Consideration Under English Contract Act - Assignment Example

? Advising Simon about the Consideration under English Contract Act. “What the law is” A valid contract must be a two way-street. If one party receives all the advantages and if the other party gets nothing, then it can be said that there is lack of consideration in the agreement and hence, it is not an enforceable contract. To form a valid consideration, the contract should contain the following essential ingredients. From the contract, both parties should be able to receive measurable value. Thus, the subject can be of anything like money, an agreement not to compete in the business or anything else which has a real value. A promise to offer something of value shall be regarded as consideration. A promise to repair a house next month is the analogues of carrying out the yard work in reality when assessing whether consideration is there or not. There should be a deal between two parties if one promises to do something if the other carryout some obligation. Consideration should not be relates to earlier period. It should have moved from the side of the promisee. Consideration should be satisfactory. It must not refer something the promise which is already required to be carried out. It must be within the purview of law. (Beatty et al 2007:276). According to Sir Frederick Pollock, consideration can be defined as “an act or restraint of one party usually known as promisee or the promise thereof is the cost for which the promise of the other is purchased (the promisor) and the promise thus offered is enforceable.” The same view was also adopted by Lord Dunedin in “Dunlop v. Selfridge.” (Andrews 2011:125). “What the law means?” In English law, when one party wants to make a promise without any compensation or consideration through an agreement which requires another party to pay or do something, is known as naked agreement or a nude pact or nudum pactum. Thus, a nudum pactum agreement entered without any seal is void in law, and a party cannot be coerced to perform upon it as per the maxim “Ex nudo pacto non oritur actio.” (Brown 2006:374). Gratuitous promises are unenforceable unless made in a written deed format which means a promise which is in writing, duly signed, had witnesses and duly delivered. In this case , a nationwide charity asks Simon if any of the artists signed to his record label would be prepared to perform free of charge at an open-air concert to celebrate the closing of the Olympic Games. Hence, the charity wants Simon to provide service of his record label free of charge which is known as Gratuitous promise, which is unenforceable in English law. In this case, the charity should have compelled Simon to sign an agreement to provide service free of charge, and any oral promise by Simon will be regarded as a gratuitous promise which is said to lack “consideration.” Thus, even if Simon has made a moral or casual commitment, it will be regarded as nudum pactum, which is having no legal impact under English law. On the other hand, if there is a contract between Simon and the Charity, which is duly corroborated by consideration, then Simon has the obligation to fulfil his promise. Why/how the law is relevant to Simon using cases (with full citation) to illustrate and support points made where appropriate? A promise which is given after the performance of an act is not enforceable under the English Contract Act. This is known as past consideration and has been acknowledged as not a good consideration. The main objective for this is that the performance or act in question is not part of any exchange or bargain, and it is rather gratuitous. Hence, any promise made subsequently will not form part of any contractual bargain and not enforceable. Those supposed agreements, which are without any consideration like one-sided undertakings, which may be binding a party morally but not enforceable under the contract law. In the eighteenth century, an effort was attempted by the courts in UK to define consideration so as to include some pre-existing moral commitments. In specific cases, it was viewed that the consideration for a promise by a discharged bankrupt to pay a debt which was taken before the discharge or to pay a time-barred debt was held to be binding under ‘moral’ duty of the defendant to clear the debts. The verdict in “Eastwood v. Kenyon “ is thought provoking as it spotlights nervousness between moral commitments and considerations. For instant, in this case, a husband held to be not legally fulfilling his promise, though he had moral obligation to do the same as, there was an absence of consideration. This decision rejected the concept forwarded by Lord Mansfield in Pillans v. Van Mierop that consideration is intimately associated with moral obligations and in specific, that pre-existing moral commitments offer consideration for one’s successive promise to pay – a principle that basically dishes out consideration as a distinctive agreement. The decision by Dehham CJ in “Eastwood v.Kenyon “stressed that if a party is under moral obligation to pay, then it extinguishes the need for any consideration at all as the just fact that extending a promise ushers a moral commitment to perform it. (Gordley 2001:101). Thus, applying the principle that there is no such a thing as free lunch, Charity cannot ask the Simon to perform free of charge as there is no consideration between Simon and the Charity. However, if Simon has accepted that his team would perform free of charge at the closing event of Olympic games as the event will attract global viewing figures in writing even without consideration, then, though he can be held liable on moral grounds but cannot be held liable under the English contract act as there is no consideration as held by Dehham CJ in “Eastwood v.Kenyon.” If we analyse the saying that as you never get anything for nothing, under English Contract Act, there is a need that consideration must be sufficient and need not be adequate. In “Thomas v Thomas [1842] 2 QB 85 “, it was held that ? 1 of annual rent collected from a widow was considered to be an adequate consideration for an agreement to reside in a house with a promise to keep the house in good condition. Likewise , if the Charity and Simon had a written contract , and if the Charity has agreed to pay ? 1000 as consideration to Simon for the participation of his team in the closing events and if Simon agreed to it as it would fetch great popularity to his team ,there it can be said there is a valid contract. If Simon fails from his promise, the Charity has every right to sue the Simon for damages. However, in this case, there is no such consideration and there is no valid contract, and the Charity and Simon have no remedies against each other. (Stone 2011:91). When parties to a domestic or social agreement do not really intent to be legally binding, there cannot be an existence of valid contract between the parties due to the absence of consideration. The English courts are under general impression that friends and family do not normally desire to have agreements, which are legally binding, unless there is an obvious proof of a business transaction. For example, in “Balfour v. Balfour [1919] 2 KB 571”, a husband who was employed at Ceylon had promised to his wife that he would pay ? 30 per month as maintenance allowance to his wife in London. The court was of the view that there existed no legal accountability between them since it was an oral promise and there was no consideration. However, if a husband consented in writing to convey his matrimonial residence to his wife on the precondition that if the wife paid the balance instalments of the mortgage and the wife paid all the installement and the husband refused to convey the house to her, as promised, and it was held that it was a breach of contractual obligation in “”Merrit v. Merrit [1970] 2 All ER 760.” Since, both Simon and Charity are having a domestic or a social agreement for a record label which do not really intent to be legally binding between them for want of consideration. Thus, applying the principle that there is no such a thing as free lunch, the English courts would not consider either an oral or implied contract between Simon and Charity for providing a free record label applying the principles held in “Balfour v. Balfour [1919]” as it will treat the same as an arrangement between friends. However, if the arrangement is in writing and the Charity paid some advance amount say ? 1000 to Simon, then he will be under obligation to conduct the show else it would be regarded as an infringement of contractual provision. List of References Andrews, N. (2011) Contract Law. Cambridge: Cambridge University Press Beatty, JF, Samuelson, SS & Bredeson, DA. (2010) Business Law and the Legal Environment: Standard Edition. London: Cengage Learning Brown, A. (2006) A New Law Dictionary and Institute of the Whole Law. New Delhi: The Law Book Exchange Ltd Gordley, J. (2001) The Enforceability of Promises in European Contract Law. Cambridge: Cambridge University Press Koffman, L & Macdonald, E. (2007).The Law of the Contract. Oxford: Oxford University Press Stone, R. (2011) The Modern Law of Contract. London: Taylor & Francis Read More