The Doctrine of Consideration - Essay Example

The Doctrine of Consideration For a contract to be binding under the English Common law there has to be consideration. According to huhaime.org website “consideration” in this context refers to interest, right, benefit or profit which accrues to one of the parties in the contract, or the loss, detriment or the forbearance accorded, undertaken or suffered by the other party in the contract. This was the definition which the case of Terrafund Financial Investment Company vs 569244 BC Limited came up with. The case of Terrafund Financial Investment Company vs 569244 BC Limited held that the basic principle in contract law, for a contract to be binding, an exchange has to occur between the contracting parties. This exchange is that exchange of consideration. Thus, if no consideration exists it holds that there is nothing on which to create or found liability. Reciprocal undertakings between the contracting parties have to be there. Promises by either of the parties have to be fulfilled. Therefore, if neither of the contracting parties promises or gives anything, there exists no consideration for the second party to promise or act. In the past, when contracts were entirely verbal, the English Common law never wanted to enforce any offers that were gratuitous, (that is, offers without anything in exchange). Thus, the criterion of consideration was added to the Common law. Judge Wilmot stated in his verdict in a 1765 case of Pillans vs Mierop, that consideration came in the times of verbal contracts and to such, the law required something to make agreements formal. This was to let the court determine at what point a deliberate undertaking took place to obligate oneself. Any contract which does not have consideration is called a nudum pactum. (duhaime.org, 2011) The doctrine of consideration attaches to itself several principles according to Ramsey and Thomas Telford limited in their book. These are very essential as per the book and they determine sufficiency and adequacy. These include the facts that consideration has to be sufficient or real, it has to be something besides the existing obligation to the contracting parties, it must not be a consideration for past contracts, it has to be given as a return to a prior promise, it must be economically valuable and it has to emanate from the party making a promise. (Ramsey and Thomas Telford Ltd, 2007 p 253) The study will narrow down on the principles, though. Focus will be on the main requirements for a contract to be considered valid. To this, four main principles will be put into consideration. Four main principles have to exist in a contract so as consideration to uphold or to be valid. These include the fact that consideration has to be sufficient but not necessarily adequate, it is a must it be valuable, consideration has to come from the promisee to the promisor and it maybe executed or executor, though. Past consideration is not enough to and a promise. This, study is going to consider the four principles or requirements in detail and also in pursuit of understanding further the doctrine. The requirements are going to be tackled in the order in which they are stated. (Lisa, 2002) The major rule under consideration as Fisher and Greenwood state in their book is that it is a must consideration be sufficient be sufficient it is not a must it be adequate, though. To the adequacy issue, the book says that there is nothing amiss in purchasing a valuable item like a painting for an amount of USD 10. Fundamentally, consideration is just token showing a party’s intent in making a legal contract unlike a social non-biding agreement. This stated token involves the giving of a thing that is of value in line with the requirements of law. Consideration, thus, is no prove of fairness or equity in a contract, but it is just an evidence that there exists a legal and enforceable contractual agreement between the involved parties. This is in opposition to any social arrangement with no intent of a legal contract. Note that, the part of this is one of the areas that Hong Kong law on contracts is similar to Common law. (Fisher and Greenwood, 2007 p73) The argument is in line with Bigwood’s book that the rule in courts is that consideration need not be adequate but it has to satisfy the threshold of “sufficiency”. Thus, it is the quality of the exchanged value as opposed to quantity. (Bigwood, 2003 p181) Lisa, in his work, illustrates that one other major considerations’ requirements is that it be of value. The term value in consideration is not, however, consistently given a definition by the courts of law. Some boundaries with regard to value have been clearly set out, though. For instance, affection as well as natural love is not enough in rendering any promise legally binding in contractual arrangements. To this, is the case White vs Bluett in which it was held that the promise by the son to his father not to complain regarding his father’s property distribution was not a fair consideration by the son to his father. In return his father was not to sue him for an owed debt. Thus, the promise by son not to complain was not of value to his father’s promise exchange. However, the principle of value courts uncertainity in any in any non-commercial setting. The case in support is that of Ward vs Byham. The facts to the case are that the father to a baby that was not legitimate made a promise to the baby’s mother to pay her ?1 per week in the provision that the baby be happy as well as well looked after. The father terminated his payments at some point in time and the mother sued him. The father’s argument was that the contract was not valid since the mother had not yet given consideration- because it was her legal obligation to ensure for the baby’s happiness and well looked after. It was held by Lord Denning that it was not the father who was to benefit from the promise of the mother and thus, the father’s promise was a unilateral type of contract- where a promise is done in an acts exchange. The third of a consideration’s major principles is that consideration has to emanate from the promisee to the promisor. The promisee in this case is the beneficiary of the promise while the promisor is the one making the promise. The other words this is the rule of privity in consideration. The case to illustrate this principle is that of Tweddle vs Atkinson. The facts of the case Tweddle vs Atkinson are that Tweddle got married to Miss Guy. Subsequent to this marriage, the fathers to the two parties entered a contract where the father of Tweddle made a promise to give his son ?100, while the father to Guy promised to pay his daughter ?200. The father to Miss Guy passed on before fulfilling his promise. The state of Miss Guy’s father executor disagreed to pay Mr.Tweddle the money arguing that no contract existed between Mr.Tweddle, his father and Miss Guy’s father since Miss Guy’s husband did not provide a consideration. He (executor) stated that the contract in this case only existed between Mr. Tweddle’s father and Miss Guy’s father. The judge in this case held the executor’s argument as valid. The other judges have, however, not entirely supported the ruling. Since there existed this disagreement by the other judges, parliament abolished this ruling in year 1999 and simultaneously passed the Act of contract, where third parties have rights. The last of the fore aforementioned principles to a consideration is the fact that consideration may be executed or executor. Consideration must not be past under this principle, though. Any given bilateral kind of contract is binding from the point where there is an exchange of promises. As such, the consideration from the point where there is an exchange of promises. As such, the consideration from this point of view is executor since at the moment promises are made non of the parties has undertaken to perform but they are bound by the contract to make the contract’s performance. In any unilateral type of contract, it is executed due to the promise made in exchange of an act that has been performed. Thus, past consideration is taken to refer to a consideration which was provided for beforehand the making of a promise. The best case to illustrate this principle is that of Stick vs Myrick. In that case reciprocity was inexistent. The predicament brought about by past consideration is well explained in the case of Roscola vs Thomas. The facts of the case are that the defendant made consent to dispose a horse but just a short moment later made an additional promise that he was to provide a fitness warranty with regard to the horse. It was held by the court that the promise by the defendant was not in any way enforceable since the consideration that the plaintiff had provided was for the entry he made to the original contract of the horse’s sale. The consideration by the plaintiff happened prior to the horse’s fitness promise and thus it was taken to be past consideration. (Lisa, 2011) Work Cited: Bigwood, R. Exploitative Contracts. Oxford University Press. Edition illustrated. (2003). p 181. duhaime.org. Consideration. (2011). Retrieved 17 March 2011 http://www.duhaime.org/LegalDictionary/C/Consideration.aspx Fisher, M.J. and Greenwood, D.G. Contract Law in Hong Kong. Kong University Press. (2007). p 73. Lisa, B. Consideration Considered: How English Law Identifies Valid Contracts. (2011). Retrieved 17 March 2011 http://review.society.cz/index.php?option=com_content&task=view&id=13&Itemid=2 Ramsey, V and Thomas Telford Limited. Construction Law Handbook. Thomas Telford. (2007). p 453. Read More