Consideration Need Not be Adequate Realistic.

Question: What the term sufficient means in this context and whether the statement is accurate in regards to Australian contract law? Answer: Role of consideration Consideration plays an important role in the formation of a contract. It is one of the most important elements without which the contract does not come into existence. The reason for entering into the contract or being party to it is answered the consideration. If an agreement is deemed to be legally binding then it has to have consideration[1]. Consideration should be something that is of value that is promised to some other person. This refers to as the legal value which is established in connection to the contract[2]. An agreement that is made without including any consideration would be void, however it would not be void when it will be expressed in writing and also it would be registered. This should be registered under the law for the time being in force. In the case, Dunlop Pneumatic Tyre Co Ltd v Selfridge Co Ltd,[3] an act or any forbearance which is undertaken by one party is regarded as the price for the promise that is given by the other party. Thus the promise that has been made would be enforceable[4]. Consideration refers to the stipulation of some price. This price refers to something that has a monetary value. It might be monetary or it might not be holding any monetary value. It is a kind of detriment on behalf of the one who binds himself into the promise[5]. This detriment take the form of waiving off of freedom which that person otherwise would have enjoyed, had he not entered into a promise. In the case, Carlill v. Carbolic Smoke Ball Company[6], the court mentioned that it was sufficient that Carlill suffered some sort of detriment due to the use of that smoke ball as it was mentioned; this could happen even if no benefit was received by the company. Consideration can be said to be anything that can be stipulated according to the will of the promisor. It is the promisor who stipulates the consideration for the promise. This is done by him either directly or indirectly. It is not for the promisee to stipulate the same or proffer something as consideration. Chapel vs. nestle is one of the most important cases that state about the nature of consideration. In this case, a peppercorn was constituted to be a consideration. Therefore, nothing of monetary value was used in this case as consideration[7]. In yet another case, Dunton vs. Dunton,[8] it was held that even if a person waives off his freedom, this would be termed as consideration for the other party. Also in some of the cases it was held that if a person gives up a legal right, this could also be taken as consideration and thus the contract would be valid. Consideration need not be adequate. Inadequate consideration is not an invalid consideration. It can be held as a good consideration. The consideration ought to have values in the eyes of law therefore; an illusionary consideration cannot be taken into consideration[9]. The past consideration cannot be held to be a good consideration. The consideration has to come into existence in lieu with the promise. When the consideration is mentioned and it predates the formation of a promise then this cannot be held to be a good consideration. This was upheld in the case, Roscola vs.Thomas[10], wherein consideration as regards to the soundness of a horse was given before any promi ses were made between the two parties[11]. However, there are several instances wherein the consideration is held in the past, and then this would be considered as a good consideration. These instances refer to the fact when it is provided at the request made by the promisor himself. Another instance could be when both the parties knew that the act would be anyway remunerated. If the promise occurred before any promise was made. If the promise occurred prior to the deed that took place then also the consideration paid would be enforceable. In the case Pao On v. Lau Yiu Long[12], these exceptions to the past consideration were upheld. Sufficiency of consideration refers the fact that it is something which holds some value. It does not have to be proportionate to the promise. It is because; the court would not be able to ascertain the value that is placed on each and every promise. This notion of sufficiency provides that economic freedom to the parties in the contract. If it is required that the consideration would be adequate then this would create difficulties between the parties and also would give rise to uncertainty in the enforceability of the contract. Sufficiency of consideration promotes economic efficiency between the parties as voluntary exchanges can then be made. Nominal consideration is also legal[13]. Therefore, for example if a house is sold by a seller for $1 only then also this would be considered valid. In the case, William vs. Roffey Bros Nicholls Ltd.