Understanding Legal Contracts: Consideration and Ratification

Consideration as used in contracts 

The term consideration is widely used in contracts to mean an amount of money or a payment which parties entering into a contract base their bargaining and forms the basis for the contract.

Types of considerations 

Executory consideration 

An executory consideration makes reference to a promises exchange where one party promises to undertake certain tasks in the future. An example of executory consideration is a situation where a supply promises to supply goods to a customer with the customer promising to pay for the goods upon delivery.

Executed consideration 

An executed consideration involves a promise by one party in exchange for another party’s act. For example an individual A may make a promise of rewarding the person B who will return A’s stolen handbag. If B successfully finds the handbag and returns it, B’s consideration is fulfilled.

Promissory estoppels 

Promissory estoppels refer to a consideration requiring an individual Y to undertake a promised act to a party X without any consideration. For example Y may promise to give X a ride , if Y cancels his trip he is obliged to provide the ride to X since X was relying on the promise from Y.

Charitable subscription 

A charitable subscription indicates an affirmation by one party to provide a religious or charitable donation. For example an individual who promises to pay school fees for another individual who now relies on the promise to continue with school.

Hamer v. Sidway 

The Hamer v. Sidway case has sufficient ground given that the promise can be considered as an executory consideration where the uncle to his nephew made a promise to be fulfilled in the future. Forbearance in the Hamer v. Sidway case is evident where the nephew decided to delay collecting his promise since the uncle promised that the money which was to be given to his nephew would come with some interest. Had it been the nephew who had promised to give up selling drugs, the outcome of the decision would have been different given that the uncle would not have made any promise.

Luce v. Fleck 

In Luce v. Fleck, a property and an engagement ring are at the center of the case. The defendant sought to counter the return of the diamond ring since the ring was a conditional gift which he had transferred to the plaintiff for marriage. The judgment required that the conditional gift cannot be retained by the plaintiff since it was only given on condition of engagement. If the plaintiff gave the defendant a “hog” motorcycle on his birthday, the defendant is not obliged to return the motorcycle upon breakup since the motorcycle is not given under conditional circumstances.

Returning the ring is different from the motorcycle case given that the ring was given under conditional terms unlike the motorcycle which is given as a gift. The ring was given on condition that the plaintiff is married to the defendant. Conditional gifts are revocable if one party does not fulfill the conditions for the consideration and thus the diamond ring was given with the expectation that a future event will take place unlike the motorcycle which was given without any future expectations.

It was right for the court to ask Luce to give back the ring since as explained was a conditional gift. Luce broke the consideration since the engagement broke and thus entitled to return the conditional ring given for engagement.

Luce was not obliged to give back property ownership since Fleck did not fully show that the house was a conditional gift to the defendant that was given with a promise of the plaintiff to marry the defendant.

In my opinion, the court decision is plausible on the basis of an executory consideration. The property which Fleck is defending from partition did not have any attached evidence of an executory consideration when compared to the engagement ring.

Adequacy of consideration 

Adequacy of consideration refers to the value of acts and promises between contracting parties. When entering into a contract the price of a promise must equal the value of the act that will be exchanged for the promise. An example of an adequate consideration is where a party N promises party M at thousand dollars for a property worth ten thousand dollars.

The designer of the Power Rangers logo having been paid two thousand and five hundred dollars was underpaid and has grounds of winning a case against Saban. The contract between the artiste and Saban was inadequate given that Saban was bound to make large profits even after paying a lesser value to the designer than he should have.

Liquidated debt 

A liquidated debt refers to a debt that has a fixed amount to be paid upon maturity of the debt. Liquidated damages concept refer to an agreed amount of money payable as compensation for breach of contract for example a bank that extends a promissory note worth two thousand, the liquidated debt is clearly indicated. There might be a provision for an amount of money that will be charged if the client to whom the promissory note is contracted with breaches the terms of the promissory note.

Promissory Estoppel 

The principle of Promissory Estoppel holds that it is possible to enforce a promise by law. In enforcing Promissory Estoppel, a formal consideration does not have to exist. An illustration of a Promissory Estoppel is where a promisor pledges a grant to an education institution which goes ahead to make purchases based on the promise. The education institution changes its financial position and thus a court of law may enforce the consideration from the promisor to fulfill his pledge to the institution.

Enforcing Promissory Estoppel 

If Trump promises Long Island Jewish Hospital ten million dollars, the hospital may enforce the promise since the hospital has already changed its financial position by purchasing land worth five million dollars. Under the Promissory Estoppel concept, the promise by Trump maybe enforceable given that the hospital has undertaken financial commitments based on the promisor’s pledge.

The difference if a thousand dollars was the promise in above 

If the promisor made a one thousand dollar pledge, the consideration would not be enforceable since the act of purchasing a land worth five million dollars cannot be affected by an input of a thousand dollars.

Preexisting Duty 

The concept of preexisting duty holds that a new promise is not valid for consideration if a party performs an act for which he was contractually bound. For example a supplier who agreed to supply a given quantity of goods but later threatens not to supply the goods unless the customer makes some extra payment, the extra payment is not enforceable since it was not part of the first consideration.

Unforeseen difficulties 

Unforeseen difficulties are situations that occur when a contract did not provide for occurrences that are out of the control of the parties involved in the contract. For example a supplier of sand may enter into a contract to supply sand but incur a cost of five thousand dollars that was not provided for in the contract but the customer agrees to cover it. The supplier may seek the court’s help to recover the five thousand dollars from the customer if the customer goes back on his words to cover the five thousand dollars.

Past consideration 

A past consideration is an act that is undertaken before parties entering into a contract. An illustration of a past consideration is a situation where an individual decides to buy a car from a dealer but tells the dealer that he will use the amount of money he previously used to purchase another car from the same dealer in the past year.

Illusory promises 

An illusory promise is a promise that cannot be enforced by a court given that it is not mutual or is not definite. For example when a car dealer and a buyer enters into an agreement stating that the car dealer can sell any car he wants to the buyer, the contract is an illusory promise since it is indefinite.

Contractual capacity 

The legal ability to enter into a binding contract is referred to as contractual capacity. An individual may not have contractual capacity if an individual is a minor, mentally disabled and or can make limited decisions independently.

A minor can disaffirm a contract under New York law. The law permits a minor to exit a contract in an aim to protect minors from being exploited. Despite the contract still being valid a minor can leave when he deems it fit. A minor disaffirming a contract can be limited to cases where they have misrepresented their age or where they have done considerable damage to goods making them liable to a reasonable value of the goods.

Necessities for a minor 

Necessities for minors refer to the basic needs for a minor that include shelter, food, medical services and clothing however a luxury to one minor may be a necessity to another.

In a case where a minor purchased a car for five thousand dollars but wants to return it to the dealer after driving it for a week and having an accident, the minor may disaffirm the contract. However, the dealer can charge considerable value of the damage to the minor. Upon returning the car to the dealer, the minor is entitled to getting a refund of money equivalent to the market value of the car. The minor can only be entitled to a refund of two thousand and five hundred dollars which is the equivalent market value of the damaged car.

Ratification of a contract 

To ratify a contract is to accept the contract and provide a legal force to the contract making it enforceable. In the above case where a minor purchased a used car for five thousand dollars, he ratified the contract giving it a legal point of view. On this basis upon returning the car, the minor cannot get the full amount of money he gave but rather the market value of the car at the time of returning.

Enforcing a contract with a mentally incompetent individual 

A contract with a mentally incompetent individual cannot be ratified since mental incapacitation reduces contractual capacity. Additionally, the mentally incompetent individual cannot make all decisions independently and therefore does not have contractual capacity.

Void and voidable contract 

A void contract is one that cannot be enforced given that it is illegal from its inception therefore making it lack legal capacity. An example of a void contract is one entered between a seller and a buyer of illegal drugs since none of them can go to a court in case of breach of agreement. A voidable contract on the other hand is one that is valid but can either be rejected or affirmed by either party. An example of a voidable contract is one where a seller of a property did not disclose full information to the buyer subsequently, if the buyer realizes that full information was not disclosed he may reject the contract making it void.

Usury 

Usury is a practice that involves making money using unethical money lending. A usurious contract in New York is not enforceable but the court can go to the aid of the party whose rights are affected by the contract.

Exculpatory clause 

An exculpatory clause in contracts provides a relief to a party from liability in cases where damages are caused while executing a contract.

Managerial strategy 

Mike cannot successfully sue a company for damages if he goes bungee jumping and signs an exculpatory clause. The exculpatory clause signed by Mike sought to relief the company o any liability for damages that he could suffer while jumping.

If the bungee cord was old and snapped causing the injury to his leg, he could successfully sue the company since despite the activity having inherent risks, the injury caused would have been resultant of negligence from the company.