Consideration and Promissory Estoppels - Coursework Example

Consideration and Promissory Estoppels Introduction Jubilee Media television has custom-made television series d “The Secret Lives of Academics” that will feature a prominent Chemistry University lecturer who runs a drug production lab and another law lecturer at a London University and who works as a secret spy for M15. The Jubilee Media has entered into advertising an agreement with various sponsors who will be advertising during the commercial breaks of the television show. The taking of films will begin in twelve weeks time and the first programming will commence a week after the taking of film. The two lecturers wish to remain anonymous throughout the programmes. The Jubilee Media has contracted Bobby Bodgit Ltd (BB), a construction company to build a studio for filming and Voice Over facilities to safeguard the identity of the lecturers. The contractor has promised to complete the work in twelve weeks. However, after eight weeks the contractor claims that the work requires an additional eight weeks to complete and the value of the contract has to be increased by £100,000 due to increase in the cost of labour. The Jubilee Media has agreed to pay the additional amount to the BB contractor due to the importance of the event. The Jubilee Media hired to Voice Over experts and an editing engineer to edit the voices of the lecturers. The two exerts are supposed to be paid £1,500 each while the engineer was supposed to receive £2,000. However, after paying the contractor the additional sum of £100,000 the Media gets into financial difficulties and offers to pay the voice editors and £1000 each of which they agreed to take reluctantly. Issue The issue in this case is to determine whether Jubilee Media is obliged to pay an additional £100,000 to the BB in order for the BB to complete the contract and whether Jubilee Media should extend the contract period by eight weeks as requested by the contractor. Also, there is another issue as to whether the two Voice Over editors and the Voice Over engineer should accept the payment of £1000 each from the Jubilee Media as a settlement of the entire amount or whether they should claim for the balances in accordance to the terms of contract. The issue focuses on whether these parties terminate the contract in case the other party decides to breach the agreement. The court has to determine whether the unwritten promises can form a bidding agreement between the parties. Rule Jubilee should claim the additional £100,000 paid to the contractor BB and request the contractor to complete the contract within the agreed duration of twelve weeks. Similarly, the Voice Over engineer should claim for the remaining balance of £1,000 from the Jubilee Media after completing the contractual obligation. Finally, the two Voice Over specialists should claim their balances of £500 each from the Jubilee Media as stated in the agreement. The court has to determine the extent to which the promissory estoppels apply between the two parties when deciding on both cases. Application A contract is a relationship that subsists between two or more parties who agrees to be legally bound to other party legally due to the obligations they owe each other.1 A contract comes into force after each party has made an agreement to the other and supported it with a consideration. Consideration is one of the basic requirements of a bidding agreement. In New ZealandShipping Co Ltd v A M Satterthwaite & Co Ltd, a contract has some condition that should be met before it becomes effective.2 For example, those conditions include an offer, acceptance and a consideration. Once the promises have been made either party may sue the other party for breach of agreement and request for payment of damages or specific performance if that is the only way the offended party can seek for justice. The agreement between the Jubilee Media and BB required BB to construct a stadium for a fixed amount within twelve weeks. However, after working for eight weeks the contractor requested Jubilee Media to increase the value of the contract by £100,000 and extend duration by eight weeks of which Jubilee accepted unwillingly. The doctrine of promissory estoppels enforce is enforced to promote justice for the offended party without the need to examine consideration.3 It will be unfair for Jubilee Media to pay extra amount under the BB’s claim of increase in cost of labor or extend the duration because further delays will result to loss of income for the Jubilee who has contracts with other parties and the additional cost of construction that could have been avoided. For example, the contractor should have hired enough workers at the time of starting the contract and make a twelve month contract with their employees to ensure the variation in cost of labour does not affect the value of the contract. In addition, the contractor was aware of the use of the studio and when it was supposed to be ready. Therefore, they cannot request for additional time since it will make the Jubilee Media to lose other contracts already signed with the sponsors. In McIntosh v. Murphy, 52 Haw. 29, 469 P.2d 177 (Haw. 1970), the plaintiff was hired in a one year contract to work in the defendant’s auto dealership. After working for two months the plaintiff was fired and sued the defendant for damages.4 The court held that “an oral promise which the promisor should reasonably expect to induce either action or forbearance on the part of the promise is enforceable when injustice can be avoided only by enforcing the contract.”5 According to the case in Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847,6 consideration is has to be given by each party to the other in order for the agreement to be valid. It is not necessary to determine the actual value of consideration, but the offended party has to prove that the other party stands to gain something at the expense of the offended party or that the