Consideration Is One Party Who Are Willing to Exchange Value for Value

The orthodox view is that, performance of an existing duty should not constitute consideration. Discuss

Learning Outcomes:

To show an understanding of what constitutes a consideration.

To be able to identify the factors affecting the court’s decision in the findings of ‘consideration’ in relation to performance of an existing duty.

Be able to give reasons for your approach.

Performance of existing duty & Consideratoin

Performance of existing duty mean the party must performance the duty that promised to exchange with something that promised by another party; but not all the performance of existing duty can constitute consideration. If the performance is a public duty, the performance cannot constitute consideration. Contrast, if the performance is does more than the duty the consideration cannot be reward.

Consideration is one party who willing to exchange something value for value, it must moving from promisee to promisor. According to Sir Frederick Pollock, consideration is “an act of forbearance of one party or the promise there of is the price for the promise of the other is bought and the promise thus given for value is enforceable.” There are two types of consideration: executor consideration which means the party already promises but one of the parties not yet performed and executed consideration mean once the party had promised the party will performed until the end at the time.

Social/ Domestic agreement

According to the orthodox vies that, performance of an existing duty should not constitute consideration, but it is base on certain circumstances such as social/domestic agreement and commercial/public agreement. There are some cases in social/domestic agreement shown that some performance of an existing duty does not constitute consideration but some in some situation it constitutes consideration.

In the case of Balfour v Balfour 1919 show that performance of existing duty should not constitute consideration in social situation. In this case, the husband had orally promises the wife to pay her $30 a month while he returned to Ceylon but both of them divorced and the husband did not pay the allowance for his wife. The court says that “…the husband needs not to pay the wife because when the husband promise to give the wife allowance is before divorced therefore it was a social agreement which is not a legal contract.”

In the other way, the case of Merritt v Merritt 1970 shown that performance of existing duty can constitute consideration. the husband left his wife for another woman therefore after that they discuss about the future arrangement of the house. The husband promises the wife to give her wife monthly allowance to help her to pay the loan of the house and after paying he will transfer the house to her. The wife written down what her husband promise and let him sign, but after the loan is finish paying the husband refuse to transfer the house to her. In this case the court says that “…the wife got the house because the arrangement was legal binding contract.” The husband are trying to use social situation to say that the agreement should not be biding but the court say that “… when both parties are separated or about to separate there are not social situation.”

Using the case of Balfour v. Balfour compare with Merritt v. Merritt, in Balfour case there are no new consideration is because husband give the promise to his wife is before they divorce which is in the social situation but after that the husband and wife already divorced therefore the husband need not to performance the promise; but in the case of Merritt the husband and wife is about to separate therefore there are not a social agreement and the husband had sign the written agreement that promise to transfer the house to the wife if the wife had performed the term which is paid off the loan.

Commercial/Public agreement

Not all the commercial agreement states that performing an existing duty should constitute consideration there are some circumstances that cause the performance of an existing duty cannot constitute consideration.

This can be seen in the case of Collins v Godefroy 1831 show that the performance of existing duty should not constitute consideration. In this case the court says that “…the plaintiff have an existing duty to attended court but not pay to attend the court therefore it is not consideration that the defendant need not to enforce the promise.”

Besides that, in the case of Stilik v Myrick 1809 also states that performance of existing duty should not constitute consideration. In this case, the captain promises the crew to give extra wages for the crew which less two members to worked the ship home. But the court make decision that “…the promise of extra wages was not enforceable because the crew did not do more than their existing duty therefore there are no any consideration for the new promise therefore the crew could not get the extra wages.” The reason of the court making this decision is because the number of the crew is only less two people who not bring big effect and it circumstances of the working environment did not have big changes.

In the case of Glassbrook v Glamorgan CC 1925, the defendant require the police to provide extra protection, but the local inspector said that: “the existing mobile force was sufficient” but he still agreed to provide 70 men with exchange for the pay of the services, but the defendant did not pay for what he promise and counterclaimed for the cost of feeding and housing the police. Firstly, the courts say that “…the police have existing duty to so, therefore the defendant does not need to pay for the extra.” Finally the defendant need to pay the amount that promise because the court say that “…the police had done a special service that more than their existing duties which they need not to do so if does not have any payment.” In this case, the court make such decision is because the existing duty of the police does not need to give extra protection which is not under their original contract. They do so is because of the defendant require for it and promise to pay more, therefore the court decide that the defendant must follow what are promised.

