The document discusses the concept of consideration in contract law. It defines consideration as something of value exchanged between parties in a contract, such as a promise to do or not do something. Consideration must involve a bargained-for exchange or detriment to both parties. Without consideration, there is no valid contract. The document provides examples of different types of consideration and notes some key rules, such as that consideration needs to be real rather than illusory and does not need to be adequately valued, as long as both sides receive some benefit.
The document discusses the concept of consideration in contract law. It defines consideration as something of value exchanged between parties in a contract, such as a promise to do or not do something. Consideration must involve a bargained-for exchange or detriment to both parties. Without consideration, there is no valid contract. The document provides examples of different types of consideration and notes some key rules, such as that consideration needs to be real rather than illusory and does not need to be adequately valued, as long as both sides receive some benefit.
The document discusses the concept of consideration in contract law. It defines consideration as something of value exchanged between parties in a contract, such as a promise to do or not do something. Consideration must involve a bargained-for exchange or detriment to both parties. Without consideration, there is no valid contract. The document provides examples of different types of consideration and notes some key rules, such as that consideration needs to be real rather than illusory and does not need to be adequately valued, as long as both sides receive some benefit.
ll.m.uk, ll.m.india To form an agreement, offer and acceptance is needed. But mere form of an agreement doesnot lead to become contract. Contract establishes from the bargain, this means each of the party must promise to give or do something for the other. This element of exchange is known as ‘consideration’. Contract is a private law in which parties are free to make their terms and condition, consideration to be exchanged. Party Autonomy. Thus when the make contract they can decide something which is to be exchanged between them. That something which parties decided to exchange is called consideration. Consideration is the next essential element with out which there can be no contract. So it is said “ No consideration no contract”. Under English law, ‘Unless the consideration has been given in return for a promise, the courts will not oblige the person giving the promise (the promisor) to fulfil the promise he has given’. What is consideration? It is mutual promise to exchange benefits and sacrifices between the parties. Generally, in agreements both parties make promises and they do not make those promises without any value or price, which is known as consideration. Here one party gets something and one loses, something, such getting and loosing is known as consideration It is the promise to exchange thing of value. Consideration may be made in the form of money, goods, and a promise to do or not to do something or providing services. It is a technical term used in the sense of a quid pro quo (something in return) and must be benefit to the promisor or a detriment to the promisee or both. In the English case, Currie Vs Misa (1875)L.Rex162, Consideration was defined as,” Some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. Section 25 of the Indian Contract Act 1872 opens with the declaration that “an agreement made without consideration is void…….” In England also “promises without consideration are not enforced, because they are gratuitous”. Nepalese Contract Act 2000 under Section 2(d), Consideration means any promise made to do or not to do as per the offer made. It must be an exchange: one person does something, because the other person does something. In the exchange; what is benefit to the offeree is, at the same time sacrifice to the offeror- like wise the benefit bargained for by the offeror results in a sacrifice by the offeree. The legal term used for this sacrifice is ‘detriment’. A simple example is; Ramesh agrees to sell his house to Santosh for Nrs 20 Lakhs. For Ramesh’s promise the consideration is Nrs 20 lakhs and for Santosh’s promise, the consideration is the house. Here both the parties are benefitted. Ramesh is benefitted because he has received money and Sandra is benefitted because she has the land and simultaneously they are at loss or detriment. The purchaser is losing the purchase price and the seller the land. Robin engages Davendra as a security guard in his office for Nrs 10000 a month. The monthly wage is the consideration received by Davendra and the services of Ddra constitutes the consideration received by Robin. Here Robin is benefited by the service of Devendra and Devendra is benefitted by receiving money simultaneously detriment is there in Robin’s part because he is losing the money and Devendra is serving to Robin. Consideration may take the form of : An action: doing something or giving something A forbearance; not doing something, and in forbearing to act, giving up some benefit or right A promise to act or a promise to forbear from acting in future Carrington v. Loan La May Carrington agreed to Loan La May his copy of the film “The Birth of the Nation” So that La May could do his research project. There was no understanding that La May would pay for the use of film. Carrington then refused to allow La May to use his print of the film. Although Carrington might have ethical duty to lend La May the film, their agreement was not enforceable one in that it contained no bargained for promise. Rules of consideration 1. Consideration required for all contracts: a contract without consideration is gift. 2. Consideration shall be at the desire of promisor. (Offeror): If it is at the desire of promisee, that would be treated as counter offer. 3. Consideration must move from promisee or from any other person. Consideration may be past, present or future Executed consideration (present consideration) Consideration which moves simultaneously with the promise is called Present Consideration or Executed Consideration. Here the parties of the contract perform their duties at the moment of the formation of contract. If the both parties side by side perform their duty then it is called present consideration. A buys an article from a shop and pays the price immediately. The consideration moving from A is present or executed consideration. In other terms, executed consideration is where one party promises to do somenting in return for the act of another. Case of reward. A offered of £50 reward for the one who brings his lost dog. B sees the advert, finds the dog and returns it to the A. Executory/ Future Consideration When the consideration is to move at a future date, it is called future consideration or executory consideration. It is oriented toward future. In a contract the consideration may be executory on both sides. They plan to execute the contract in the days ahead. They promise in the present time for the exchange in future.; A promise may support a promise. Thus a promise to pay money at a future date for goods to be delivered at a future date is valid contract. Past consideration Example: John give Susan a lift home in his car after work.On arrival, Susan offers