What kinds of remedies equity provide which cannot be provided by contract n cases of where there is deficient consideration? To what extent the principal of promissory estoppels can be developed. Explain and Illustrate.”

What kinds of remedies equity provide which cannot be provided by contract n cases of where there is deficient consideration? To what extent the principal of promissory estoppels can be developed.

1. Introduction

It is required under the eye of the law that any exchange be backed up by a contract. It is mainly because without any contract, a valid agreement, an exchange cannot be considered valid in the eye of the law. Contract is a legal binding of promises of exchange or exchange between two or more parties, which is enforceable by law[1]. For example, A wants to buy a pen with 10 taka from B, now what is the basis of this exchange, a simple answer is a contract with sufficient consideration. Although, here there is no written agreement, but it is implied from this statement that A is bound to pay the agreed 10 taka to B provided he receive the pen from B. However, this will only be considered a valid contract only if B agrees to sell the pen to A. Under the umbrella of law a contract can be void if there is a deviation from the agreed statement for example, A does not pay 10 taka upon receiving the pen instead paid 5 taka. Thus B can sue A for this action in the court of law. One key thing to note in this transaction is the mutual assent or in other words offer and acceptance. A offered to buy the pen B with the stated price of 10 taka and provided B agreed to sell the pen to A implying B accepted the offer of A validates the contract. This is particularly important under the eye of the law when forming a contract. This constitutes one of the key components of a contract without which the contract will be redeemed as void able. Thus when forming a contract no one can force another to form a contract[2]. Even when marriage contract is made both parties must willingly form the contract though mutual agreement, which is not the case in many occasions when one party forces the other to accept the offer using unlawful means. This is completely against the code of law. There are also other key points when forming a contract such as the capacity to form a contract which may come in either forms mental or physical or both. Other key points include consideration, lawfulness of purpose, and legality of form, intention to create legal relations; and consent to contract[3]. However, sometimes-deficient consideration holds the contract back and deems it as invalid thus, raising the question of equity to act as a remedy for contracts with deficient considerations.

2. Overview of consideration

Consideration as some might say “bargaining chip of a contract” or “the price of a promise” where there must be some form of concept of legal value, which is in connection with forming a contract. If we consider about the previous example of A buying a pen from B with 10 taka then from the perspective of A the consideration is the value of 10 taka while for B the value of pen. It means that both party have something valuable in order to form a contract and according to the considerations in the contract A must pay 10 taka and B should also give the pen to A. Now if we look at the contract statement closely it is unclear what type or color of pen is not mentioned thus particular color or type do not fall under consideration[4]. Although in some common laws consideration is deemed as unnecessary as both the parties under a contract see it as performing the same functions. Although this argument is also quite vague, now several key components of consideration are there:

Ø      Consideration must be recognized by law however it might not be of sufficient value for one exchange medium with which another medium is exchanged. Such as selling a house for much lesser value then the stated market price can be a contract of consideration recognized by law, although the consideration can be deemed as inadequate[5].

Ø      Past consideration can be seen as void able such as A pays his uncle 5000 taka each year for the rest of his life, now if A dies suddenly the A’s son will not be obliged to pay that amount to A’s uncle as that falls under past consideration.

Ø      If a person is under contract that requires him to do a job then it will not be good consideration to pay extra for doing the same job.

Ø      Consideration cannot be those that is already obliged to be done under the civil or common law such as promise to testify in the court or refraining from killing someone. Now this again falls under clause of consideration that must be recognized by law[6].

3. Overview of Promissory Estoppels

When sufficient consideration is not present in a contract then a legal doctrine is used by the court of law, which prevents or estoppes from arguing that his or her promise should not be upheld. Now this is particularly important in such a case example: Mr. X wants to make a movie however it is subjected to the contract which is still not signed yet. Mr X contacts Mr. Y and asks him to paint a background scenery for the movie and in return Mr. X will share the profit from the movie with Mr.Y.  He did just that however Mr. X refused to pay later by stating that as the contract of the movie could not be made so the question of the profit is not coming and as there are no profits, Mr. X will not be held accountable to pay Mr. Y for his service.