There is another case which is Hartley v Ponsonby 1857 show that performance of existing duty should constitute consideration, because a ship which need 36 crew to worked but the number of crew reduce to 19, therefore the 19 crew are promised to pay extra if they ship back to England. The court says that “…the defendant must pay the extra wage because the crew was reduced and the circumstance is changes to become more dangerous while doing the duty. Therefore, the captain has no right to demand for it with no extra payment so that the original contract is ended and new consideration comes in and the term of the new contract that agreed.” In this case, the court make this decision because the circumstances of the working environment had change and the worker need to do more than their existing duty which is ratio of 2:1 therefore the court say that the performance of an existing duty should constitute consideration.

In the case of Collins v Godefroy 1831 and Stilik v Myrick 1809 show that the performance of an existing duty should not constitute consideration but in the case of Glassbrook v Glamorgan CC 1925 and Hartley v Ponsonby 1857. It is because in Collins v. Godefroy and Stilik v Myrick the court say the party have the existing duty to performance it therefore there are no any new consideration in this two case. For example in Collins v Godefroy 1831 the plaintiff going to the court is a public duty which not consideration. In order way, cases of Glassbrook v Glamorgan CC 1925 and Hartley v Ponsonby 1857 shown that the performance of existing duty constitute consideration, it is because they performance the duty that need them to put more effort. For example in Hartley v Ponsonby the number of the crew less almost half therefore the crew need to do more than their own effort to complete the duty therefore the performance are constitute consideration.

Conclusion

In my opinion, I think that performance of exiting duty should constitute consideration because if a party put more effort to do something that require by another party who promise to pay reward, he/she must get what suppose to get or the promises by the party. If the party does not did what he/she promise than is unfair for the party who done the performance, but sometime will also depend on the circumstances. For example, in Stilik v Myrick 1809 there are less only 2 person of crew which not affect much on the environment and performance compare with Hartley v Ponsonby 1857 which less 19 of crew member which will bring a big effect on the working environment and the performance. Therefore, in Stilik v Myrick 1809 the performance of an existing duty did not constitute consideration but in Hartley v Ponsonby 1857 the performance are constitute consideration.

What are the general principles in the formation of a contract?

What are the various forms of remedies available for a breach of contract? Give examples with cases.

Define contract

In business world, contract is very important in every transaction, it is because in business world every promise is consist of a lot of money therefore in business every promise need contract to protect both parties. According to Paul Richards in the law of contract: “An expression of a willingness to contract on certain terms made with the intention that a binding agreement will exist once the offer is accepted.”

General Principles in Formation of a Contract

To make the contract legally be bidding need consider many things in order to make sure the contract will not be void which is offer, intention to create legal relations, consideration and acceptance.

Offer means one party willing enter to a contract with term and the offer must be communicated, if there are no any communications there will be no offer. An offer can condition by written, express or by conduct. If the offer is written or orally it is an express offer and if the offer is made by conduct is an implied offer. There are two type of offer can be made, which is bilateral offer mean when the offeror (person who give the offer) know who is the offeree (person who accept the offer) is and both of them promise to do something in return of doing something. The second type of offer is unilateral offer; it is when the offeror des not know who the offeree is, the offeror one side promise to enter to a contract for someone performing an act. In the case of Carlill v. Carbolic Smoke Ball Co. show that the company is unilateral offer that published newspaper advertisement to promise to pay for anyone who still contracted flu after using their smoke balls with the correct ways. In this case, the company had made a unilateral offer to all the people who saw the advertisement, Carlill is the offeree who accept and willing to go into the contract with Carbolic Smoke Ball Co because she performed what Carobolic smoke ball Co require.

Besides that, offer may also be an invitation to treat which mean the party invites another party to go into the treat. Generally, advertisement, distribution of catalogues is an invitation to treat but not offer it is because the companies use advertisement to invite the consumer to treat with them. Example case is Partridge v Crittenden 1968; the company placed an advertisement on magazine to tell the promotion price of the bramble finch cock and hens but after awhile his change the offer to wild bird. The court says that “… advertisement is an invitation to treat but not offer therefore the party can change the product while the stock is finish.”

In order to make sure the contract is legally binding need intention to create legal relation(ITCLR. Intention to create legal relation means both parties are willing to legally binding with an agreement. Some agreement which involve social and domestic situation which mean the agreement are made every day in the social and family life will not have intention to create legal relations because one of the parties may not take the agreement seriously because there have social relationship. In the case of Balfour v Balfour there are no ITCLR between the wife and husband because both of them is in social situation while the husband made the promise therefore the judgment is given to the husband.

