Business Law: Nudum Pactum - Assignment Example

Business Law Nudum pactum Nudum pactum means a promise without a consideration. It is also known as a ‘bare or naked promise. British law will never enforce a Nudum pactum because according to the British law a promise without a consideration is void. A promise to be valid must be supported by consideration, (i.e.) there must be a transfer of consideration from one person to another. A promise without consideration cannot be legally enforceable. An example of Nudum pactum could be selling goods without getting money r money’s worth in exchange. Such a contract is void and is not legally enforceable. In the similar manner an offer made containing a promise not to revoke it and keep it open does not prevent the offeror from revoking the offer if is not supported by consideration. 2. Definition of consideration According to sec. 2(d) of the Indian Contract Act, “when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such an act or abstinence or promise is called a consideration for the promise.” Justice Patterson defines consideration as, “consideration means something which is of some value in the eyes of law. It may be some benefit to the plaintiff or some detriment to the defendant.” In the English case of Currie v. Misa, (1875) L.R. Ex. 153, consideration was defined as follows, “a valuable consideration in the sense of law may consist either in some right, interest, profit or benefit accruing to one party. Or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. 3. Consideration must be sufficient but need not be adequate Consideration means something in return. This something in return need not be necessarily equal to something given. The law simply provides that the contract should be supported by consideration. So as long as the consideration exists, the courts are not concerned as to its adequacy, provided it is of some value. The adequacy of consideration is for the parties to determine at the time of making the contract, and not for the court when it is sought to be considered. Consideration must, however, be something to which the law attaches value though it need not be equal in value to the promise made. The courts do not exist to repair bad bargains. Case Law Haigh v. Brooks, (1839) A&E. 209 B promised to pay certain bills if H would hand over guarantee to him. H handed over guarantee but it turned out to be unenforceable. Held, as B received what he had asked for there was consideration for his promise, although guarantee was of smaller value than he had supposed. Anson (The English Law of contract) observes in this connection that the consideration need not be adequate to the promise, but it must be of some value in the eyes of law. The curt will not make bargains for the parties to a suit and, if a man gets what he contracted for, will not inquire whether it was equivalent to the promise which he gave in return. Therefore consideration must be of some value but it need not be adequate. 4. Past consideration is no consideration Past consideration can never be a good consideration for a new contract. A contract cannot be based upon a consideration which was provided before the contract had been entered into. Therefore if a person promises to pay another person consideration for an act which the other person had already performed, than it cannot be a good consideration for the contract. Therefore consideration passed before the contract had been entered into cannot be a good consideration for the contract. Therefore if a person has been benefitted from the other person, and afterwards because of good feelings the other person promises to do something for the first person accepting the past benefit as consideration, than that consideration is not a good consideration and cannot be enforced. Consideration must move from the promisor to the promisee only after the contract has been entered into. Consideration moved from the promisor to the promisee after the contract had been entered into is past consideration and cannot be considered to be good consideration for the contract. 5. Exceptions to the rule, ‘past consideration is no consideration’. The following are the exceptions to the rule ‘past consideration is no consideration’ 1. If the promisee has performed at the intentions or according to the requests of the promisor (i.e.) if the promisor himself has directed the promisee to do that act. 2. The contract between the parties provides, either expressly or impliedly, that the promise will be rewarded for the performance of that act. 3. If a person does anything which the other person is bound to do either under a contract or as his implied duty under the law and the other person later on promises to pay him a consideration for that act, than it can be a good consideration. Therefore in the above cases past consideration can be considered to be a good consideration. 6. A. An empty can of coca-cola. An empty can of coca-cola can be a good consideration. Consideration must be something to which the law attaches value. An empty can of coca-cola has a value for a can dealer. Therefore an empty can of coca-cola is a good consideration. B. Giving evidence in a trial Giving evidence in a trial is also a good consideration. Consideration means an act, abstinence or forbearance. Therefore if a person promises to do something for the other in return of the other giving evidence in a case, it can be a good consideration. But where a person has been summoned to appear before the court of law for the purpose of giving evidence, then consideration given to him to appear before the court of law cannot be a good consideration as he was already under a legal duty to do so. 7. Can pre-existing contractual duty be count as good consideration? Pre-existing contractual duty cannot be counted as good consideration. A promise to do what one is already bound to do, either by general law or under an existing contract, is not a good consideration for a new promise, since it adds nothing to the pre-existing legal or contractual obligation. Likewise, a promise to perform public duty by a public servant is not a good consideration. Therefore if a person enters into a contract to do something which he is already bound to do under cannot be a good consideration for the contract and therefore the contract cannot be enforced. Case Law Collins v. Godefroy, (1831)1 B. & Ad. 956 A promised to pay B, who has received summons to appear at a trail in a civil suit, a certain sum being a compensation for the loss of time during his attendance. Held, the promise was without consideration, for B was under a duty imposed by law to appear and give evidence. Therefore a promise to do something which a person is already bound to do is not a good consideration under the contract. Therefore a policeman cannot take a consideration from a civilian to find out his lost bike. Because the policeman is under a legal obligation to find out the lost bike of any person and therefore he cannot demand consideration for his services. Case Law Ramchandra Chintaman V. Kalu Raju. (1877) 2 Bom 30 There was a promise between two persons to pay the lawyer an additional sum if the suit was successful. Held, the promise was void for want of consideration. The lawyer was under an pre-existing contractual duty to render the best of his services under the original contract. But where a person being already under a legal or contractual duty to do something undertakes to do something more than he is bound to do under the original contract, this will be a good consideration for the promise. Therefore pre-existing contractual duty cannot be considered to be a good consideration. If a person is bound to do an act under a contract or by any law, than he cannot get consideration for the same act under any other contract. Works Cited 1. Kapoor, Naresh(2007), “Elements of Mercantile Law”, New Delhi 2. Jain, Ashish(1999), “Business Law”, Macmillan: Mumbai Read More