Here, in the example two things can be seen clearly one of which is the deficient consideration, as it is not stated what if the movie contract cannot be secured and then what will happen to the payment of Mr. Y. Therefore, in this case promissory estoppels will come into play where Mr. Y can sue Mr. X and the judge will hold Mr. X responsible to pay Mr. Y. This is very much possible under the law of equity where judgments are provided based on logic and values rather than the common law[7].

The major types of Estoppels

The main species of estoppels:

Ø      Reliance-based estoppels—These estoppels are quite effective when deficient consideration is there under a certain contract. It is mainly because one party may rely on the information given by another party however if the provider of the information acts later, which is not consistent with the information then he can be estopped in the court. Such an example would be that a landlord told his tenant that the utility bill has been reduced so it can be inferred from the information that the rent has also gone down. Therefore, the estoppels can be implemented on the landlord from increasing the house rent[8].

Ø      Estoppel by record—Estoppel by record is mainly made in order to estoppe a party from filing a lawsuit on the same issues that has already been judged in the court. Thus the previous judgments are held in this case.

Ø      Estoppel by deed (often regarded as technical or formal estoppels)—“Where rules of evidence prevent a litigant from denying the truth of what was said or done”.

Ø      Estoppel by silence— It is mainly done in order to prevent someone from asserting something in the present situation as he did not have done it earlier when given the chance[9].

These estopples act as remedies for the litigant in cases of breach of contract or the contracts without any sufficient consideration. Transactions based on vague statements are the major causes for the estopples to take place.

4. Law of Equity acting as a remedy for deficient considerations

As law of equity is judgment given in the court by a judge based on logic and natural law and his sole discretion, equity provides some remedies for a breach of contract. Such as the monetory compensation which is provided for a damage of a property by one party to another. But there are cases where injunctions are given in temporary conditions where one party is forced file a lawsuit against the other. For example: recently the Former Prime Minister of Bangladesh has been compelled by the authority to leave her home saying that the authorization of the house is to be redeemed as unlawful and that house is to be destroyed. However, a injunction can be filed in the court against the destruction of the home by the authority in equity law[10]. The rise of equity law is mainly formed when common law was not enough to serve as the guideline of law in all the situation. Sometimes humanitarian issues also have to be considered such as an orphanage is established in the property of wealthy person without his permission. Now as it was unknown to that person regarding the building of the orphanage on his land gives him the full right to destroy it[11]. But as orphanage is seen as a charitable work the court can use equity law to pass a judgment of not destruction of the orphanage. Here promissory there is no contract between the parties nor sufficient consideration as the wealthy man is getting nothing out of it yet. However, a mediation can be made between both parties which can resolved with monetary compensation. Equitable remedies are mostly based on injunctions and specific performance of contracts be compensated through consideration such as money[12].

5. Criticisms of Law of Equity

Such a judgment is sometimes biased as it is done according to the view of the judge. One person’s view is sometimes not enough to make a judgment especially when it does not fall under common law. As equity law gives complete provision to the judge it becomes imperative that judgment be done after seeing all aspects of the particular case. Here, complexities arrive from many sections and even in a case where promissory estoppels can be placed against particular party for assertion of certain assumption and later denying it, one might find loopholes, as the judgment is not based on the common law. Therefore equity does not always serve the purposes of a common good because of mainly misrepresentation of case may lead to wrong judgment. The vague 12 ethical statements, which is the basis equity law, are not enough to ignore the common law completely, which are strict codes to be followed. As equity is said to be based on the conscience of the defendant, so a person is always targeted for equitable remedies on the basis of his knowledge, state of mind and motives. Thus these relevant issues are important to look at whether a remedy should be granted or not, but it is not easy asses such characteristics when a particular case is presented upon them[13].

