Contract Law - 1

NAME: - Prathmesh Agrawal

EMAIL: - prathmesh220036@nujs.edu
ROLL NO.: - 220036
YEAR : - 3rd Year
PROJECT: - Contracts-1
SESSION: -Monsoon Semester (2020-21)

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Problem 8

Paris is a seller of chocolates. She sells all variety of chocolates. In order to boost her
sales margins, she places an advertisement in all the papers and other media, that any one
furnishing Rs. 100/- and five chocolate wrappers will get a large packet of chocolates,
containing 5 premium brand chocolates, each costing Rs. 30/-. The manufacturers of the
premium brand chocolates demand that Paris should share twenty percent of the profits
that she will earn because of the scheme. Further in calculating the profits the value of the
chocolate wrappers need to be taken in to account. Paris however insists that the profits
will be calculated only on the basis of the actual price that she is charging per customer
viz. Rs. 100. Her point was that the five chocolate wrappers really don’t signify any profit
for her since they are just useless waste papers. The manufacturers are not convinced by
this argument.

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 Table of Contents

1. Introduction…………………………………………………………………………4

2. Issues………………………………………………………………………………..4

3. Arguments for claimant……………………………………………………….…….5

4. Arguments for respondent…………………………………………………………..6

5. Judgement.…………………………………………………………………………..8

6. Bibliography……………………………………………………………………...…9

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Introduction

The Indian Contract Act 1872 is the governing act for all contractual transactions. Section 2
of the Indian Contract Act deals with consideration. In consultation with this act and a few
judicial pronouncements this project aims to arrive at a solution to the given problem. The
case deals with the adequacy of consideration. The issues are as follows:

Issues

1. Do the chocolate wrappers form a part of the consideration?

2. Does it matter that the empty chocolate wrappers are an adequate consideration or
not?

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Arguments for the Claimant (The Chocolate Manufactures)

1. The Chocolate wrappers form a part of the consideration

In this case, the point of disagreement is whether the empty chocolate wrappers are indeed a
valid consideration. In the legal sense, a valuable consideration might be a right, interest,
profit, or advantage accruing to one party, or a forbearance, harm, loss, or duty granted,
endured, or undertaken by the other.1 The house of lords 1960, in a similar case had held that,
“wrappers did form part of the consideration for the sale of records despite the fact that they
had no intrinsic economic value in themselves.” 2 According to law the very basic definition
of consideration is “when at the desire of the promisor, promise or any other person has done
or abstained from doing or does or abstains from doing or promises to do or to abstain from
doing something, such act or abstinence, or promise is called a consideration for the
promise.”3
According to the facts of the case at hand, the customers buying from Paris, had to furnish
five chocolate wrappers along with the 100 rupees to purchase chocolates from her, which in
a legal sense creates an obligation on the customers which can also be stated at the duty
granted to them. It is quite obvious in the case that the wrappers have no intrinsic or
economic value, however that is not a criterion for an item to be considered consideration.
Thus, even if Paris states them to be “useless waste paper” 4, it does not matter if they are
waste paper or not, according to the facts of the case, they form a part of the consideration.

2. It does not matter if the wrappers are adequate consideration or not

In one of his instances, Blackburn J emphasised the aforementioned factor of deliberation by

stating that good consideration is a pledge to do anything that helps the offeree or

1
Currie v Misa [1874] LR 10 Ex 153
2
Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 97
3
Indian Contract act, section 2(d)
4
Facts of the problem

