideration is not Binding, But Should Be, Northwestern University Law Review, vol. 97, no. 4, pp. 1809-1851.

25
Hope, E 1919, Ignorance of Impossibility as Affecting Consideration, Harvard Law Review, vol. 32, no. 6, pp. 679-688.

26
Beale, J. & Joseph, H 1903, Notes on Considerations, Harvard Law Review, vol. 17, no. 2, pp. 71-82.

27
Pricopi, C 2012, Considerations regarding the legal interpretation of Contracts in private international law, Contemporary Reading in Law & Social Justice, vol. 4, no. 1, pp.232-240.