Valid Consideration prima facie evidences the fairness of a Contract. Justify the statement with the essentials of Consideration
Law as it is the command of the Sovereign. It means, firstly, law has its sources in sovereign authority, Secondly, law is accompanied by sanction, and lastly, the command to be a law should compel a course of conduct. Being a command the law must flow from a determinate person or group of persons with the threat of displeasure if it is not obeyed. Law interpret that Law is a system of rules and guidelines which are enforced through social, institutions, to govern behaviour, wherever possible. It shapes politics, economics, and society in numerous ways and serves as a social mediator of relations between people. However, Law of contract is constituted with four factors. Without this four elements cannot be make a contract. Whatever, Consideration is one of them. Consideration means, an agreement is legally enforced only when each other parties (gives something and gets something in return is called Consideration.) Consideration is an essential element for the formation of a contract. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other’s performance, the performance is consideration for the promise, while the promise is consideration for the performance.Consideration is one of the integral parts of a contract. Without lawful consideration an agreement cannot be entered into – Critically analyze the basic legal provisions of consideration in the law of contract. So to some extent it is clearly understand without consideration it not possible to be made a contract. So it is an integral part of contract.
An agreement enforceable by law is contract.
· An agreement and
· The agreement must be enforceable by law.
Agreement: It sort of promise. To some extent, every set of promises, forming the consideration for each other, is an agreement. Most importantly, without consideration cannot make an agreement.
According to Sir Wlliam Anson
“A contract is an agreement enforceable at law made between tow pr more parties, by which rights are acquired by one or more to acts or forbearance on the part the other or others”
1.3 The Essential Elements of a Contract
An agreement becomes enforceable by law when it fulfils certain conditions. These conditions, which may be called the Essential Elements of a Contract, are explained below.
§ Offer and Acceptance
§ Intentions to create Legal Relationship
§ Lawful Consideration
§ Capacity of Parties
§ Free Consent
§ Legality of the Object
§ Possibility of Performance
§ Void Agreements
§ Writing Registration and Legal Formalities “
Consideration is one of them. Consideration means, an agreement is legally enforced only when each other parties (gives something and gets something in return is called Consideration.) Consideration is an essential element for the formation of a contract. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. Consideration must be something of value in the eyes of the law – (Thomas v Thomas) (1842) 2 QB 851. This excludes promises of love and affection, gaming and betting etc. A one sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by deed. In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other’s performance, the performance is consideration for the promise, while the promise is consideration for the performance.Consideration is one of the integral parts of a contract. Without lawful consideration an agreement cannot be entered into – Critically analyze the basic legal provisions of consideration in the law of contract.
For example, if someone offered to drive you to work on Mondays and Tuesdays in exchange for your promise to return the favour on Wednesdays and Thursdays, a Bilateral Contract would be formed binding both of you once you provided consideration by accepting those terms. But if that same person offered to pay you $10 each day you drove him to work, a unilateral contract would be formed, binding only upon the promisor until you provided consideration by driving him to work on a particular day.
1.5Importance of consideration in the law of Contract:
It is perhaps dangerous to make broad general comments on a book of this nature, containing as it does fifteen distinct essays. Nevertheless, certain aspects are worthy of note. As already stated, the participants were encouraged to analyse “doctrines considered tangential or antiquated”. It is no surprise, then, that several essays focus on the doctrine of consideration: a doctrine mysterious to those who do not come from a Common Law background. The doctrine is clearly alive and well. One of the leading texts on English contract law, Treitel’s The Law of Contract, edited by Edwin Peel and now in its twelfth edition, devotes just over 100 pages to the doctrine. Its existence poses problems on a wider scale: as we march towards the further Europeanization of contract law, it throws into question the possibility of further harmonisation. Clearly this doctrine continues to shape the leading theories applied to contract law in Common Law systems. Stephen Waddams, in his contribution, “Principle in Contract Law: the Doctrine of Consideration”, provides a useful summary of the doctrine, in all its fragmented glory. Waddams also explores the link between consideration and contracts for the benefit of third parties. He suggests that statutory reform in England has not met with success and summarises the difficulties involved in the creation of a workable third party right. This may lead the Scottish reader to admire his or her own version, the jus quaesitum tertio, but lament the fact that it is so under-used.