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inconveniences the offeror. The adequacy of the consideration is irrelevant.5 As long as the
agreement is the product of a normal interplay of forces, courts do not inquire at the
sufficiency of consideration.6 A number of cases have also held that consideration, need not
be adequate, nor does it specifically need to have intrinsic/economic value, as long as it has
value in the eyes of law, it can be considered to be valid consideration. 7 In Chappell vs
Nestle it has clearly been stated, that “A peppercorn does not cease to be good consideration
if it is established that the promise does not like pepper and will throw away the corn” which
implies that it does not matter whether or not the consideration has value for the offeror or the
offeree. When determining whether or not a contract was freely entered into, the court
considers the adequacy of consideration.
In the case presented before us, it is the chocolate wrappers have been made part of the
consideration, by the fact that it forms an essential part of the contract between Paris and her
customers. It is also important that in the instant case, both the purchasers and the defendant
willingly entered into the contract, therefore the court has no reason to be concerned about
the appropriateness of the compensation offered. In this situation, the chocolate wrappers
have legal value since they represent evidence of a sales-boosting advertising effort and are
an essential component of the overall transaction.
Based on the above reasons, it is reasonable to conclude that the wrappers represent
consideration and that their worth should be factored into the selling price of premium brand
chocolates. The profit should then be determined based on the selling price including the
price of the wrappers.

Arguments for the Defendant (Paris)

1. The chocolate wrappers do not form part of the consideration

The promise’s disadvantage in return for the promise is viewed as a favourable factor.
According to Sir Fedrick Pollock, this disadvantage is usually, “the price at which the promise is
bought”.8 The chocolates were also purchased outside of the contract signed to purchase the

5
Bolton v Madden [1873-74] LR 9 QB 55
6
Pollock and Mulla, The Indian Contract and Specific Reliefs Acts [16th edition, volume 1]
7
Thomas v Thomas (1842) 2 QB 851; 114 ER 330
8
Chitty on Contracts [30th edition, Volume1]

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branded chocolates. As a result, the wrappers are no longer a factor to consider. And a
previous consideration is not a consideration.9
In case at hand, delivering chocolate wrappers does not put the customer at a disadvantage,
which has already been clarified to be an essential part of consideration. Moreover, the
wrappers also form a part of a previous agreement when the chocolates were originally
purchased, thus being a part of the previous agreement, in this case disqualifies the wrappers
to be used as consideration in this case.

2. Adequacy of consideration matters

Adequacy of consideration is certainly a necessary element.10 Market value of an item is not
absolute also therefore cannot be yardstick to find out adequacy or inadequacy of
consideration; nor the consideration for such transfer is determinable immediately on the date
of transfer, but it lies in the womb of future.11
In the facts of the present case, the chocolate wrappers cannot be said to be consideration,
simply because it is inadequate, having no intrinsic value, nor value in the eyes of Paris
herself, as she calls them useless waste paper. The wrappers posses no market value, in case
the customers were to furnish it anywhere else, except to Paris, they would have no value,
neither economic nor legal.
Based on the above reasons it should be concluded that the wrappers in this question actually
do not posses any economic, legal or intrinsic value, which disqualifies them from being
consideration in this case.

9
Pollock and Mulla, The Indian Contract and Specific Reliefs Acts [16th edition, volume 1]
10
Gopalakrishnan vs Balasubramania Chettiar And Ors. [1969] 1 MLJ 537
11
Cit vs Marudhar Hotel (P) Ltd. [2003] 130 TAXMAN 403 Raj

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Judgement
After considering all of the necessary facts and reasons, it is clear that the chocolate wrappers
are included in the offer. The chocolate wrappers comply with the Indian Contract Act's
concept of consideration, which is included in section 2 (d). A consideration should bestow
an advantage on the promisor or a detriment on the promise, according to several cases
throughout the years. Customers in this instance were harmed because they were forced to
engage in a transaction that they would not have done otherwise. These wrappers are also
advantageous for Paris since they are evidence of a marketing plan aimed at increasing sales
by enticing more individuals to purchase chocolates from the defendant. There may be a few
examples where the wrappers were obtained through other ways but basing a decision on a
few isolated occurrences is illogical. In the case of Nestle vs. Chappell, the court decided that
if the purported qualification is only valid for one transaction and must be re-acquired before
each transaction, it no longer qualifies and should be recognised as a consideration. The court
has no cause to assess the economic sufficiency of the provided compensation. Only the legal
sufficiency of the same needs to be considered by the court. Because the chocolate wrappers
are an integral component of the transaction, they have legal value.
For the reasons stated above, I believe the wrappers are worthy of consideration. Their worth
should be taken into account when determining earnings.

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