Business and the Law - Essay Example

For example in Carlill v Carbolic Smoke Ball C. [1893] is was held that there would be consideration even if the promise suffered an inconvenience by using the advertised smoke ball under the directions of the promisor and the promisor had not incurred a benefit. As Selwyn LJ noted, “any act” which either confers upon the promisor a benefit or “any detriment, or inconvenience” to the promise will amount to consideration.2 Essentially, consideration is an act or exchange of promises or bargains from which a quid pro quo outcome can be inferred.

3 There is no consideration where there is a mere gratuitous promise with no exchange of promises.4 Giving the broad meaning of consideration in the law of contract, a collateral contract satisfies the requirement for consideration. It was held in De Lassalle v Guildford [1901] that there is consideration when the promisor promises to enter into the principal contract.5 It therefore follows that not only do collateral contracts require consideration, they by necessity encompass consideration. .

For instance in relationship based upon the requirement of confidence and trust, there is a presumption of undue influence. However, fiduciary relationships and relationships characterized by inequality in bargaining positions will not automatically give rise to a presumption of undue influence.7 In this regard, it is not likely that ordinary contracts between banks and consumers will give rise to undue influence sufficient for voiding a contract. The specific facts of the case will determine whether there was undue influence.

For example in Lloyds v Bundy [1975] QB 326, an aging farmer with no business experience provided the plaintiff with three guarantees in favour of a loan for his son’s failing business. The aging farmer had not been told of the gravity of his son’s business failings and was not the recipient of neutral legal representation. The loan failed to save the son’s business and the plaintiff took action to realize the loan by taking possession of the aging farmer’s farm. The court ruled that there had been undue influence.

8 The inequities between the bank and the elderly farmer in circumstances where there was essentially undue influence on the part of the bank, can give rise to unconsionability under Section 51 of the Trade Practices Act 1974 (as amended). Section 51 of the Trade Practices Act 1974 demonstrates the close relationship between unconscionability and undue influence.9 Essentially, Section 51 permits remedies for the consumer in circumstances where bargaining is conducted with the result that its corresponding agreement or the conduct during bargaining is unconscionable.

A contract is unconscionable where one party is stronger than the other and asserts his will on the weaker party so