1.6 Differences between consideration in contract and in unjust enrichment:
Failure of condition is an unjust factor, more commonly known as failure of consideration. It is not suggested that it is the only possible unjust factor that applies in anticipated contract cases. However, failure of condition can explain most (perhaps all) the decided cases in this field, and there is no objection to overlapping unjust factors. Further, it is the only unjust factor we need to explain the use of risk in cases on anticipated contracts. Two preliminary points must be made on its breadth. First, while it has been suggested that failure of condition is limited to those cases where there has at some stage been a valid contract between the parties, as Lord Goff said, the doctrine “need not be so narrowly confined”. Secondly, it was once controversial to claim failure of condition could be an unjust factor in *L.Q.R. 618 cases of restitution for the value of services. While there was undoubted historical support for this view, the contrary arguments of principle are stronger. Either way, the matter is now settled authoritatively: in Cobbe v Yeoman’s Row the House of Lords recognised a claim for a failure of condition for services rendered (extra-contractually).The seminal case on failure of condition is Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. The claimants made an advance payment of £1,000 towards the purchase of £4,800 worth of machinery from the defendants. When war broke out between England and Germany, the contract was frustrated and the claimants sought restitution of their money for a “total failure of consideration”. Their Lordships drew a clear distinction between the consideration in contract and in unjust enrichment, the conflation of which had greatly undermined the doctrine.Viscount Simon L.C. said the latter “is, generally speaking, not the promise but the performance of the promise”.
1.7 Requirement of mutual consideration for contract:
The above juridical development deprived European private law of the most obvious explanation for the nature of many transactions. It is a fact that, while we normally expect to receive something in exchange for what we give, there are also many occasions on which we undertake duties without being able to compel a counter-performance from anyone. For such transactions, the best explanation is that they constitute a unilateral promise, such a promise being a declaration by which one party commits itself to some future performance in favour of another, and to which *I.C.L.Q. 462 commitment it binds itself as a result of that declaration alone. All legal systems wish to recognize, in some types of circumstance, the efficacy of such unilateral promises, but they often do so by forcing promise to wear the borrowed clothing of contract. This not only distorts a proper understanding of contracts, but it displays a lack of honesty about why liability is being imposed, for the reality is that it is being imposed because the promisor has unilaterally bound himself by his declaration of will to undertake a specific performance. Nothing else is needed by way of explanation, and attempts to explain liability by reference to fictional acceptances of such promises, or by an assertion that it is detrimental reliance which is being protected, are an unhelpful and misleading addition. That at least is the thesis advanced here, though it is freely admitted that adoption of such a thesis would cause most European legal systems some degree of realignment, especially those with a requirement of mutual consideration for contracts.
1.8 Consideration in unilateral and bilateral contract:
In English Law, as with the firm offer example, the principal hurdle here is the doctrine of consideration. A valid option can only arise in English law if it is given for some reciprocal consideration. Nonetheless, given the willingness of the courts to find *I.C.L.Q. 467 ever more imaginary instances of consideration, a potential purchaser of land under an option might very well be seen as having provided consideration for the option by, for instance, instructing a survey to assess the suitability of the land for an intended purpose. In the absence of some type of consideration however, no matter how strained or convoluted it may be, a gratis option (such as that in the example) is clearly invalid. Where options are validly created in English law, they are conceived of a species of so-called ‘unilateral contract’, as they create binding duties on only one party. As unilateral contracts they are said to transform into bilateral or synallagmatic contracts once the option is exercised.19 So English law, in trying to describe a unilateral obligation, has to give it the clothing of contract in order for it to be accommodated within the Common Law obligational model.
1.9 Valid consideration for a renunciation of the debt:
English Law faces the problem with renunciation of rights that, since the 16th century onwards, the courts have taken the view that informal agreements to vary a contract are not valid, including variations in terms of which a creditor undertakes to renounce some or all of its rights.The position adopted was a consequence of the doctrine of consideration: some consideration requires to have been received by the party undertaking the renunciation in order to make the act valid.This view was upheld by 18th and 19th century courts, with the development that the courts were willing to treat even a slight benefit in the creditor’s favour as valid consideration. Despite this development, the courts maintained the view that the alleged ‘practical benefit’ of a creditor receiving the part performance of a debt, rather than the alternative possibility of no performance at all from a financially distressed debtor, did not count as valid consideration for a renunciation of the debt. The harsh results stemming from the requirement of mutual consideration for a valid renunciation of rights has been somewhat mitigated by the development of the doctrine of promissory estoppels, a promissory based defence which fulfils some of the functions that would be met by a properly recognized obligation of unilateral promise, but only where reliance has been placed on the promise.