[14], the English Court of Appeal upheld the validity of the consideration even if it was inadequate. It was held by the court that Roffey Bros paid Williams as they derived a benefit practically, and this was held to be a sufficient consideration. An exception to the general rule of past consideration arose in this case. It was held that practical benefit was given to the person on the fulfillment of some obligation under the contract[15]. It was held that there was sufficiency of consideration in this case. The members of the court had tried to generate the practical benefit principle[16]. This rule states to emphasize on the fact that if any actual performance takes place in lieu of the legal duty that is in existence[17], this would be taken as sufficient consideration. If there is a mere gratuitous promise that is made to the other party, then this would be invalid for the want of consideration. In the case, Stilk vs.Myrick[18] case, the Lord said that if there was a promise to perform a duty and the person was already bound to do the same under the contractual duty then this could not held to be a good consideration. This principle was referred to as the existing legal duty rule. It was held by the Lord that agreements that were made to give effect to the modifications that were one sided then these would be invalid as there was no proper consideration in it. In yet another case, Hawkers vs. Saunders,[19] it was held that when a man is under a moral duty or an obligation wherein no Court of Equity or law could enforce the same, and then these ties of conscience are held to be as the consideration that was sufficient. It was upheld in this case that whenever a person is the defendant and is under a duty to pay as per the principles of equity and conscience then this would be counted as the sufficient consideration. In another case, Coggs vs. Bernard[20], the definition of sufficient consideration was highlighted. In this case, the defendant made a promise to transport safely the casks of the brandy of the plaintiff. While transportation, one of the casks broke and large number of gallons of brandy got lost. It was held by the court that this was the detriment that was suffered by plaintiff and this was in consequence to the promise given by defendant. Hence, it was upheld that this was a sufficient consideration for rendering the support to the contract. Justice Gould said that if an undertaking is given by a man to hold the goods of other people safely and if he does not take utmost care of the same then this would be entitled to be held as a sufficient consideration. This kind of trust paced upon the defendant would be a sufficient consideration to the contract. In the case, Thomas vs. Thomas[21], it was held that motive cannot be taken to be as a sufficient consideration. As consideration is something that holds value, motive could not be said to have any value in the eyes of law and could not be calculated. In this case, a house had been promised to a widow and she promised in return to pay around 1 pound per annum as the rent and she stated that she would maintain the property in a good condition and make repairs if needed. This was held to be sufficient consideration under law as it had an actual value. Another case, Zecevic v The Russian Orthodox Christ the Saviour Cathedral[22], this case talked about the plaintiff who had sued the priest as he had not upheld his duty of performing the funeral service. There was no fee paid by the plaintiff to the priest and therefore no issue of money ever arose between them. Also no particular fee was set and finally it was held that there was no intention to form any kind of legal relations between the parties and therefore there was insufficient consideration as no payment was made. Therefore consideration should be something that is of value and then only it can be taken to be as a sufficient consideration. In the case, Sea-Land Service Inc v Cheong Fook Chee Vincent[23], the same principle of sufficient consideration was also held. Adequate Consideration refers to when a mutual exchange is made between the parties and this is based on a price that is fair enough in accordance of the transaction being made. It means that when the consideration is adequate, the contract is enforceable. For example, a promise is made by B to A that he would sell his house which costs around $100000. However, A in return promises to pay $120 then this consideration would not be at all adequate. However, there can be another instance in which if B tries to exchange those services of worth $50000 then this would be treated as adequate consideration[24]. If the consideration is too certain or it is too inadequate then this would infer that there was no intent to form any kind of contract. The question here arises as to how the court would be able to determine the value of any subject matter. To know whether the subject matter is adequate or not the court goes through two ways, one is by law and the other way is through fact.