offended party has to lose something due to failure of the offender to execute the contract. For example, in the case above the promise to pay the monetary value of the contract by the Jubilee Media is its consideration for the contract to the BB while the promise to construct the studio in twelve weeks serves as consideration for the BB to the Jubilee Media. Therefore, BB has to perform the contract in accordance to the agreement in order to prevent Jubilee Media from suffering monetary loss while Jubilee Media has to pay the contractual amount in order to compensate the BB for the work done The agreement may be discharged under the doctrine of frustrated contract if a situation arises that renders the contract performance impossible.7 However, there is need for evidence that the change in condition rendered the contract performance impossible in which case none of the parties can sue the other after the contract is discharged. In such a situation the loss incurred by each party are determined under the Law Reform Act 1943.8 However, the contract cannot be frustrated due to increase in the value of the contract. In the case of Davis Contractors v Fareham UDC [1956] AC 6969, the claimant was contracted to put up seventy-eight houses for the defendant within a duration of eight months at a value of 85,000. The cost of labour went up and was in short supply. The claimant took twenty-two months to complete the work and at a higher cost than anticipated. The defendant paid the contractual value thus the plaintiff sued claiming for extra pay on a quantum meruit basis by arguing the contract was frustrated. The court issued that the contract was not frustrated since the contractor was able to implement the contract requirements. Therefore, tough conditions and unperceived loss does not make the contract frustrated thus the plaintiff did not get any extra pay. Similarly, BB is not entitled to extra pay since the conditions were easy to be perceived by either of the parties at the time of making agreement and the contract was not frustrated. Therefore, Jubilee should claim for the additional payments made to the BB. Similarly, BB should perform according with the contract and deliver the studio to the Jubilee media in accordance to the agreement. The doctrine of promissory estoppels does not require consideration in order to be enforceable. In Central London Property Trust Ltd v High Trees House Ltd,10 the landlord (central London) had reduced the rental value of their houses during the world war as a result of low demand for the houses at that time. In 1945 after the world war the demand of the houses started increasing and the landlord raised the rent to level it were before the war. The landlord wanted to charge the tenants (High Trees) for the period they had reduced the rent, but the court stopped the landlord from implementing affecting the rent in arrears by upholding that the promissory estoppels did not require consideration in order to be effective. The doctrine of promissory estoppels is a doctrine of equity that requires a person who opts to pursue it do so in good faith. In D&C Builders Ltd v Rees,11 Ms Rees forced the plaintiff to take smaller amount as a full settlement of the amount she owned them for construction of the house. Due to the financial difficulties they were in they opted to take the amount offered, but sued Ms Rees for the remaining balance. The court decided that she did not act “equitably” and therefore she could not use the doctrine of promissory estoppels as a shield against her injustice. The judge declared that she acted unfairly by taking advantage of the plaintiffs financial challenges thus she was asked to pay the balances. The same situation applies in the case above whereby Jubilee Media offered the Voice Over experts and engineer a lesser amount in settlement of the full amount it owned them. Jubilee Media owes the two contractors £500 each and the Voice over engineer a sum of £1,000. Therefore, Jubilee cannot raise a claim under promissory estoppels since such a move will result to injustice to the other parties. The doctrine of promissory estoppels emphasizes on trust between the contracting parties.12 It aims at granting protection to the weaker party against exploitation by the stronger party in terms of bargaining power. For example, in the case between the Jubilee Media and the contractors, jubilee is the stronger party and thus cannot rely on promissory estoppels to enforce unfair requests they had made to the contractors. The promisor cannot use the promissory estoppels doctrine to acquire more benefits than what was delivered in the consideration as stated in the case of Williams v Roffey Bros & Nicholls (Contractors) Ltd.13 Therefore, Jubilee Media cannot offer lesser pay to the contractors than the original value of the contract. Conclusion The promissory estoppel waves the need for consideration in a contract. However, in order for the doctrine of promissory estoppels to apply the party pursuing justice must be acting fairly in order for the justice to prevail. Consideration is necessary when forming a bidding agreement though it need not be sufficient. A party cannot pay a lesser amount in settlement of a larger amount even under promissory estoppels since this will propagate injustice. Therefore, Jubilee Media can claim the excess amount paid to BB, but should also settle the balances it owes the Voice Over experts and engineer. Bibliography Davis Contractors v Fareham UDC [1956] AC 696 Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847 Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130 McIntosh v. Murphy, 52 Haw. 29, 469 P.2d 177 (Haw. 1970), New ZealandShipping Co Ltd v A M Satterthwaite & Co Ltd OSullivan, Janet and Hilliard Jonathan. The Law of Contract. (UK: Oxford University Press, 2012) 491 Vermeesch and Lindgren’s, Business Law of Australia (Lexis Nexis Butterworth, 2011) Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Read More