1.10 Consideration about contracts at abnormal price:
The importance of planning and the relation between shifts in purchasing power and planning explain why courts should be concerned about contracts at abnormal prices. But these considerations do not apply equally to all contracts at abnormal prices. First, not all abnormal price contracts *L.Q.R. 152 upset planning. In particular, contracts where either (1) the losing party was making a gift, (2) the losing party did not care about price, or (3) the losing party was mistaken as to the nature and hence value of the good he or she was selling (for example, not realising that the painting offered was a Rembrandt) do not upset the losing party’s ability to plan. In the first and third situation the losing party’s expectations were not upset and in the second case the losing party had no expectations. Such contracts should therefore be enforced.
The harm to planning of an enforcement rule is avoided insofar as potential losing parties are able to ensure that they contract at normal price. *L.Q.R. 153 The harm to planning of a non-enforcement rule, on the other hand, is avoided insofar as potential gaining parties are able to ensure that they contract at normal price. Which parties are in the better position to protect them and to prevent harm to others? The potential gainers from abnormal price contracts are nearly always better able to avoid having their plans upset than are the potential losers. Leaving aside contracts that are invalid for independent reasons (for example, contracts made under duress) and contracts that we have already eliminated from consideration (gift contracts and so on), contracts at abnormal prices are most likely to arise in two types of situations. The first is where the reason a party agrees to pay more than the normal price is that he has made a mistake, for example not understanding the terms of the contract or being mistaken about the normal price for the good. Such mistakes can arise because of the complexity of the contract or the relevant market and/or because the mistaken party has reduced cognitive abilities. The other situation where contracts at abnormal prices are likely is where the losing party has contracted with a standard or situational monopolist. Standard and situational monopolists are in a strong position to charge more than normal prices (whether the normal price is set by the monopolist itself, as happens with standard monopolists, or set by the market, as happens with situational monopolists), should they wish to do so.
1.11 Types of Consideration
There are three types of Consideration…as follows
1. Present Consideration : Consideration which moves simultaneously with the promise is called present consideration
2. Past consideration: When the consideration of the one party was given before the date of the promise, it is said to be past \consideration.
3. Future Consideration: This consideration is also called “executor” where there is an exchange of promises to perform acts in the future, e.g. a bilateral contract for the supply of goods whereby a promises to deliver goods to B at a future date and B promises to pay on delivery. If A does not deliver them, this is a breach of contract and B can sue. If A delivers the goods his consideration then becomes executed.
1.12 A good consideration:
The rules of the necessary factors for consideration can be submitted up as follows
· There must be desire of the promisor;
· It must be real
· It should be reasonable
· It cannot be illegal immoral, or opposed to public policy
· Present , Past, and Future and
· Promisee can move from the promise or any person
1.13 Rules Governing Consideration
1.13.1 Consideration must not be Past
If one party voluntarily performs an act, and the other party then makes a promise, the consideration for the promise is said to be in the past. The rule is that past consideration is no consideration, so it is not valid and cannot be used to sue on a contract. For example, A gives B a lift home in his car. On arrival B promises to give A £5 towards the petrol. A cannot enforce this promise as his consideration, giving B a lift, is past.
1.13.2 Consideration must be sufficient but need not be Adequate
Providing consideration has some value, the courts will not investigate its adequacy. Where consideration is recognized by the law as having some value, it is described as “real” or “sufficient” consideration. The courts will not investigate contracts to see if the parties have got equal value.
1.13.3 Consideration must move from the promisee
The person who wishes to enforce the contract must show that they provided consideration; it is not enough to show that someone else provided consideration. The promisee must show that consideration “moved from” (ie, was provided by) him. The consideration does not have to move to the promisor. If there are three parties involved, problems may arise. See:
- Price v Easton (1833) 4 B & Ad 433
1.13.4. Forbearance to sue
If one person has a valid claim against another (in contract or tort) but promises to forbear from enforcing it, that will constitute valid consideration if made in return for a promise by the other to settle the claim. See:
- Alliance Bank v Broom (1864) 2 Dr & Sm 289.
1.13.5. Existing Public
If someone is under a public duty to do a particular task, then agreeing to do that task is not sufficient consideration for a contract. See:
- Collins v Godefroy (1831) 1 B & Ad 950.
If someone exceeds their public duty, then this may be valid consideration. See:
- Glassbrooke Bros v Glamorgan County Council  AC 270.
