Consideration Is an Act That Was Involved in the Formation of a Contract

A contract is forming by a few needed elements as is an offer, intension to create a legal relation, acceptance and consideration. Offer is the first segment of a contract and it will be involved at least 2 parties which is the offeror and the offeree, it is a must for both parties to have the intension to create a legal relation within it then only it can move up to another stage which is consideration before a contract being bind. Consideration must be provided by the offeree and it is need not to move to the offeror and once the acknowledgement from the offeree based on the consideration is done, the next stage will be taken place by the last element – acceptance. This is the overview of the entire formation of a contract and consideration is the part that will be more emphasizing on this discussion.

Constitution Of Consideration

Consideration will happen when a party (offeree) is thinking of whether want or don’t want to accept the offer that provided by the other party (offeror) and it may consists by the implied or the express terms (terms and condition) and the consideration must be valuable enough to make a fair exchange ( money with the goods and services). Consideration will constitute when the binding of a contract, agreement, buying and dealing. For example Watson pharmacy, it state a price label of RM10.90 of a Colgate toothpaste and the situation now is Watson having the invitation to treat to the customers, and those customers will having consideration on the toothpaste whether it worth or not before they offer RM10.90 to Watson for an exchange with Colgate toothpaste.

Performance of an existing duty was defined as a job or task that should be able to complete within his or her capability or responsibility but it have some cases show that performance of an existing duty has involved into consideration and on the other hand, it was not and even the orthodox view was also state that performance of an existing duty should not constitute consideration but in the real life cases, it was accidently supporting both sides.

Performing an existing duty will be involved in 2 sectors which is a domestic or commercial circumstance since either as private or public it may also consist of the existing duty based on the agreed terms and condition in a contract.

In the case of Thomas v Thomas (1842) 114 ER 330, QB, J had offer his widow P a cottage in return of a payment cost £1 a year towards on it ground rent and after the consideration has been made by the widow P, the acceptance of this offer was there and the existing duty of the P (offeree) is to make the payment of £1 every year. This case show that a performing of an existing duty was constitutes consideration. On the other hand, the case Balfour v Balfour (1919) 2 KB 571, CA, a wife P sought to enforce D’s promise as state P to be given £30 per month by D on the period while working outstation but the court said that there was no contract at all, both of them having their own capability to stay alive and those £30 was not a big effect on it, between, both of them are performing their existing duty as their character, so this case state a performing of an existing duty is not constitute consideration.

The case of Collins v Godefroy (1831) 1 B & Ad 950; 109 ER 1040 is belongs to commercial sector; in this case, D subpoenaed the P to give out evidence on behalf of him in litigation and agreed to make a paid on it but at the end D refused to do so and the court said that there was no consideration on those circumstance because P is just only performing his existing duty to give out evidence as a witness and those was required by the court will not constitute consideration.

In the case of Ward v Byham (1956) 2 All ER 318, CA, the father D offered to pay £1 a week for the mother P to look after the child in sense of provided happiness after they separate with the unmarried status. D was stopped paying after some period and P wish to claim for it by the legal law and she success to do so because even though she is performing her existing duty as a mother to take care of the child but she was no any legal relationship with the child’s father D, by the time the father D offered to pay £1 per week and it was become the existing duty of father D to do so. Performing an existing duty constitute consideration was also appears in this case as the real life example.

An orthodox view that the consideration should not constitute by the performing of an existing duty and actually in the real life, it was not provided any fixed answer on it with supporting by the cases.

For more clarification, it provides a focus discussion on the relationship between performance of an existing duty and consideration as below to show that how the factors affect the court finding that consideration related to the performing of an existing duty.

Consideration Vs Performance An Existing Duty

Stilk v Myrick (1809) 170 ER 1168, KB

Based on the orthodox viewing, performance an existing duty should not be constitute consideration as the case of Stilk v Myrick (1809) 170 ER 1168, KB, there was 11 sailors in a ship and accidently get 2 disappearance and the captain promised to give out extra ‘bonus’ for the balance 9 sailors in return of they can sailed the ship back but eventually the captain refused to pay for the ‘bonus’ and those sailors was try to sued the captain for breach the contract and they failed to do so. As the info from the court, the balances of the 9 sailors have to take place the workload of those 2 disappear sailors is based on their own responsibility and capability to do so and not play role of the offer that given by the captain when the problem occur because it just only a minority of the sailors disappears and it won’t cause affection for the rest of the sailors and the responsibility of a sailor is to meet such as an emergencies of the voyage and those promising to sailed back is not a valid consideration. This case is more on the orthodox’s view side because it state that performing of an existing duty should not be constitute consideration and it was matched with the case of Stilk v Myrick (1809) 170 ER 1168, KB. If a student is giving offer by his or her parents to get a good result in return of money rewards, for sure it won’t be able to obtain as a binding contract and it will also useless by the time the parents breach the contract because the task and responsibility of a student is to study hard and well, so get a good result is still under the responsibility and capability of a student.