Contracts also need the support of consideration, if not the contract will not legally binding. Considerations mean one party are willing to exchange something value or given a price to another party to exchange with something same value. Besides that, a consideration not only can exchange by a product and money, it also can exchange by performance which mean when the party did something that the offeror require and the performance will exchange with something that promise by both parties. The consideration must move from offeree to offeror. Consideration may be executory which mean the contract is already binding but the party will not performed immediately but it is agreed by both parties or executed which mean the contract must be immediately performed until the end. Example case of consideration is Thomas v Thomas 1842, in this case the testator expressed the wish before he dead, he allow his wife to have the house with payment of $1 per year as long as she did not remarry but the executor does not allow the wife to have the house because the executor say there are no contract. In this case the court say that “… there is an enforceable contract because $1 per year was a valuable consideration that enough to binding a contract.”

Acceptance is the final stage of a contract; it means there are someone who accepts the offer with specific term and condition and it must be communicated with the offeror in three way which is orally, written or conduct. Sometime there is an exception, this exception only appear in the unilateral offer which show in the case of Carlill v. Carbolic Smoke Ball Co. that does not have any communication between offeror and offeree but the offeree who is Carlill had performed what the offeror said therefore in this case there is still a biding of contract. Acceptance can communicate in 3 ways through face to face, letter or telegram. When the communication is through letter, it only can complete when the letter is posted and when the communication is through telegram, it can be communication complete when a person authorized to receive to transmission to the addressee. In the case of Adams v Lindsell 1880, the letter of acceptance was delay arrived because of the wrong address and the defendant sell the wool to other therefore the plaintiff sued for breach of contract. In this case the court says: “…the contract is occurred when letter had been post, which mean that once the plaintiff had post the letter the contract is complete no matter the plaintiff receive it or not.”

Remedies Available for Breach of Contract

Breach of contract mean one of the parties does not perform according to the term and condition of the contract. Therefore, if one of the parties did not perform according to the contract, another party can claim for the remedies of breach of contract. The most common remedies are award of damages, it means the party that injured will go into the court to and sue for damages. The court will consider how much that the injured party loss and how serious is effect of breach of contract to the party. Example case of award of damages is Victoria Laundry (WINSOR) LTD v Newman Industries LTD 1949. In this case the defendant agreed to sell and deliver a boiler to the plaintiffs which the plaintiff is need immediately, but the defendant fail to deliver because the boiler was damages while delivery. Therefore, the plaintiff sued for damages for loss of profits. The court say: “…the defendant have to pay for the amount of the damage of loss of customer, but not for the loss of special dyeing contract for the ministry of supply because the defendant does not know that if deliver on time the plaintiff will have special opportunities of profit.”

Besides that, suit for specific performance mean the court will directly called the party who breach the contract to performance the act that decide by the court or continue the original contract act. Example cases is Sky Petroleum v. VIP petroleum 1974, in this case the defendant have a long term contract with the plaintiff, but the plaintiff demanded for too much fuel therefore the defendant stop supply the fuel except the plaintiff can give a unreasonable high price. The court say: “…if the plaintiff does not have the supply of fuel from defendant the business will close down and the fuel are not easily to find in other place, therefore the a specific performance is provided to avoid unique of the product.”

Injunction is one of the remedies of breach of contract which totally different with specific performance. Injunction mean to stop someone to do something, this will use when the action will bring negative impact contrary if the action bring positive impact injunction are not allow. For example, in the case of Whitewood Chemical Co v Hardman 1891 the defendant contracted with the plaintiff to work at his company for year and promise to give all his to the company, but the defendant had connecting himself with the competitor. The court says that: “the defendant has no right to do such thing that will bring negative impact to the company with the written contract and promises of giving all his time to company.” Therefore the court makes an ordered to stop the defendant to continue connecting with competitor of the company.

The last remedy is quantum meruit that consists of payment for the work done of the plaintiff and it is because the plaintiff believes that the contract is exist. In Planche v Colburn 1824-34 the plaintiff who is an author are planning to write a treatise for $100 and he already wrote part of it and ready to complete it but the defendant would not publish. Finally, the plaintiff gets the award of $60. The court say: “Although there are no any work are been published but the plaintiff have done half of his jobs and it may cause a loss of reputation if the treatise published in other way.”

Conclusion

In the conclusion, the contract will only be legally binding when the offer, intention to create legal relation, consideration and acceptance is available. If without anyone, the contract cannot be legally binding and will be void. Sometime although element of formation a contract is fulfill but the contract may breach because of certain reason. Once the contract breached there are few remedies which is award for damages, suit for specific performance, injunction and quantum meruit which used in different circumstances.