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According to the law, consideration for a contract must be sufficient but it need not be adequate. Explain what this means and what it is so.
First of all, in order to make a contract, there have four elements that compulsory. They will be offer, acceptance, consideration and intention. Now we are going to talk about the consideration. Consideration is one of the important elements that must be present with the purpose of making a contract binding. Consideration can be defined as payment or money and it is also a fundamental element into a contract. The principle of consideration is to ensure that promises are enforced to the parties that promised to exchange something of value in the viewpoint of the law. Consideration is only present when the parties mean to have an exchange.
However, consideration must be sufficient but need not be adequate. It means consideration must be having some values, whether it appropriates in order to meet the return of the agreement. The things that they agree to make an agreement are not just simply in oral promises but also in exchange of some value of the exchange. They would probably not need to have the same value or equal value of the exchange in an agreement but the law will take it as a consideration as adequate if the parties are agreed to the exchange. The conditions of a legally consideration is simply that the parties agree into an exchange and respect to each other, the subjects exchanged or promised in exchange.
In White v Bluett (1853), Bluett sued his father’s will for an outstanding debt to his father and he claimed that his father had promised him to return it for him. But his father asked him to stop complaining in return for him. The court held that the promise does not counted as real consideration, because to stop complaining was not have any economic value. So Bluett was still liable for the debt. In this case, we can see that in consideration, the exchange of the promise must be tangible. Not stop grumbling or complaining, these are no economic value to have an exchange with the other parties.
“A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise.” Restatement, Section 71.
Distinguish between offers and invitations to treat and explain the importance of this distinction
According to the dictionary the definition of the offer is a statement that gives the listener the power to conclude a contract. It is also an expression of willingness to sign a contract on particular terms. The person who makes the offer is an Offeror and who accepts the offer is an Offeree. The “expression” may have a direct contact in the different forms, in a media such as, newspaper, letter, advertisement, as long as it is prepare into a contract by the offeror. If the offeror makes his offer through the media just as newspaper or through the television advertisement, it means that everyone can either take his offer. For example, an offer that rewards the person who has found her cat or dog is made to the whole of the world. So if the person finds her cat, the offeror must reward the person just as what she has mentioned to. This rule was applied:
In Carlill v Carbolic Smoke Ball Co (1893), it was happened that Mrs Carlill saw a newspaper advertisement advertised that the producer of smoke ball would pay 100pound to anyone who has bought the smoke ball, used it accurately and still got sick. So Mrs Carlill bought the smoke ball and used it as what they have mentioned but she still got flu. So Mrs Carlill wanted to claim the 100 pound but the manufacturer refused to pay the claiming and said that the advertisement was not an offer. Finally, court held the wording of the advertisement did count as an offer and by buying and using the product Mrs Carlill accepted the offer. The contract in Carlill v Carbolic Smoke Ball Co (1893) was known as a unilateral contract which offeree accepts the offer by performing her side of good buy. Because the manufacturer has advertised their products and thus they must be responsible with their promises.
On the other hand, invitation to treat does not counted as an offer, but an indication of the people’s enthusiasm to make a contract. An invitation to treat is an indication by the owner of the possessions that he or she might sell it at the certain price. For the example, products that displayed on the shelves and placing in a shopping windows. This does not mean that the shopkeepers offer the products to their customers but it is the other way round. The customers who will be the offeror those come into the shop and then make a contract with the shopkeeper. In this case, the shopkeeper will be the offeree that accepts the offer and at the end will have a contract between them.
In Pharmaceutical Society v Boots Cash Chemists (Southern) Ltd (1952), the UK Pharmacy and Poisson Act 1933 forbidden the trade of any listed poison unless it was “effected under the supervision of a registered pharmacist”. Because of the necessity for certain drugs to be sold under the pharmacists’ supervision, self service pharmacy problems of Boots occur. As a result, Boots was charged with breaking the legal prohibition. It was suspected that the goods that displayed on the shelves and that the contract of sale. Therefore, arose at a point that was not directly supervision of the pharmacist who could not witness the whole shop from the cash desk.