Williams v Roffey (1990) 1 All ER 512, CA

In the other hand, performance of an existing duty also defined with the relationship of consideration by court. In the case of Williams v Roffey (1990) 1 All ER 512, CA, both of them have cooperation in a contract work of a flat and accidently Williams had underestimated the cost of the work and finally he faces with the financial difficulties and Roffey offer Williams extra payment for every flat in term of Williams can complete the work by agree date since penalty clause will be applicable if the work cannot be complete by the expected date but Williams had complete more flat and still can’t get the full payment and finally Williams refuse to do so and it brought an action of damages and Roffey was argued that Williams was only doing what he was contractually bound to do and so had no provided consideration but those offer from Roffey was consider as an extra bonus for the binding contract since he agreeing to pay extra to Williams in term of he can finish up his work by time and finally Roffey refuse to do so and he was breach the contract even thought Williams is still performing of an existing duty. Court will related both consideration and performing of an existing duty is because it be given an additional terms while performing an act, the offeree might have to reconsider the whole contract and get the outcome whether accept or reject, so additional terms of a contract was the main factor that affecting the court’s decision. As per logic, if failure was given by a task, it might cause a party (offeree) to exit it but if the other party (offeror) provide a solution for it with some additional terms (money), then the party (offeree) may have to reconsider the whole contract and analysis whether will it still work for him or her or not, in this situation, even thought the task may have no changes at all (performing of an existing duty) but it still under the categories of consideration with the additional terms and condition for the contract.

Overall conclusion, performing of an existing duty should not constitute consideration with the normal acting as well, means that there are not any additional terms and condition to be given by the period of performing as the illustration by the cases above because performing an existing duty is a performing that within own capability and responsibility, so it need not be consider to do and it is a must to do.

The General Principles in the Formation of a Contract

Consideration

Intention to create legal relationship

Offer and acceptance are the two important terms to form an agreement and contract. An agreement or a contract can be defined as a legal binding within the offeror ( people who make the offer ) to the offeree ( people who accept the offer ). That is the legal promise or transaction makes between both parties when the promisor offers something to the promisee and the promisee accept the offer.

Offer

Offer is to express the desire into an agreement or contract to another party. It can be made through the bilateral offer and unilateral offer. Bilateral offer is made through the offeror and with another party and the unilateral offer is made through the offeror to a group of people who willing to accept the offer and without any specific offeree. Bilateral offer can be explain like person A offers to person B buy him a pen for RM 5. The transaction just involved in two parties, the offeror offered the deal to the only offeree and the offeree accepted the deal. On the other side, unilateral offer can be explain like person A offer to a group of peoples who can sell to him RM 5 for a pen and the first person B who deal with him and the person B will become an offeror and the person A will become an offeree to accept the deal from the person B. This become again the bilateral contract and this also known as counter offer. In the case of Carlill v Carbolic Smoke Ball Co.(1893) 1 QB 256, the rewarded had been bank in and the offered was promise on one sided and to reward to the person who performed.

The different of the offer and invitation to treat must be defined it clearly. An invitation to treat is an action that inviting other parties to make an offer to form a contract. Like the goods selling in the shop, the prices tag on the goods that display on the shop is an invitation to treat. If someone comes and buy it, that person will be the offeror and the cashier will be an offeree in the situation of consideration. In the case of Fisher v Bell (1960) 2 ALL ER 731 DC, the defendant was guilty because that was an invitation to treat. The shopkeeper can reject to sell the knife to the customer whom not qualified in the terms and conditions. It must be depends on the circumstances and questions when the invitation to treat is form.