6. Conclusion

Although equity does provide a remedy for contracts with deficient considerations it is still not full proof because the judgment is based on the judge alone. However, in the course of time equity lost its flexibility and incorporated some fixed precedents just like the common laws based on which judgment is passed. Sensitive issues such as land disputes are the main driving force of equity and on a case by case basis it proved to be more effective than the judgment done through common law. Constraints on common law made equity such an attractive package for settling the dispute between parties under a contract where there is deficient consideration. Promissory estoppels come under both common law and equity law constraining any form of misinterpretation of the information when forming the contract.

Bibliography

1.        Ewan McKendrick, Contract Law – Text, Cases and Materials (2005) Oxford University Press

2.        Equity in a Nutshell by T. Cockburn & M. Shirley, Lawbook Co, Sydney, 2005.

3.        Equity & Trusts by T. Cockburn, W. Harris & M. Shirley, Butterworths, Sydney, 2005.

4.        Glendon MA et al. (2008). Comparative Legal Traditions In a Nutshell, 3rd edition, pp. 142-3. Thomson-West.

5.        Goff & Jones, The Law of Restitution, 4th ed.

6.        Meagher and Gummow, Equity, Doctrines and Remedies, 3rd ed.

7.        Randy E. Barnett, Contracts (2003) Aspen Publishers

8.        JH Baker, ‘Origins of the Doctrine of Consideration 1535-1585’ in JH Baker, The Legal Profession and the Common Law: Historical Essays (London 1986)

9.        Events Subsequent to the Contract As a Defence to Specific Performance,” Columbia Law Review,

10.     J Selden, Table Talk, quoted in M B Evans and R I Jack (eds), Sources of English Legal and Constitutional History, Butterworths, Sydney, 1984, 223-224.

11.     Glendon MA et al. (2008). Comparative Legal Traditions In a Nutshell, 3rd edition, pp. 142-3.

12.     Hudson states that these are primarily “culled from Snell’s Equity, the 4th edition

13.     Gummow & Lehane’s Equity: Doctrines & Remedies, 4th edition, Butterworth: 2002, Chapter 17 and Pakinson, The Principles of Equity, 2nd edition, LBC: 2003, Chapter 7.

14.     Punishment and Proportionality: The Estoppel Approach, by Stephan Kinsella, a rights theory based on the concept of estoppel

15.     Dillwyn v Llewelyn (1862) 4 De G.F.& J. 517 C.A. See also Inwards v Baker [1965] 2 Q.B. 29, C.A.

16.     Dawson, John P. “Judicial Revision of Frustrated Contracts: The United States.” Boston University Law Review. 64:1 (January 1984), p. 32.

17.     Events Subsequent to the Contract As a Defence to Specific Performance,” Columbia Law Review, May 1916, p. 411.

18.     J Selden, Table Talk, quoted in M B Evans and R I Jack (eds), Sources of English Legal and Constitutional History, Butterworths, Sydney, 1984, 223-224.

19.     Convergence of estoppels (2) : High Court of Australia – The Commonwealth v Verwayen

20.     Douglas Laycock, Modern American Remedies, 3d ed. (Aspen Press 2002), page 370.

style=”text-align: justify;” size=”1″ />

[1] Contract Law – Text, Cases and Materials (2005) p. 99

[2] P.S. Atiyah, The Rise and Fall of Freedom of Contract (1979) p.35

[3] Randy E. Barnett, Contracts (2003) pp.243-245

[4] ‘Origins of the Doctrine of Consideration 1535-1585’

[5] Brantly, William Theophilus (1912). Law of Contract

[6] ‘Consideration: A Restatement’ in Essays onContract (1986) p.195

[7] 28 Am Jur 2d Estoppel and Waiver § 1

[8] David Swarbrick. Estoppel (England) – 1980- 1984

[9] Equity: Doctrines & Remedies, 4th edition, Butterworth: 2002, Chapter 17

[10] S Worthington, Equity. pp. 10-11.

[11] Glendon MA et al. (2008). Comparative Legal Traditions In a Nutshell

[12] Equity & Trusts by T. Cockburn,

[13] Meagher and Gummow, Equity, Doctrines and Remedies