Consideration - Business Law

Consideration

For any contract to be valid, consideration is needed. Consideration is the benefit or detriment in the exchange process. If X goes to the shop to buy a bag of rice. And he takes it to the cashier. X pays the money for the bag of rice. He looses his money but gains a bag of rice. The shop on the other hand looses the bag of rice but gains the money.

Consideration need not be adequate and has to be nominal. A peppercorn is still a peppercorn. So if Y sells his book for Rm 1.00 and the book actually cost Rm 200.00. By paying Y Rm 1.00 and he accepts, then a contract exists.

If someone agrees to sell you a piece of property for Rm 300,000.00 and you pay a deposit of Rm 1,000.00, a contract exists. If you cannot pay the balance of the purchase money, then the seller has the right to forfeit the Rm 1000.00 deposit.

If the seller refuses to sell the property to you, then you can sue him for breach of contract. Apply to the court for Specific Performance to force him to sell you the house.

Past Consideration is not consideration.

Eastwood v Kenyon

Eastwood gave his own money to a minor who was his ward. He was the administrator of her father’s estate. Later she promised to pay him back all the money he had given to her while she was a minor.

Held : this was past consideration and was not consideration. She did not have to pay him back. After all he was her guardian and was responsible for her up bringing.

Roscorla v Thomas.

Roscorla went to a horse auction. Bought the horse and then after paying the money he asked the owner whether it was a good horse. The owner replied,” The best horse I have had”. The next day Roscorla found the horse to be bad tempered and crazy. He sued the horse owner.

Held: Past Consideration was no consideration.

Anderson v Glass

The Employer informed the employees that as they had worked hard the previous year he was going to give them a reward. He did not give them the reward and they sued for breach of contract.

Held: Past Consideration. Employer does not have to pay.

Lampleigh v Braithwaite

Braithwaite was convicted of murder and he asked Lampleigh to get a King’s pardon. In return he would pay Lampleigh if the pardon were granted. Later he refused to pay.

Held: By getting the King’s pardon, this was good consideration.

Re: Casey’s Patent

X and Y were inventors. They promised Casey that if he did the administrative work and got the product the patent they would make him a partner. Later X died and Y refused to make Casey a partner.

Held: There was good consideration provided by Casey.

Privity of Contract.

What this means are those only parties to the contract can sue? Sometimes there are exceptions where parties not directly involved in the contract can sue. This is the exception to the rule of the privity of contract.

Dunlop Pneumatic Tyre Company v Selfridge.

Dunlop --------------------------------------Drew

Tire Manufacturer -----------------Tire Wholesale and dealer

|

The term of the contract was |

Not to sell any tires below $5.00 each |

|

|

|

Selfridges

Bought