Finally the court held that Boots were not in break of the Act. The goods displayed were only an invitation to treat. Customers are offered to buy when they take the goods to the counter and at that point Boots could decided to whether accept their offers or not. So this was counted as a part of the transaction of the sale and it was supervised by a pharmacist.
The differences between an offer and an invitation to treat are quite dissimilar. First of all, an offer is an obvious statement of the words ahead which an efferor is prepared to be contractually. It normally gets the outline of the promise to do or to abstain from doing something. And it is usually the offeree gets into condition and agrees to do or abstain from doing something. On the other hand, invitation to treat is about asking the others to make offers. The goods are usually displayed with the prices clearly shown. The dissimilarity between offers and invitation to treat may be gladly rationalized on a commercial basis. For the example, the shopkeeper or any person that advertises their willingness to make in a certain agreement, it is possible that certain of group of persons and to the world may accept the offer.
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Consideration in contracts refers to the benefit each party receives in exchange for what it gives up in the contract. It is a vital element in a contract. 3 min read
1. Consideration in Contracts
2. Essential Elements of Consideration
3. Types of Consideration
4. Consideration Need Not Be Monetary
5. Disproportionate Consideration
6. Is It Mandatory to Mention the Word 'Consideration'?
7. What Happens When a Contract Lacks Consideration?
8. Failure to Provide Consideration
Updated November 17, 2020:
Consideration in contracts refers to the benefit each party receives in exchange for what it gives up in the contract. It is a vital element that must be present in a contract in order to make it legally binding on the parties. A contract, whether oral or in writing, becomes invalid if there is no consideration involved.
In order to form a valid contract, consideration must meet the following conditions:
- It must be something worth bargaining for.
- It must benefit all the parties to the contract.
- It must be something of value.
There are two types of consideration:
- Consideration in a bilateral contract involves exchanging a promise for a promise.
- Consideration in a unilateral contract involves one party making a promise and the other party doing something in return.
Consideration can be in the form of money, property, promise, services, or something else. It can be something as simple as a promise to do or not to do something. For example, if you enter into a contract with your neighbor wherein he agrees not to sue you for the damage you caused to his property, and in return, you agree to pay him a sum of $800, then the amount of $800 is the consideration your neighbor gets, whereas his promise to not sue you is the consideration you get from the contract.
Consideration can be as big or small as the parties mutually agree to exchange between themselves. For example, when you go to buy a dress, it's between you and the seller to agree upon the price. When a valid consideration is present, courts rarely interfere to decide whether the deal is unfair or disproportionate. However, if a party is tricked into an unfair deal by hiding some important information or otherwise acting in bad faith, then it can affect the legal validity of the contract.
Most contracts contain a line or two to the effect that a valid and sufficient consideration forms the basis of the contract. However, just mentioning something in the contract does not prove the existence of valid consideration. Likewise, a consideration does not become invalid if it doesn't find a mention in the contract. No
If there is no consideration present in a contract, the contract becomes invalid, and the courts may refuse to enforce the contract. Sometimes, a contract may lack consideration though it may seem at the surface that the parties are exchanging something of value.
Following are some of the scenarios where there is no valid consideration involved:
- When a party promises to perform something he or she was already legally bound to perform. For example, when a policeman promises to catch the thief.
- When the consideration is more of a gift and does not require bargaining or mutual agreement between the parties. For example, when a mother creates a legal document promising to buy her son a car if he graduates with good marks.
- When a party promises to give something in exchange for some "past consideration" by the other party.
- When the promise to do something is illusory. For example, when a mango juice company enters into a contract with a farmer, saying that the company will buy all its mango requirements from the farmer, and the farmer can sell to the company as many mangoes as he wants, then the consideration given by the farmer is illusory since he is not legally bound by the contract to sell the mangoes to the company.
If a party fails to provide the promised consideration, the other party can cancel the contract. The defaulting party can also be sued for damages or specific performance.
The following instances are tantamount to failure of consideration:
- When the provided consideration is worth less than promised.
- When the provided consideration is damaged or destroyed.
- When the performance is not carried out as promised or expected; for example, when a mechanic does not repair a car properly.
It is worth noting that a promise to do something illegal or immoral does not serve as a valid consideration.
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