Consideration and Intention to Create Legal Relation - Essay Example

? Consideration and intention to create legal relation of Consideration and Intention to create Legal Relation First issue Bubba v Greenwich Bank In advising Bubba on his legal position, we need to consider a number of issues. First, the proposal by the Greenwich Bank to Bubba constituted an agreement between the two parties. By failing to pay the monthly installments as agreed with the bank, this signifies Bubba’s acceptance of the bank’s offer and hence signifying existence of an agreement. This is a case of acceptance by conduct. Acceptance need not necessarily be in writing. In the case of Carlill v Carbolic Smoke Ball1, Miss Carlill demonstrated her acceptance of the offer by purchasing the smoke ball Another issue for determination is whether there was the intention by the parties to create a legally binding relationship. We will access the issue of promissory estoppels to access the existence of legal relationship between the parties. In England and Wales, Lord Denning interpreted promissory estoppels to be a promise that had been made by one party to another with the intention of creating legal relations2. The promise should be made with knowledge that it is going to be relied on by the other party. In the instance case, the bank approached Bubba with a promise to change the terms in the contract on how the loan was to be repaid following Bubba’s financial crisis. This promise was relied on by Bubba. The bank will therefore not be allowed to go back from its promise. This is primarily owing to the fact that it had been acted upon by the recipient. After realizing that Bubba’s fortune had turned, the proposal to Bubba to revert to the old system of payment constituted an offer to Bubba which he was entitled to accept or reject. The bank now demands that Bubba should pay the lump sum for eight months as well as repay the loan within a period of three years as per the earlier agreement. The earlier agreement had been revoked upon the establishment of new terms by the bank that was accepted by Bubba. The facts in the high trees case, involved a situation at the beginning of Second World War where High Trees House had leased some flat in London from Central property. As a result of the war, occupancy rates drastically went down. The parties therefore made an agreement to cut down the rent that was payable by half. When the situation turned around after the war, Central London property sued for the full rent. The court held that they were entitled to full payment of rent. However, they could not recover the amount that they had agreed to cut down the rent by during the period of war Lord Denning based his decision in the previous case3 which held that if a party to a contract leads another person to believe that they will not enforce their legal rights, they cannot go back from this promise, especially if the other party had accepted the promise and altered his position in reliance on the promise. In the case of Smith v. Hughes4, the court held that for there to be a valid contract, there must be a meeting of the minds of two parties who intend to be legally bound. For there to be meeting of the minds, offeree must communicate his acceptance of the offer to the offeror. It is not necessary that acceptance should be communicated verbally. It can in some situations be inferred from the conduct of the parties. The court in the case of Brodgen v. Metropolitan Railway Company5 held that acceptance can be inferred from the conduct. In this case the plaintiff had been supplying the company with coals for some of years. The plaintiff thereafter came up with a suggestion that they needed to enter into a formal contract. Their respective agents met and engaged in some negotiations on the best agreement that they wanted to enter into. The company’s agent then drew up the contract which he sent to the plaintiff for approval. The court held that the company’s acceptance could be inferred from its conduct. By continuing to deal with Brodgen under the terms in the agreement, this signified that they had accepted the terms. The third issue is whether the initial contract by the parties had been successfully rescinded. Rescission means setting aside of a contract. One of the ways in which a contract can be rescinded is by formation of another contract dealing with the same or similar subject matter. This was the holding in the case of Curtis v. Chemical Cleaning and Dyeing Co 6. Since the initial contract has been effectively set aside it means that it is no longer operational. Moreover, it this was a case of representation as to the future. For a representation to the future to constitute a contract, it must be embodied into a contract7.f the bank went ahead to change the terms that compelled Bubba to accept the promissory estoppels it would amount to a misrepresentation8. The Court9 held that it would amount to misrepresentation if a party altered the situation that exited at the time of contracting and which situation influenced that other party to enter into contract. In Bubba’s case therefore, the bank was entitled to revert back to the old system of payment. However, the bank cannot be allowed to recover the amount of money it had foregone for eight months. Allowing the bank to recover for the eight months would be allowing the bank to alter the promise it had to Bubba and on which promise Bubba had acted on10. Bubba should therefore comply with the previous contract with the bank. Second issue Bubba v staff The legal issue arising between Bubba and the staff concerns whether a promise to employee to do that which they are employed to qualifies as consideration. In the case of Thomas V. Thomas11, the court defined consideration as that which has value in the eyes of the law. The question for courts to determine is whether promise to do something under a pre-existing legal duty will suffice as consideration. As a general rule if one is performing a legal duty that is required of him in a contract, this will not be considered as consideration. Therefore if a person agrees to do something under a contract, such a person cannot thereafter go ahead and change the terms without providing any consideration in hope that they will be enforced. This has been expressed by the courts as ‘legal duty rule.’ This will only be different if the parties agreed to change the terms in the contract. A promise to perform an act that one is legally bound to do does not qualify as consideration for another promise. This is because such consideration is not sufficient consideration. In the case of Stilk v. Myrick12, a captain promised that he would divide the wages of two crews who deserted the voyage to those who remained behind. This was to happen if those who remained behind successfully sailed the ship. The crew successfully sailed it home. The court held that such a contract was unenforceable owing to the fact it was the duty of the crew to sail the ship all through the perils of the sea. Similarly in the case of Angel v. Murray13 an employee had been employed in a construction site as a fore man. The employer promised him that if he supervised the construction of a certain building to the employer’s satisfaction, he would earn extra money. He did so and when he demanded for an extra payment from the employer he declined. He sued the employer. The court held that there was no basis to enforce the contract between the two since there was no sufficient consideration coming from the employee. In absence of sufficient consideration the contract was therefore not enforceable. Lord Denning14 held that where there was an existing lease for two years, the tenant ought to have paid rent. It concerned premises that dealt with women clothing. The defendant had promised to pay 175 pounds for the first year and thereafter pay 200 pounds for the second year. After the first year there arose a controversy with the defendant alleging that since the economy was bad that he would leave the premises if the plaintiff failed to take 175 pounds for all the years. The plaintiff agreed to this agreement and later sued for the balance of 25 pounds. The court held that the defendant had not given any consideration for the plaintiff’s promise. The tenant was under an obligation to pay rent to the tenant.  In our case, the employees of Bubba had been employed to work in the bar under a contract of employment. They were therefore under a legal duty under the contract to provide services in the bar. They had an agreement with their employee to earn an extra amount of money to perform that which he had employed them to do. The terms of the contract had not been changed in any way. From the foregoing, it would be right to conclude that there was no sufficient consideration given by the employees in return of the promise by their employer to give them additional payment in the course of their employment. Consideration is one of the essentials of a valid contract. If there is no consideration, there can never be a valid contract in place. This is because it is consideration that provides the courts with a basis with which to enforce a contract. Since there was no adequate consideration, a valid and enforceable contract cannot be said to exist. The court in the case of White v Bluett, refused to enforce a contract in which no consideration had been provided. In this case an executor had promised to waive certain debts that the son owed in return for the son not reporting that he had mismanaged the estate. The court held that the son had not given sufficient consideration and therefore the contract was not enforceable. The court in refusing to enforce the contract held that a party who has not given any consideration in return for a promise has nothing to enforce. My advice to Bubba therefore is that there is no obligation on his part to pay the money promised to his employees. Third issue Buba v Samantha In this case Bubba agrees to pay Samantha $ 100 for a job that was done in the past. This job done in the past by Samantha constitutes past consideration. The legal issue therefore is as to whether past consideration by Samantha constitutes sufficient consideration. The general rule is that past consideration is not adequate consideration. If there is no sufficient consideration, then a court has no basis for enforcing the parties’ rights. In absence of adequate consideration, a valid and enforceable contract cannot be said to exist. In the case of White v Bluett, the court refused to enforce a contract in which no consideration had been provided. The court in refusing to enforce the contract held that a party who has not given any consideration in return for a promise has nothing to enforce. In this case an executor had promised to waive certain debts that the son owed in return for the son not reporting that he had mismanaged the estate. The court held that the son had not given sufficient consideration and therefore the contract was not enforceable. In conclusion, it is clear that Bubba does not owe any obligation to the daughter Samantha. This is in light of the foregoing that past consideration is not sufficient consideration. In absence of sufficient consideration, a valid contract does not exist. This is what the court held in the case of White v. Bullet15. Bibliography Richards, Paul. (2007).Law of contract. Pearson Longman. London. United Kingdom. Koffman, Laurence. Macdonald, Elizabeth. (1989).The law of contract. Pearson Longman. London. United Kingdom. Collins, Hugh. (2003). The law of contract. Oxford University Press. London. United Kingdom. Chandler, Adrian. Brow, Ian. (2007 and 2008). Law of contract. Pearson Longman. London. United Kingdom. Brantley. W. T. (1912). Law of contract. M. Curlander. Mancester. United Kingdom Kaczorowska, Alina. (2008). European Union Law. Taylor & Francis. London. United Kingdom.1152 pages Collins, Hugh. (2003). Cases on European Community Law. Oxford University Press. London. 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