Intention to Create Legal Relationship

Any binding of the contract or agreement was strongly enforce that is a must to be not involved any forces but is a willingness between both parties (offeror and offeree) to create a legal relationship on it. In the case of Balfour v Balfour (1919) 2 KB 571 CA, this a case related to a couple which is a husband and a wife. Husband D was promise his wife P to pay her £30 a month in return of his wife P will not calling him for any other extra maintenance until he is back from Celyon with his work and subsequently they divorced. The wife P try to breach the contract and enforce D’s promise for the ‘extra’ payment. But Court of Appeal said that although the consideration are from the promisee’s side but there was no contract at all since the promisor (husband D) was have no intension to create a legal relationship with his wife P offer.

Acceptance

Before a contract being bind, a party (offeror) must accept the offer or promise based on his or her own willingness in exchange of the other goods or services being provided by the other party (offeree). All the acceptance must be pass through by either written or verbally and it cannot be revoked but the offer can revoked as long as it is not being given any acceptance from the party (offeree). In the case of Adams v Lindsell (1818) 106 ER 250 Lord Ellenborough, the court said that the plaintiff was entitled to the damages because the defendant was sold the wool somewhere else and not referring to the acceptance from the plaintiff. This transaction was being made through with the postal rules and since the offer letter was delayed in post, so automatically the acceptance from the offeree will late be informed but the acceptance was complete when the offeree reply the letter although it was haven reach to the hand of the offeror even its late.

Consideration

Consideration is the process that playing a role of evaluation for a transaction within a contract in exchange with it goods and services. It is a must for every contract to have a consideration before the contract being accept and binding and consideration must be provided by the party who being offer (offeree) and those consideration must be sufficient but need not to be adequate. In the case of Thomas v Thomas (1842) 114 ER 330, QB, P instructed his executors to convey his widow a cottage in return of the payment £1 a year for the ground rent and this offer have been made before his death. Finally the court said that this was an enforceable contract since the £1 a year for the ground rent was a valuable consideration and this was enough to complete the contract.

Breach of Contract

Every contract will involve it terms and condition or even some agreement on it within the 2 parties (offeror and offeree). It is a must for both parties to accomplish the terms and condition that had been make to bind a contract and if any failure accomplishment has founded, it will be automatically consider as a breach of contract and those ‘problem’ contract such as rescission, damages, specific performance, injunction and restitution will have it own remedies to act as the solution of those breach of contract.

Rescission

Rescission is a contract that entitles a person to set aside a contract and effected by the misrepresentation, coercion, or undue influence. Compensation can be request if any failure performance or any wrong information given found due to the causes as stated. In the case of Redgrave v Hurd (1881) LR 20 ChD 1, CA, a solicitor P advertised for partner and eventually D agreed to join the firm at more attracted by the exaggerated account of the firm’s profitability and D retracted once the true position had been discover and finally P make a sued on it based on the specific performance and D was defended and counterclaimed for the rescission and damages. The court was refused the damages but entitled D to rescission the contract because of the misrepresentation of P.

Damages

Damages happen when either 1 party breach the contract to the other party and compensation can be claim by the suffer party from the other party by legally based on the section 74 of the contract act 1950, when a contract has been broke by a party and the suffer party is entitle to receive the compensation from the party who breach the contract for the coverage of the losses caused. In the case of C & P Haulage v Mddleton (1983) 3 All ER 94, CA, P hired a garage for six months and equipped it to fulfil his particular needs and eventually D terminated the contract ten weeks early and P sued for the expenses of equipping the garage but it failed to do so because the court said that the early termination contract by D was merely cause the loss and not incurred the expenses of equipping.

Specific Performance

Specific performance will be take place if the loss causes are negligible and not able to be considering as a damages, in this case, plaintiff can granted or direct the defended to continue accomplish and perform a part of the contract as stated. In the case of Beswick v Beswick (1967) 2 All ER 1197 HL, the court finding that the nephew must be performed based on the contract’s terms and condition as stated to pay the annuity although Mrs Beswick are no the privity to the contract but she sued as a executrix of her husband’s estate and directed the specific performance to the defended.

Injunction

Injunction in an order that required by the court on someone or something based on the act of the complaint to protect a plaintiff being face to any damages.

Restitution

Compensation can be made not only based on the breach of contract but it also can be follow by the failure performance compare with the expected performance that being made in a contract. Compensation being made is to cover the losses that suffer by either 1 party to being stand for the unexpected outcome by someone or something.