Business Law Issue of Peter - Case Study Example

Case Study Analysis When Sue lend Peter the sum of 25,000 on 2nd April with 12% interest in return which Peter accepted, the agreement formed an executory consideration. This is because the lender; Sue, agreed to lend Peter the money based on her conditions that is, to be repaid before 1st July and with interest. Peter on the other hand, promised to repay the amount with interest before the stipulated date (Mckendrick, 2014). In the Rule in Pinnel’s case, the Law provides that Sue could have claimed the balance and interest, if Peter had not made the payment before its deadline which Sue agreed. After accepting the 20,000 on 2nd June in full settlement of the debt, Sue lost the right to claim the balance and plus the interest. Based on Mckendrick (2014) Peter made the payment in 2nd June instead of 1st July which Sue gladly agreed for the settlement of the debt. In this instant, Sue accepted the consideration which made the promise binding. Instead, Sue could have neglected the underpayment and insist on full settlement. Additionally, the balance could have been enforceable if after the payment, she still told Peter to repay the balance and interest before the end of the agreed period. Sue claiming the balance and interest on 1st July contrary to their 2nd June agreement, is a past consideration which makes it a bad consideration. This is because Sue accepted settlement of the debt by Peter’s prepayment but where she later on changed her mind. Bose (2008) confirm Peter’s prepayment constituted the accepted act, which Sue later on rejected. Bose (2008) outlines Peter could press charges against Sue based on the ‘consideration must move from the promisee’ defense. Peter kept his promise by making the prepayment on 2nd June which Sue agreed in full settlement of the debt. The agreement was mutual which made the agreement enforceable. Beson (2011) suggests forbearance to Sue was further formed when Sue accepted the 20,000 amount to settle his debt fully. The acceptance closed the case and Sue had no right to sue Peter for further payments. The claim of the balance makes the agreement unfair. 2.Sue could defend herself on the interest receivable based on the Pinnel’s case rule. The rule provides that payment of the lesser amount does not satisfy the outstanding amount. After Sue demanded the balance and interest on 1st July, Peter decided to pay her the 25,000 loan. Peter had the legal right to refute payment due to her breach of the contract on 2nd June. Instead he went ahead to accept liability and pay the other balance of 5000. The Law holds Peter accountable for the remaining interest due to the rule in Pinnel’s case. Peter could have escaped the liability of refusal to pay the extra balance and the outstanding interest all together (Beson, 2011). In the Public Duty principle, Peter is obligated to honor the debt due to acceptance of his liability. Webb (2013) articulates the liability acceptance comes from the payment of the extra 5000, which he was initially not obliged to. The payment of the loan amount on the deadline day without the interest makes no sense. Peter is obliged by Law to pay the interest because initially at the start of the contract, he agreed on repay the interest at the close of the window period. Webb (2013) explains the principle of sufficiency of consideration solidifies the payment of the outstanding interest. Sue is obligated to receive her full amount based on the agreement. At inception, Sue and Peter had a mutual agreement on payment of the loan with 12% interest. At the end of the contractual period, Peter decided to service the loan, but without interest. The act itself constitutes the breach of contract. If Peter felt the repayment of the loan was unfair, he had the moral duty to reject the payment of the extra 5000. Since he paid, he also has the duty to pay the interest in order to satisfy the consideration fully. 3.Sue can claim the balance based on Pinnel’s case rule. Peter pays 18000 on the due date and claims it is because he is financially indebted. First of all, the payment of the amount to satisfy his 25000 loan plus interest was reluctantly accepted. This is because Peter forced her to to accept the amount or get nothing at all if she refused. This constitutes a void contract which was entered without mutual agreement. Posner (2004) depict the underpayment makes the settlement of debt null and void. Sue had to personally agree to call off the debt. Therefore, there was no consideration on Peter’s side. Posner (2004) based on the Public Duty rule, Peter has to repay the balance because the Law commands him to. Irrespective of his financial distress, Peter had the obligation to repay the loan even before winning the lottery. The Law does not recognize the underpayment especially if there is no mutual agreement. Peter’s underpayment constitutes breach of contract which he is liable to pay. Peter has the responsibility of repaying the loan from his lottery irrespective his existing financial obligations. Sue will claim compensation based on the initial agreement that they entered in 2nd April. Based on Schwartz & Scott (2003) Peter can be charged under the Past Consideration rule due to the aftermath. In the beginning of the agreement, Peter had promised to repay the loan fully and with interest before the end of the contractual period. However, on 1st July, he repaid 7000 less the loan amount and with no interest. He further insisted that if Sue could not take his amount, she could lose the entire 25000 outstanding amount. This proposition is contrary to the initial agreement which terms it a bad consideration. Consideration should be settled with the initial terms in order for it to be enforceable. 