In simple contracts, consideration is what each party in the contract bargains for and gives in exchange for a promise. Consideration then is the price one pays to buy the promise of the other contracting party. In all simple contracts, consideration must be present as an integral part of the promise that forms the basis of the contract. In addition, the rules of consideration dictate that it can be present, future but can never be past, must have some value and must be referable to the promise of the other party (Gibson & Fraser, 2013). The value of the consideration is left to the parties involved to decide. Provided the consideration has value, it does not have to be commercial value though it must have some legal value.
In the first scenario, Jane offers to give Jack her Lotus Super 7. However, Jack makes no promise in return. Thus, Jane’s offer is a gratuitous promise. There is no consideration since Jack has not made any promise in return. Consideration is essential in all simple contracts, and thus Jack has no enforceable agreement.
In scenario two, Jane offers to sell her Lotus Super 7 to jack for $25, 000. The market value for this type of car is $ 25, 000 meaning Jane is selling her car at the current market value. In this case, consideration is present since there is a promise between the two parties. Jane has promised to give the car to Jack in return for $ 25,000. The consideration has a value of $ 25, 000 and according to Jane and Jack this value is adequate. In addition, the consideration is in the future since the transaction has not yet taken place. This simple contract is valid, and Jack has an enforceable agreement.
In the third scenario, Jane offers to sell the car for $ 2,500, and Jack agrees. There is a promise between the two parties, and thus the consideration is present. The fact that the market value of the car is $ 2, 5000 does not affect the consideration. Consideration must have value, but the adequacy of the value is a decision for the parties involved to decide (Gibson & Fraser, 2013). In this case, Jane has already offered to sell the car at $ 2, 500 and Jack has accepted the offer. This means that the two parties have come to an agreement that the price is adequate. In addition, the consideration is a future consideration and has value. Thus, this is a valid contract, and Jack has an enforceable agreement.
The ship builder was under contract to build a ship and to receive the payment in US dollars. The contract had no clause to cover the devaluation of currency. However, when the United States devalued its currency, the shipbuilder demand some more US $3 million from the buyer to cover the losses made due to the devaluation. The ship builder claimed to stop work unless the extra money is paid. Given that the buyer had a Charter for the Tanker he deemed it essential to deliver the tanker on time, he opted to pay the amount but notified the shipbuilder that the payment was under protest.
A payment made under protest signifies that there is a dispute. The payer, in this case, has the right to object to the payment later and recover the payments made. In this case, the buyer has to prove that payment made were not due. He has to prove that the payments fall under the categories recognized by law as sufficient to make retention (Bevans, 2007).
Payments made under protest to prevent the destruction of one’s business are considerably compulsory. This is because the payment is involuntary. In Lelighk Coal and Navigation Company v. Brown & Lawall of 1883, the defendant had threatened to draw water from a dam to prevent the plaintiff from ferrying logs (Bevans, 2007). Had the defendant carried out the threat, the plaintiffs business would have been “practically ruined”. The Supreme Court held that the tolls paid by the plaintiff were illegal and recoverable since they were involuntarily paid.
In the case presented here, the shipbuilder threatens to stop building the ship if the buyer does not pay the extra money demand. The buyer having a Charter for the tanker deemed it necessary to deliver the tanker on time. If the shipbuilder had carried out the threat, then the buyer would not have delivered the Tanker thus affecting the buyers business. The buyer involuntarily made the payment for safeguard his business. The shipbuilder, in this case, possessed some power over the buyer and the buyer, on the other hand, had no immediate relief.
The buyer will thus be able to recover the excess payment made but only if he manages to prove that the payment was involuntary due to the lack of immediate relief. If the payment is involuntary, this makes it not liable and thus recoverable. Though there are, risks involved in the recovery of payments made under protest, categories recognized by law such as involuntary payments are sufficient for recovery (Bevans, 2007).
Bevans, N. R. (2007). Business organizations and corporate law. Clifton Park, NY: Thompson Delmar Learning.
Gibson, A., & Fraser, D. (2013). Business Law 2014 (8th ed.). China: Pearson Higher Education AU.
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