Compensation Laws Issues - Essay Example

?Case study: Introduction: This paper presents analysis of a case study in light of the compensation laws. The characters are Orlando (lender) and Kate (borrower). I am supposed to advise Orlando apropos his wish to sue Kate for the remaining amount of debt that he had formerly waived. Before writing my advice to Orlando, it is customary to briefly review the various contract laws and conditions that apply on the case under consideration. Promissory estoppel: Promissory estoppel is employed as one of the legal principles in US law. It may also exist in many other legal systems with a different title. “Promissory estoppel allows a party to recover on a promise even though that promise was made without consideration” (Oppenheimer, 2011). It necessarily keeps an individual from asserting that a promise he/she made in the past is not to be upheld. When a party who holds a contract with another party, makes a promise to it that essentially waives any or all traits of the contract between the two, upon certain conditions that the other party complies with, the promisor no more remains in a position to enforce the contract at a later point in time. This is the fundamental principle of promissory estoppel. The law gives all the importance to a contract in the analysis of cases. Previously, a promise that rendered the contract unenforceable in any way was not given any consideration as per the common law theory. However, promises were frequently made in practice that caused considerable abuse that was not adequately addressed by the common law. Equity later brought up a new disparity of estoppel. Because of that, although the promise was not given due consideration, the promisor is deprived of the right to enforce the earlier contract against which, he/she had made a promise to the other party. Contract offer and acceptance: In contract law, a traditional approach that can be used to check whether or not an agreement sustains between two or more parties, is the offer and acceptance analysis. An offer is a suggestion made by one entity to another whereby the first expresses a will to engage in a contract on clearly defined conditions. The contract does not leave any room for further discussions. The rules are clearly identified and fixed. Once the second entity accedes to the conditions put forth by the first entity and conveys its acceptance to the offerer, a contract is established. A contract forms as a result of momentary unionization of minds of the parties entering it, and serves as a standard for the time to come. Such developments as the estoppel law, unjust enhancement and inappropriate conduct have caused considerable damage to the classical contract development approach. Part payment of debt: Part payment of debt involves partial return of the debt instead of full by the borrower to the lender. When looked at from the perspective this contract law, Orlando may still have some rights to exercise. Although Orlando consented to accept ?625 from Kate in full satisfaction of the original amount i.e. ?1250, this does not bind Orlando by his promise. The law offers Orlando right to demand the remaining amount by suing Kate at a later point in time. “Part payment of a lesser sum, on the day (that it is due) cannot be any satisfaction for the whole because it appears to the judges that by no possibility a lesser sum can be satisfaction to the claimant for a greater sum…” (SIC, 2010). However, Orlando has lost his right over the rest of the money because the case involves one of the three exceptions to the general rule. The case reveals that Orlando has asked Kate to return half of the money till Wednesday, but Kate paid him the sum on Tuesday instead of Wednesday which essentially means that Orlando had accepted the payment, one day in advance of the payment date he had formerly told Kate. According to the law, if the creditor accepts the payment in advance of the due date, he waives his/her right to sue the borrower later (SIC, 2010). Consideration: Consideration is the name of a benefit of any sort that the parties entering into a contract bargain. It is the fundamental reason for which a party may make a contract with a second party. Consideration necessarily has a value to the parties entering the contract on the least. It is exchanged between the parties for performance or its promise made by the second party. A contract is one in which considerations are exchanged with each other. One party shows performance (one consideration) while the other pays for it (second consideration). Under the common law, no contract can be rendered as binding if there is no consideration, whereby. Consideration as defined by the 1875 English decision is “some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other” (Duhaime, n.d.). My advice to Orlando: Parties must exchange consideration with each other in order to maintain a binding contract with one another, as per the rule of contract law. Without a consideration, there is no concept of contract. And without a contract, neither of the parties can make any claim for any liabilities. Consideration may be anything that has some value that the promise delivers to the promisor. In the case of Kate and Orlando, when Orlando as a promisor, asked Kate to return the half of the debt money by the following Wednesday, Kate came with the money one day in advance i.e. on Tuesday and Orlando took it. This way, he waived his right to claim his money from Kate as per the Part payment of debt contract law. Not just this, Kate “tried” to make the return of half the money “a solid contract” by offering Orlando a bottle of wine in consideration of his kindness that he had displayed by waiving half of the remaining debt thinking that Orlando would not be able to claim that his promise to Kate was no contract. Accordingly, he would not be entitled to any return of money by Kate. However, that is not the case. As mentioned above, consideration should have a value for the parties. A bottle of wine in exchange of a waiver of ?625 is by no means, sufficiently valuable so as to be called as consideration. “The payment by one side of a merely nominal amount – such as one dollar for a return promise of much greater value - does not satisfy the consideration requirement” (Klass, 2010, p. 74). A gift of informal nature like a painting can not be considered as consideration to make a contract (Klass, 2010, p. 74). Likewise, Kate can not make a contract with Orlando on the basis of a bottle of wine. Obviously, that bottle has no value to Orlando in comparison to ?625. I totally understand that Orlando is innocent in this case and actually deserves to get the money considering the matter from an ethical perspective. However, I would not advise Orlando to sue Kate on the basis of the Part payment of debt because he received the money earlier than the date he had himself given to Kate. Instead, I would advise Orlando to sue Kate on the basis of the Consideration. He may be benefited because his promise to Kate does not make a contract as long as she does not offer Orlando consideration for the waiver. However, as per the policy of promissory estoppel, Orlando remains on the loosing end. Responsibilities of Kate and Orlando from an ethical perspective: With respect to the matter under consideration, Kate and Orlando assume different roles and responsibilities towards each other. For Kate, although it is true that Orlando had promised her that he would let go of the rest of the payment if she managed to return a certain amount within a certain time limit, it does not relieve her of her ethical responsibility towards Orlando particularly when she later gets in such a position, that she can easily manage to return Orlando’s money. What Orlando did for her was out of generosity and his personal kindness and good conduct. It is not that Orlando does not require money. It is only that he felt for her, and considered her incapable of returning his money in full because of her poor financial status before she happened to get the new job. By waiving the rest of the payment, he has already fully met the standards of ethics. He felt pity for her. On the other hand, Kate may not owe Orlando any Money given his prior commitment with her. However, Kate should realize that she is no more in a financial stress. It is now, her turn to pay Orlando in the same coin. Considering this, it is technically wrong to say that Kate now, owes Orlando any money. However, from an ethical perspective, Kate should herself return Orlando all the money. Works cited: Duhaime. (n.d.). Consideration Definition. Retrieved from http://www.duhaime.org/LegalDictionary/C/Consideration.aspx. Klass, G. (2010). Contract Law in USA. Netherlands: Kluwer Law International. Oppenheimer, L. (2011). What is Promissory Estoppel? Retrieved from http://www.wisegeek.com/what-is-promissory-estoppel.htm. Singapore Institute of Commerce. (2010). Law of Contract Consideration Part Payment of Debt. Retrieved from http://www.docstoc.com/docs/3005897/Law-of-Contract-Consideration-Part-Payment-of-Debt. Read More