4.Under the Contractual Duty rule, Sue is bound to sue Peter for her money. Peter has done nothing to fulfill his duty of repaying the loan. Investment in stock markets is relatively considered gambling due to the nature of the industry. The performance of the stock market sector is unstable due to the nature of the economy which fluctuates periodically. Peter investment his money prior to the knowledge of the industry. This constitutes negligence based on his surrounding circumstances. Grossi (2010) illustrates Investment of loan money in gambling activities contributes to negligence which he could have prevented initially. This accumulates the lack of efficient contractual duty by him to repay his debt irrespective of Sue’s emotions and initial perception. Sue can also realize her debt through the Contractual Duty and Third Party principle. Through Peter’s engagement, he entered into a contract with Sue where he believed investment in the third party; stock market, would assist him to repay his loan amount and interest. The placement of interest in stock market to repay his loan contributes lack of consideration. The third party, stock market, cannot be held accountable due to Peter’s public duty (Grossi, 2010). Peter was negligent due to lack of effort to repay Sue’s loan. Bearing the nature of the stock market, a prudent person could not have spend all his money especially loan amounts, for his debts settlements. This constitutes laziness and negligence in fulfilling his promise. On Sue’s defense, there was no move of consideration by the defendant. From the beginning of the contract, Peter had not issued any amount to the claimant (Grossi, 2010). Over the past three months from the contract’s inception, Peter had not issued any amount to settle the debt. This contributes to lack of adequate consideration by the defendant to plead for remorse from Sue. 5. Capper (2009) based on the Accord and Satisfaction rule, Sue will not be granted damages for her claim. Sue agreed and accepted to take the piano in settlement of the claim. The accord was the agreement and acceptance, while the grand piano formed the satisfaction. Sue had initially accepted that the grand piano was worth 25000 in settlement of the debt. Before Sue agreed to the terms, she could have first conducted a valuation on the piano before accepting and believing it was worth her loan amount. The act of acceptance contributes to the accord where she was satisfied with the piano and withdrew the case. This accord and satisfaction was legally binding due to the agreement that was reached. Capper (2009) outlines the principle of Promissory Estoppel prevents Sue from changing her decision. The rule provides that the promisor cannot enforce his or her legal rights to recover his or her balance. Sue agreed and accepted the piano, in exchange for settlement of the debt. The agreement was legally binding because Peter relied on her promise, where he gave away his valued property to fulfill the deal. Even if Peter did not reveal the true worth of the piano, Sue estimated the piano to be worth the price; otherwise, she could not have accepted it in the first instance. Sue could also not be compensated based on the rule of Past Consideration. Sue had initially agreed to settle the case in exchange of the piano which she accepted. Sue had therefore agreed to settle the matter even though the findings turned unfavorable. The acceptance of the piano enforced the agreement (Capper, 2009). Lastly, the Forbearance to Sue rule was implied when Sue agreed to accept the piano as compensation. Sue accepted to take the piano in order to settle the case outside court. The agreement enforced the rule. Reference list Mckendrick, E. (2014). Contract Law: Text, Cases, And Materials. United Kingdom ; Oxford University Press. Bose, D. C. (2008). Business Law. New Delhi, Phi Learning. Beson, P. (2011). The Idea Of Consideration. 61(2): 241-278. Webb, C.(2013). Principle And Policy In Contract Law: Competing Or Complementary Concepts? 63(3): 527-532. Posner, R. (2004). The Law And Economics Of Contract Interpretation. 229: 21-42. Schwartz, A. & Scott, R. (2003). Contract Theory And The Limits Of Contract Law. 113: 541-485. Grossi, P. (2010). The Foundations Of The Modern Legal System. 1: 201-329. Capper, D. (2009). Common Mistake In Contract Law. 1: 457-473. Ogorman, D. (2013). Redefining Offer In Contract Law. 82(6): 1050-1096. Ferdous, S. (2009). Consideration Of Contract In English Law & Law Of Bangladesh: A Comparative Study. 31(1): 19-38. SALJ, (2005). Contract Modifications, Consideration And Moral Hazard. 17: 566-595. Read More