John £10 towards the petrol but, finding that she has not got any change, she says she will give him the money next day at work. John cannot enforce Susan’s promise to pay £ 10 because the consideration for the promise (giving lift) is in the past. John would have given Susan the lift home without expecting payment and so there was no bargaein between the parties. Consideration must be real not illusory Consideration must be of some value but need not be adequate: It is a matter for the parties themselves to determine what they consider is the proper value of their acts or promises. Adequacy of consideration refers to the fairness of bargain. In general a court will not question the adequacy of consideration if the consideration is legally sufficient. Under the doctrine of freedom of contact, parties are normally free to bargain as they wish. If people could sue merely because they had enforced into an unwise contract the courts would be overloaded with frivolous suits. In extreme cases, a court of law may consider the adequacy of consideration in terms of its amount or worth because inadequate consideration may indicate, fraud, undue influence, lack of bargained for exchange. It may also reflect party's incompetence. For e.g. an individual might have been too intoxicated or simply too young to make a contract) Therefore, it is up to the parties to decide the terms of their contract. The court will not intervene to require equality in the value exchanged; as long as the agreement has been freely entered into, the consideration exchanged need not be adequate. Suppose Romeo has a house worth £1M.and he sells it for £100000. A £100000 sale could indicate that the buyer unduly promised Romeo into selling or that Romeo was defrauded into selling the house for £100000 which is far below the market value. (Of course it might also indicate that Romeo was in a hurry to sell and that the amount was legally sufficient). Thomas v Thomas` The executors of a man’s will allowed the widow to live in the house of her deceased husband for a rent of £1 per year. The defendant later claimed that £1 per year was not consideration, because it was well below an economic rent for the property . He removed the widow from the house and the widow sued for breach of contract. The court held that the nominal rent of £1 was valid consideration, even though it was not adequate. The widow won the case Consideration must be legal:
Consideration requires that the benefits and
sacrifices promised between the parties be legal. Absence of legality renders the consideration invalid. Thus a party cannot agree to do something that he or she does not have legal right to do. Similarly, a party cannot promise not to do something that he or she has no legal right to do. Pre-existing duty need no consideration: Collins v Godfrey 1831 The defendant promised to pay the plaintiff for giving his evidence and attending the court which was his duty. When the plaintiff tried to enforce the promised payment, it was held that there was no binding agreement, as he had provided no consideration by simply fulfilling his existing duty. However, if a promisee does more than his duty, he is entitled to claim the consideration. Glasbrook v Glamorgan CC 1925, The court decided in favour of police authority that they have provided more protection than their public duty required and entitled for consideration Stilk v Myrick Eleven sailors agreed to crew a ship on a voyage from London to the Baltic and back. Two sailors deserted in the Baltic, and other nine refused to continue their work, claiming higher wages. The captain agreed to pay them more when they got back to London, subsquently refused to make extra payment. The sailor sued for extra wages, but lost. Held: The court held that they had agreed to crew the ship for the two way voyage, and their agreement in the Baltic to fulfil their existing contractual obligations was not sufficient consideration in return for the promise of higher pay. Hartley v Ponsonby (1857)
When nineteen out of thirty-six crew of a
ship deserted, the captain promised to pay the remaining crew extra money to sail back, but later refused to pay saying that they were only doing their normal jobs. In this case, however, the ship was so seriously undermanned that the rest of the journey had become extremely hazardous. It was held that sailing the ship back in such dangerous conditions was over and above their normal duties. It discharged the sailors from their existing contract and left them free to enter into a new contract for the rest of the voyage. They were therefore entitled to the money. Williams v Roffey (1990) Roffey had a contract to refurbish a block of flats and had sub-contracted the carpentry work to Williams. After the work had begun, it became apparent that Williams had underestimated the cost of the work and was in financial difficulties. Roffey, concerned that the work would not be completed on time and that as a result they would fall foul of a penalty clause in their main contract with the owner, agreed to pay Williams an extra payment per flat. ation. Williams completed the work on more flats but did not receive full payment. He stopped work and brought an action for damages. In the Court of Appeal, Roffey argued that Williams was only doing what he was contractually bound to do and so had not provided consider It was held that where a party to an existing contract later agrees to pay an extra "bonus" in order to ensure that the other party performs his obligations under the contract, then that agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical advantage or avoided a disadvantage. In the present case there were benefits to Roffey including (a) making sure Williams continued his work, (b) avoiding payment under a damages clause of the main contract if Williams was late, and (c) avoiding the expense and trouble of getting someone else. Therefore, Williams was entitled to payment. Glassbrooke v GCC (1925)
The police were under a duty to protect a
coal mine during a strike, and proposed mobile units. The mine owner promised to pay for police to be stationed on the premises. The police complied with this request but when they claimed the money, the mine owner refused to pay saying that the police had simply carried out their public duty. It was held that although the police were bound to provide protection, they had a discretion as to the form it should take. As they believed mobile police were sufficient, they had acted over their normal duties. The extra protection was good consideration for the promise by the mine owner to pay for it and so the police were entitled to payment. Exception to the rule no consideration no contract: Nepalse law is silent. Indian law, ‘agreement without consideration is void’. 13(4): consideration must be legal. Exceptions: Natural love and affection: Rajlakhi Devi v Bhootnath A husband by a registered document, after referring to quarrels and disagreements between him and his wife promised to pay for her maintenance, but no consideration move moved from her: Held:, the agreement was void for want of consideration because it was not made out of natural love and affection. Gift Contract Act is silent but law of property on National code on Dhan Bakashko Chapter recognised that if property is transferred with deed, it is valid even if nothing is given by the other party. Time Barred Debt: