Consideration Seminar

8/8/2019 Consideration Seminar

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LawfulLawfulConsiderationConsideration

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Ajantha Balu09-BBA-FR-005

6 August 2011


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All agreements are contracts only if they are

made by the free consent of partiescompetent to contract, for a LAWFULCONSIDERATION and with a lawful object,and are not hereby expressly declared to be

void.

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ConsiderationConsideration

An act or forbearance of oneparty, or the promise thereof, is the price forwhich the promise of the other is bought, andthe promise thus given for value is

enforceable. - Sir Frederick Pollock

It is the value set for the promise.

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What is LawfulWhat is Lawfulconsideration?consideration?

Quid pro quo- Something in returnSomething of value in the eyes of lawThe Consideration is modified in a existing contractonly when a new promise is made between theparties.

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Consideration

Executed

Consideration

Executory

Consideration

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Executory Consideration

Promise

Ramesh promises to

pay $1200 when anew fax machine isdelivered.

Promise

Suresh Ltd promises

to deliver themachine in onemonth.

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Legal rules relating toLegal rules relating toConsiderationConsideration

y 1.It need not be adequate

y

2.It should move at the desire of thepromisor.

y 3. It may move from the promisee or anyother person.

y 4. It may be an act or Forbearance to suey 5. It may be past, present or future.

y 6. It must not be illegal or immoral

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1.It need not be adequate1.It need not be adequate

Providing consideration has some value, the

courts will not investigate its adequacy. Whereconsideration is recognized by the law as having somevalue, it is described as "real" or "sufficient" consideration.The courts will not investigate contracts to see if theparties have got equal value.

The something in return need not be equalin value to something given.

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2. It should move at the desire of2. It should move at the desire ofthethe PromisorPromisor..

y A consideration should have been done at

the desire or request of the promisor.y If it is done by a third party without the

will of the promisor then itll not be agood consideration.

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3. It may move from the3. It may move from the promiseepromiseeor any other person.or any other person.

y The person who wishes to enforce the

contract must show that they providedconsideration; it is not enough to showthat someone else provided consideration.

y The promisee must show that

consideration "moved from" (that is it wasprovided by) him.

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4. It may be an act or Forbearance4. It may be an act or Forbearanceto sueto sue

y If one person has a valid claim against

another but promises to forbear fromenforcing it, that will constitute validconsideration if made in return for apromise by the other to settle the claim.

y

Raghu borrows $400 at 5% interest fromPraku and fails to pay. Praku can exercisehis right of suing Raghu but instead if hesettles for higher interest, still itll

constitute good consideration.

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5. It may be past, present or5. It may be past, present orfuturefuture

PAST CONSIDERATION

y If one party performs an act, and the otherparty then makes a promise, theconsideration for the promise is said to be inthe past.

y The past consideration is valid in English law.However in Indian law, the consideration canonly be present and future.

y For example, Salary to workers. The

consideration is past for the companies.

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PRESENT OR EXECUTED CONSIDERATION:

When a consideration is givensimultaneously with a promise. Example,In a cash sale.

FUTURE OR EXECUTORY CONSIDERATION:When a consideration from

one party to the other is to passsubsequently to the making of the

contract.

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6. It must not be illegal or6. It must not be illegal orimmoralimmoral

y An illegal consideration makes the whole contractinvalid.

y Example: A, B and C enter into an agreement forthe division of profits among them acquired, orto be acquired, by them by fraud. The agreementis void, as its object is unlawful.

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Exceptions for contracts withoutExceptions for contracts withoutConsiderationConsideration

y Love and affection

y Compensation for voluntary services

y

Promise to pay a time barred debty Creation of agency

y Completed gift

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Love and affectionLove and affection

y An agreement which is made on the naturallove and affection and if there is no

consideration between such types of thecontracts even then they are enforceable inthe court of law.

y

The agreement is made between two partieson the basis of near relationsbetween the parties must in the writing andit should be registered.

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Compensation for voluntaryCompensation for voluntaryservicesservices

y If an agreement is made to compensate any person for thepast deed or service rendered by that person does not

need any consideration and still can be enforceable in thecourt of law.

y If a person promise to another person that he will pay tothe person for his services rendered in the past then this isa enforceable contract and can be enforced in the court oflaw.

y But there are some things which should be noticed whendealing such types of the contracts the services renderedby the promisor should be voluntary.

y There is no promise plus promise

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Promise to pay a time barred debtPromise to pay a time barred debt

y A promise by a debtor to pay a time

barred debt is enforceable provided it ismade in writing and is signed by thedebtor or by his agent generally orspecially authorized in that half.

y The debt must be such of which thecreditor might have enforced payment butfor the law for the limitation of suits

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Completed giftCompleted gift

y No consideration, but still contract does

applies here.

y Example: Promise to pay Charitablecontributions.

