Lecture 7 Consideration.docx

**CONSIDERATION** One of the pillars in the Law of Contracts Consideration MUST be valuable in the eyes of the law. The essential ingredient is that each party to the contract exchanges something of value. EXAMPLE: I will buy you the iPhone X on 3 November 2017. However, if I buy you the iPho...

**CONSIDERATION** One of the pillars in the Law of Contracts Consideration MUST be valuable in the eyes of the law. The essential ingredient is that each party to the contract exchanges something of value. EXAMPLE: I will buy you the iPhone X on 3 November 2017. However, if I buy you the iPhone X, then you must buy me 10 cups of coffee on 10 November 2017. - Consideration need not be adequate: ALL contracts require consideration. But remember, consideration can be VERY SMALL. It's about being sufficient even if it is not adequate. It does NOT necessarily have to be adequate. I can agree to buy your house for \$400,000 and give you a \$10 deposit. Sure, this \$10 deposit is NOT adequate, but it might be sufficient in constituting consideration. If A promises to pay Tk.100 to B for an old stamp which B gives to A, it will be no defense of A in answer to B\'s claim that the stamp is in actual fact of a much smaller value. - Consideration must be real and not sham: This means that the consideration must be of real value and not one, which has only an apparent value. Thus, if A promises to pay B TK. 1,00,000.00 in consideration of B\'s promise to take him to the moon, the consideration is sham and not real, as B\'s promise is an absurdity/silly. - Consideration must not be illegal: A consideration is said to be illegal when it is intended to defeat that provisions of any law or is against the public policy. Thus, a promise by A to pay B TK. 10,000.00 in consideration of B\'s promise to drop a prosecution for robbery instituted by him against A, is illegal. **CAPACITY** Section 11 of The Contract Act, 1872: "Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject" In order for a contract to be fully enforceable under the law, the parties to the contract MUST have the capacity to enter the contract Often, there are situations where one or both of the parties might lack the capacity to enter into the contract This issue of incapacity might make the contract void. **REASONS AS TO WHY PARTIES MAY BE INCAPACITATED:** **1. MINORITY (INFANT STATUS)** Section 3 of The Majority Act, 1875 stipulates that a person is of legal age when he/ she becomes eighteen (18) years old Mohori Bibi v Dharmodas Ghose An agreement by a minor is absolutely void. A minor's mental faculty is not yet fully developed and he/she cannot be seen to be making sound judgment about his/her interests. Doyle v White City Stadium **2. UNSOUND MIND** Section 12 of The Contract Act, 1872: "A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests." **Who is of unsound mind?** 1\. A patient in an asylum 2\. A sane human being who is delirious from medication or fever, or a person who is drunk It cannot be said that this person makes rational judgments. ** TEST OF SOUND MIND:** 1\. Does the person have the capacity to understand the business concerned? 2\. Does the person have the ability to form a rational judgment as to its effect on his/her own interest?   **CONSENT** Section 13 of The Contract Act, 1872: "Two or more persons are said to consent when they agree upon the same thing in the same sense" MISREPRESENTATION DEFINITION: A false statement of fact that has the effect of inducing someone into a contract. **Coercion:** Definition: Coercion is the act of forcing someone to do something against their will by using threats or intimidation. Example: If someone threatens to harm you or your family if you don\'t sign a contract, that\'s coercion. **Undue Influence:** Definition: Undue influence occurs when someone uses their authority or a position of trust to manipulate another person into making a decision that benefits them. Example: If an elderly person\'s caregiver pressures them into changing their will to include the caregiver as the main beneficiary, it could be considered undue influence. **Fraud:** Definition: Fraud involves intentional deception to gain an unfair or unlawful advantage, usually involving false information or misrepresentation of facts. Example: If someone sells you a car claiming it has low mileage, but they tampered with the odometer to show fewer miles, that\'s fraud. **Misrepresentation and Mistake:** Definition: Misrepresentation is when someone provides false or misleading information, either intentionally or unintentionally. Mistake is when there is a misunderstanding or error regarding a fact or term in a contract. Example (Misrepresentation): If a seller mistakenly tells a buyer that a piece of art is an original Picasso when it\'s not, it\'s misrepresentation. Example (Mistake): If two parties enter into a contract for the sale of a painting, but they both mistakenly believe it\'s a genuine Picasso when it\'s not, it\'s a mutual mistake that can potentially void the contract. **Anatomy of Contract Act, 1872: Should malafide intention try to be restrained?** In the context of the Contract Act of 1872, \"Should malafide intention try to be restrained?\" means should dishonest or bad intentions be prevented or discouraged in legal contracts. In a legal context, the term \"malafide\" refers to actions that are carried out with deceitful or harmful intentions. Essentially, this is about whether we should prevent or restrict people from entering into contracts with bad or harmful intentions. **Example:** Let\'s say Person A knows that a car they\'re trying to sell is defective, but they deliberately hide this information from Person B and sell the car without disclosing the issues. They do this to trick the buyer into paying more for the car. This is a malafide intention because they are intentionally deceiving the buyer for their own gain. The question here is whether the law should discourage or prevent such dishonest intentions in contracts to protect the innocent party. In general, most legal systems aim to prevent malafide intentions to ensure fairness and integrity in contracts. The question posed here is whether the law should step in to prohibit such dishonest actions, making it legally obligatory for Person A to honestly disclose the car\'s defects to Person B before selling it. This would be a way of restraining malafide intentions in contracts to ensure fairness and honesty.