1.13.6. Existing Contractual Duty
If someone promises to do something they are already bound to do under a contract, that is not valid consideration. Contrast:
- Stilk v Myrick (1809) 2 Camp 317.
- Hartley v Ponsonby (1857) 7 E & B 872.
The principle set out in Stilk v Myrick was amended by the following case. Now, if the performance of an existing contractual duty confers a practical benefit on the other party this can constitute valid consideration.
1.13.7. Existing Contractual duty owed to a third party
If a party promises to do something for a second party, but is already bound by a contract to do this for a third party, this is good consideration. See:
- Scotson v Pegg (1861) 6 H & N 295.
1.13.8. The Consideration must not illegal, immoral, or opposed to public policy
If the consideration of the object of the agreement is illegal, the agreement cannot be enforced.
22.214.171.124. Exceptions to this Rule:
(A) Previous Request
If the promisor has previously asked the other party to provide goods or services, then a promise made after they are provided will be treated as binding. See:
- Lampleigh v Braithwait (1615) Hob 105.
(B) Business Situations
If something is done in a business context and it is clearly understood by both sides that it will be paid for, then past consideration will be valid. See:
- Re Casey’s Patents  1 Ch 104.
Note: The principles in Lampleigh v Braithwait as interpreted in Re Casey’s Patents were applied by the Privy Council in:
- Pao On v Lau Yiu Long  AC 614
(C) The bills of Exchanges Act 1882
Under s27 (1) it is provided that any antecedent debt or liability is valid consideration for a bill of exchange. For example, A mows B’s lawn and a week later B gives A a cheque for £10. A’s work is valid consideration in exchange for the cheque.
1.14: Monetary value of consideration
Generally, courts do not inquire whether the deal between two parties was monetarily fair—merely that each party passed some legal obligation or duty to the other party. The dispositive issue is presence of consideration, not adequacy of the consideration. The values between considerations passed by each party to a contract need not be comparable.
For instance, if A offers B $200 to buy B’s mansion, luxury sports car, and private jet, there is still consideration on both sides. A’s consideration is $200, and B’s consideration is the mansion, car, and jet. Courts in the United States generally leave parties to their own contracts, and do not intervene.
1.15: Option contracts and conditional consideration
Generally, conditional consideration is valid consideration.
Suppose A is a movie script writer and B runs a movie production company. A says to B, “buy my script.” Instead, B says “How about this – I will pay you $5,000 so that you do not let anyone else produce your movie until one year from now. If I do produce your movie in that year, then I will give you another $50,000, and no one else can produce it. If I do not produce your movie in that year, then you’re free to go.” If the two subsequently get into a dispute, the issue of whether a contract exists is answered. B had an option contract—he could decide to produce the script, or not. B’s consideration passed was the $5,000 down, and the possibility of $50,000. A’s consideration passed was the exclusive rights to the movie script for at least one year.
Law is most important to us. The objective of Law is order, and the result of order is that men are enabled to look ahead with some sort of security as to the future. More importantly, the objective of law is to bring order in the society with a view to enable its members to progress and develop with some sort of security regarding the future. In addition I mention this report full Law of contract but especially I have made this report about consideration which is most important element to make a contract. Without consideration cannot make a contract. Moreover, Law of Contract is to introduce certainly in commercial and other transaction. Anson observes that the law of contract is indented to ensure that what a man has been led to expect shall come to pass, and what has been promised to him shall be performed. Last but not the least, Law, Law of Contract and the part of consideration all things are most important to us. As a Citizen of a country we have right to live with peach and to use a pa proper law.
Traditionally, courts have distinguished between unilateral and bilateral contracts by determining whether one or both parties provided consideration and at what point they provided the consideration. Bilateral contracts were said to bind both parties the minute the parties exchanged promises, as each promise was deemed sufficient consideration in itself.
In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other’s performance, the performance is consideration for the promise, while the promise is consideration for the performance. Consideration must have a value that can be objectively determined. A promise, for example, to make a gift or a promise of love or affection is not enforceable because of the subjective nature of the promise.
Consideration is one of the integral parts of a contract. Without lawful consideration an agreement cannot be entered into – Critically analyze the basic legal provisions of consideration in the law of contract. So Consideration must need present into lawful contract. No consideration no contract. Consideration is an essential element for the formation of a contract. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. Last but not the least, to make a contract consideration is mandatory.