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AgencyAgency

y No consideration is required to create an

agency [section 185].

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Multiple choice questionsMultiple choice questions

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y Consideration, in the formation of a valid contract,may be identified as:

y a) The need for fairness in the contract.

y b) The intention of the parties to be legally bound.

y c) A balance in the terms of the agreement.

y d) The 'bargain' element of a contract.

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y Consideration, in the formation of a valid contract,may be identified as:

y d) The 'bargain' element of a contract.

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Shahid orders a pizza by telephone, and

says he will pay on delivery. Which of thefollowing would constitute consideration?

y a. Placing the call

y b. Promising to pay for the pizza

y c. Handing over the money

y d. Accepting delivery of the pizza

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Shahid orders a pizza by telephone, and

says he will pay on delivery. Which of thefollowing would constitute consideration?

y b. Promising to pay for the pizza

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y Consideration must be something which

the Promisor A)Is already bound to do

B)Is not already bound to do

C)May voluntarily do

D)Must not do

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y Consideration must be something which

the Promisor

B)Is not already bound to do

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y Arnold contracts with Nina to paint the interior ofher flat for $200. Halfway through the work he

asks for an additional $100. When will he beentitled to the extra payment?

y a. If he runs out of paint and needed to buy more.

y b. If Nina asked him to also paint the exterior ofthe flat

y c. If he realized he had undervalued the work.

y d. If he realized Nina could afford more than$200.

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y Arnold contracts with Nina to paint the interior ofher flat for $200. Halfway through the work he

asks for an additional $100. When will he beentitled to the extra payment?

y b. If Nina asked him to also paint the exterior ofthe flat

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y Consideration in a contract

y A)May be present or future only

y B)Must be present only

y C)Must be future only

y D)may be past, present future

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y Consideration in a contract

y D)may be past, present future

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y Paul employs Steve as a salesman. Last month

Steves sales increased by 30%. Paul was sohappy that he promised to give him bonus by theend of the year. The bonus is an example of

a) Exeuted Consideration

b) Executory Consideration

c) Past Consideration

d) Of a promise that does not constituteconsideration

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y Paul employs Steve as a salesman. Last month

Steves sales increased by 30%. Paul was sohappy that he promised to give him bonus by theend of the year. The bonus is an example of.

c) Past Consideration

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y Which of the following is a correct statement?

y A) Consideration needs to be neither adequate

or sufficienty B) Consideration needs to be adequate, but not

sufficient

y C) Consideration needs to be sufficient, but notadequate

y D) Consideration needs to be both adequate andsufficient

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y Which of the following is a correct statement?

C) Consideration needs to be sufficient, but not

adequate.

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y Greg bought a laptop from Simple Electronics. Heput down a deposit of $100 and agreed to paythe balance of $1400 upon the delivery of thecomputer. The balance owed is an example of

a) Exeuted Consideration

b)Executory Considerationc) Past Consideration.

d)None of the above

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y Greg bought a laptop from Simple Electronics. Heput down a deposit of $100 and agreed to paythe balance of $1400 upon the delivery of thecomputer. The balance owed is an example of

b)Executory Consideration

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y A promise to subscribe to a charity. Thepromise is a

y A) Valid contract

y B) Voidable contract

y C)Void contract

y D)Void Agreement

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y A promise to subscribe to a charity. Thepromise is a

y C)Void contract

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y Would you be able to sue a newspaper if a

free DVD promised to be included in the paper ismissing?

y a. No, as there is no consideration

y b. Yes, as consideration can be found for the

promise of the DVDy c. No, as promotional offers are not meant to be

binding

y d. Yes, as promotional offers are always binding

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y Would you be able to sue a newspaper if a

free DVD promised to be included in the paper ismissing?

y b. Yes, as consideration can be found for the

promise of the DVD

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ReferencesReferences

LINKS:

y http://www.netlawman.co.in/acts/indian-contract-act.php

y http://www.lawteacher.net/contract-law/lecture-notes/consideration-lecture.php

y http://www.lawteacher.net/contract-law/cases/consideration-cases.php

y http://www.blurtit.com/q902823.html

y http://en.wikipedia.org/wiki/Category:English_contract_case_lawy http://cw.routledge.com/textbooks/9780415481373/questions.asp?u

nit=3

y http://www.oup.com/uk/orc/bin/9780199544455/resources/a_mcqs/ch08/?view=Standard

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Consideration Seminar