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Consideration Discussion Board Discussion Board Group

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Table Of Contents-

Question - Answer

The general rule is that each contract must meet the requirement of having consideration. This means that each party must give something of value and there must be a bargained for exchange. Before responding to this week’s discussion board, please read Chapter 12 and the chapter overview. In a new thread, please answer the following questions:

Please explain the purpose of consideration and why this element is necessary for contracts. Please reference a case in Chapter 12 to support your explanation. 

Consideration is a lawful value that is exchanged for a promise or action. According to the requirement of the consideration, promisee should pay a price to the promise for gaining the right to enforce the promisor’s promise (Wishart, M, 2013). Consider the case of Thorne v. Deas in which the name of the ship’s owner is Sea Nymph. He made a promise to insure the ship for the voyage to his co-workers. However, the ship was lost in the sea and as per the court’s instructions, he was not liable to his co-workers as his promise was unwarranted and he received nothing in exchange.

In this example, there are two requirements of the consideration. The first requirement limits the scope of the liability made by the promisor for his promise by protecting him against the liability of his promise. The second requirement leads to unfair results. This leads to dissatisfaction with the concept of consideration.

In the case of unilateral contract or bilateral contract, consideration is regarded as an act. The act has legal value in two ways. First, if the promisee agrees to do in exchange of promisor’s promisee, he had no legal duty that provides legal value. Second, if the promisee refrains to do in exchange of promisor’s promisee, she has legal right that provides legal value (Teacher, Law, November 2013).

In case of Hamer v. Sidway, the uncle made a promise to his nephew to pay $5000 is he stopped drinking, playing cards, tobacco and swearing until his 21st birthday that was supported by the consideration. Although, the nephew has legal right to involve in these activities, but he stopped from doing this according to his uncle’s request.

All this required for the consideration. However, legal value requirement is not related to the actual value (Johnson, A, n.d.). This implies that the court does not ask if the promise was worth as long as the promise satisfies all the legal requirements of the legal value test. This is the rule of the accuracy of consideration that reflects the assumption in the classical contract law. The rule considering the accuracy of consideration can increase predictability and certainty in business transaction.

At the time of making the contract, consideration is needed for making a valid and formal contract (Fandl, K, 2016). This is one of the main requirements for making the contract. Basically, consideration refers to the exchange of goods and services for money. For example, the contract for the sale of apple in exchange of some value. This value is generally in form of monetary payment. Consideration is required so that the parties can incur some obligation in the agreement. Without this consideration in the agreement, the exchange will be considered as a gift. 

Do you think that the doctrine of promissory estoppel should apply as an exception to consideration? Why or why not?

The consideration requirement is considered as an example of the contract law rule. In some cases, it leads to insignificant injustice. However, the court responds to this justice by making several exceptions to the requirement of the consideration. One such exception is Promissory Estoppel. It emerges by the court in this century. The contract consideration principle does not identify the reliance made by the promise as a sufficient basis for imposing the promise made against the promisor (Matheson, J & Farber, D, 2005).  

But, donative promises are unenforceable as they are not maintained by consideration. In fact, it does not want any bargained for exchange. Consider the example of Thorne v. Deas, the co-owner of the sea relied on the promise made by their fellow to insure the ship. Some courts have also taken the action to protect the relying promises by stopping the promisor from increasing the defense that the promises made by them were not supported by the consideration.

In some cases such as the promises made up the employees regarding the bonuses and pensions has started using the detrimental reliance on the donative promise that is a substitute of the consideration. In 1932, promissory estoppel is now used as a substitute of the consideration (Tripathy, R, 2013).  In fact, the role of promissory estoppel has expanded beyond the role of consideration in some areas of contract la

References-

  • Fandl, K. (2016). Cross-Border Commercial Contracts and Consideration. Berkeley Journal of International Law. 34(2).
  • Johnson, A. (n.d.). CONTRACTS AND THE REQUIREMENT OF CONSIDERATION: POSITING A UNIFIED NORMATIVE THEORY OF CONTRACTS, INTER VIVOS AND TESTAMENTARY GIFT TRANSFERS. Retrieved from https://law.und.edu/_files/docs/ndlr/pdf/issues/91/3/91ndlr547.pdf.
  • Matheson, J & Farber, D. (2005). Beyond Promissory Estoppel: Contract Law and the 'Invisible Handshake. The University of Chicago Law Review. 54(2). DOI: 10.2307/1599520.
  • Teacher, Law. (November 2013). Main Elements constituting A Valid Contract. Retrieved from https://www.lawteacher.net/free-law-essays/contract-law/main-elements-constituting-a-valid-contract-contract-law-essay.php?vref=1.
  • Tripathy, R. (2013). THE DEMISE OF CONSIDERATION. Nirma University Law Journal, 3(1).
  •  Wishart, M. (2013). In Defence of Consideration. Oxford University Commonwealth Law Journal. 13(1). doi: 5235/14729342.13.1.209.

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