[25] First ly, when the method of law for calculating adequacy is exercised by the court then, a rule would be applied which states that if there is any sentimental value applied then this would not constitute as an adequate consideration. Also, if the consideration involves such a promise to waive off the right which is not possessed by him then this would be an inadequate consideration[26]. In the case White vs. Bluett[27], the son gave a promise not to complain anyone about the distribution of the property by his father was not an adequate consideration. It was because the son did not possess the right of complaining and therefore he could not exercise that right without even possessing the same. According to the method of fact, the adequacy of the consideration would be taken to be as something which would be of sufficient value and which causes some inducement for the parties to enter into a contract or seal the same. In the case Chappell vs. Nestle,[28] it was held that if there is any k ind of mutual inducement then this would be the most basic type of the exchange. Therefore, the court gives weight age to burden that lies on both the parties to the contract. This onus is levied on the parties before the signing of the contract which is deliberated to be entered into and also the adequacy of the consideration is decided upon by both the parties. For the purpose of proving the adequacy of consideration even the most trifle detriment or benefit would be sufficient enough to form adequate consideration. The existing duty rule was inferred from the contract law of Australia had sought to play a major role in the creation of law of consideration in Australia. This is also supported by a lot of precedents. It was held that the obligations or duties were not to be held as consideration; however, there is a drastic change in the new kind of approach. This rule of existing duty has paved way for solutions to a lot of similar cases that came to the court. Therefore, the consideration has to be sufficient but not adequate[29]. Consideration must be something that has an economic value or even if it is negligible then also it would be sufficient. However, following wishes of some other person cannot hold good and therefore cannot be termed as consideration. In the case Hamer vs. Sadway[30], the above mentioned statement was upheld. In the case, Combe vs. Combe[31], it was again held that a promise that is made by a party not to enforce any claim that is existing would be held as sufficient consideration only when any promise in return was made in the influence of the former[32]. Realistic means which is real or something that is actual[33], however consideration may or may not be actual. It just has to be sufficient. Bibliography Books/Articles/Journals Thampapillai, D., Practical Benefits And Promises To Pay Lesser Sums: Reconsidering The Relationship Between The Rule In Foakes V Beer And The Rule In Williams V Roffey (2015) 34, Australasian Legal Information Institute. Scott, K.,N. From Sailors To Fisherman: Contractual Variation And The Abolition Of The Pre-Existing Duty Rule In New Zealand (2005), (2005) 11 Canterbury Law Review. Giancaspro,M., The Rules for Contractual Renegotiation: A Call for Change, (2014) 1, Australasian Legal Information Institute. Street, T., A., The History and Theory of English Contract Law (Beard Books, 1999). Others Chest of books, Sec. 639. What Constitutes Inadequacy Of Consideration (2017), https://chestofbooks.com/business/law/Law-Of-Contracts-4-1/Sec-639-What-Constitutes-Inadequacy-Of-Consideration.html. Weitzenboec, M., E., English Law of Contract: Consideration (2012), https://www.uio.no/studier/emner/jus/jus/JUS5260/v12/undervisningsmateriale/Consideration.pdf. Twyford, J., W., The Doctrine of Consideration (2002), https://opus.lib.uts.edu.au/bitstream/10453/20049/2/02Wholethesis.pdf . Clarke, J., Consideration (2015), https://www.australiancontractlaw.com/law/formation-consideration.html. Clarke, J., Overview of Australian contract law (2010), https://www.australiancontractlaw.com/law.html. K, Consideration (Part 1 Of 3 Definition And Essentials) (2014), https://kanwarn.wordpress.com/2014/02/21/consideration-part-1-of-3-definition-and-essentials/. Mance, K., L., Contract Consideration (2017), https://www.legalmatch.com/law-library/article/contract-consideration.html. Kier, Post: Explain the statement consideration must be sufficient but (2006), https://counsel.net/chatboards/contracts/topic5/3.31.06.04.51.11.html. Giancaspro, M., A., For Your Consideration: Old Rules, Practical benefit and a New Approach to Contractual Variation (2017), https://digital.library.adelaide.edu.au/dspace/bitstream/2440/84690/8/02whole.pdf. National Para Legal, Introduction to Contracts and Consideration (2017), https://nationalparalegal.edu/public_documents/courseware_asp_files/contracts/Consideration/IntroductionAndConsideration.asp Study, Lack of Consideration in Contract Law (2017), https://study.com/academy/lesson/lack-of-consideration-in-contract-law.html. Swarb, Dunlop Pneumatic Tyre Co Ltd V Selfridge And Co Ltd: Hl 26 Apr 1915 (2017), https://swarb.co.uk/dunlop-pneumatic-tyre-co-ltd-v-selfridge-co-ltd-hl-26-apr-1915/. Swarb, Combe V Combe: CA 1951 (2017), https://swarb.co.uk/combe-v-combe-ca-1951-2/. The Voice of Political Nonsense, The Relationship between Trade Openness and Economic Growth (2016), https://thevoiceofpoliticalnonsense.wordpress.com/2016/04/ List of Cases Carlill v. Carbolic Smoke Ball Company [1893] 1 QB 256 Chappell vs. Nestle [1959] UKHL 1 Combe vs. Combe, [1951] 2 KB 215 Dunlop Pneumatic Tyre Co Ltd v Selfridge Co Ltd [1951] UKHL 1 Dunton vs. Dunton 1892 18 VLR 114 Hamer vs. Sadway 124 N.Y. 538 Hawkers vs. Saunders (1782) 98 ER 1091 Pao On v. Lau Yiu Long [1979] UKPC 17 Roscola vs.Thomas (1842) 3 QB 234 Sea-Land Service Inc v Cheong Fook Chee Vincent [1994] 3 SLR 631 Stilk vs.Myrick [1809] EWHC KB J58 Thomas vs. Thomas (1842), 2 QB 851 White vs. Bluett (1853) 23 LJ Ex 36 William vs. Roffey Bros Nicholls Ltd [1989] EWCA Civ 5 Zecevic v The Russian Orthodox Christ the Saviour Cathedral [1988] O.J. 1282 (Sup.)