Intention and Consideration in Contracts
Discuss About The Esso Petroleum Commissioners Of Customs?
Out of four elements required to form a contract consideration and intention to create legal obligation are two elements.
It has been stated by the court in the case of Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 that there is a requirement of intention when the parties are entering a contract to be bound legally to each other towards the terms of the contract. It has to be provided by the parties that there was an intention as discussed above in the contract. The intention is analyzed in an objective way. The court applies that test to find out whether a prudent person would hold at the management has been intended to be legally binding. For this analysis the court takes into consideration the surrounding circumstances.
In the case of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8 it was stated by the court that where the parties have a commercial relationship, there is a presumption that there is an intention on the part of the parties to form a contract which is legally binding.
On the other hand in the case of Todd v Nicol [1957] SASR 72 the court ruled that where the parties have a purely domestic or social relationship there is a presumption that they do not have the intention to form a contract which is legally binding.
Consideration is another important element of a contract. There are few specific rules in relation to consideration which needs to be adhered to in relation to it being valid. Consideration is an exchange of promise. It is the price which has been paid against the promise of the other person. The consideration has to move from the promisee. The person has to show that a consideration was provided in order to execute the contract. Anything which the promisor considers to be of a value will be held as a consideration. The test of consideration is value and not adequacy. In the case of Thomas v Thomas (1842) QB 851 the court ruled that the consideration is not required to be adequate, rather it requires sufficiency in the eyes of law. This means that even a small mount can be considered as a valid consideration. In this case the house was to be provided at 1 pound every year. The court had the question that whether sufficient consideration has been provided by Mrs Thomas in relation to making the agreement with other party enforceable legally.
The Elements of an Agreement
From the case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 it can be analyzed that “past consideration is not good consideration”. Thus the consideration will only be held at law to be valid if it has been given in response to the promise of the promisor for the performance of their obligation in relation to the current contract. It cannot be in relation to a pre-existing obligation which will again become a past consideration.
Damien has a business through which he provides transport and accommodation services to people who want to get associated with sporting and other considerable events. He has been contacted with his brother who wants to book a sent for a package which includes luxury transport and accommodation. In this situation are Bryce is the cousin of Damien and thus the relationship between them may e domestic. It has been stated by the court in the case of Todd v Nicol that where the parties have a purely domestic or social relationship there is a presumption that they do not have the intention to form a contract which is legally binding. However in the case of Ermogenous v Greek Orthodox Community of SA Inc it was stated by the court that where the parties have a commercial relationship, there is a presumption that there is an intention on the part of the parties to form a contract which is legally binding. Here it can be stated that the contract between Bryce and Damien was in commercial capacity. In addition as per the case of Esso Petroleum Ltd v Commissioners of Customs and Excise the intention is to be analyzed in an objective manner which means that a reasonable person has to be find intention present. Any reasonable person in the position of Bryce will assume that there was intention to be binding legally. Thus it can be stated that there is intention to be legally binding on the part of Damien and Bryce.
The other element which needs to be analyzed is that of consideration. It has been stated by the case of Carlill v Carbolic Smoke Ball Co that past consideration is not valid consideration. Here Bryce has attempted to reduce the price of $25000 to $20000 based on the accounting services which he had provided to Damien in the past. This would be regarded as a past consideration which is not a good consideration. However it has been stated by the court in the case of Thomas v Thomas that consideration has to be sufficiently present and not adequate. Here the consideration of $20000 will also be considered as sufficient for the formation of contract. This it can be stated that it was a valid consideration.
Case Examples and Analysis
Whether the elements of a valid agreement is present between the correspondences between Damian and Bryce
The parties to the contract have to be in a complete agreement with each other as contracts are consensual transactions. The agreement needs a meeting of minds where the essential terms of the agreement are comprehended by both the parties to contract. There are two components of agreement which are that of an offer and of an acceptance as per Sudbrook Trading Estate v. Eggleton [1983] AC 444. An offer is a statement which depicts the willingness of a party to get into a contract. An acceptance is a action or statement which provides assents to the offer terms. The offeror is a person who makes the offer and the offeree is the person who has been made the offer as stated in the case of Scammell & Nephew v. Ouston [1941] AC 251
In the case of Harvey v Facey [1893] AC 552 the court stated that offer has to be promissory in nature and also has to be sufficiently complete. This means that the basic nature of an offer has to outlines such as price, quality and quantity. The offer must also have words which depicts the intention of the offeror.
Advertisements are not offer as per the ruling in the case of Partridge v Crittenden [1968] 2 All ER 421. The offer can be made to the whole world as provided in the case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. The offer can be withdrawn before acceptance is made. Where there is no time for validity the offer is valid for a reasonable time. The offer is destroyed by a rejection as per the case of Hyde v Wrench (1840) 49 ER 132 and is held to be a counter offer.
In the case of Hyde v Wrench the court stated that the acceptance has to be in terms with the offer and must not have any conditions attached to it.
The acceptance can only be made by a person who has been directed with an offer. A person not having the offer knowledge cannot accept the offer as per R v Clarke (1927), 40 CLR 227 case.
There has to be communication of the acceptance in generally and once communication is completed it cannot be undone as a valid contract is formed between the parties as stated in the case of Felthouse v Bindley [1862] EWHC CP J35.
Communication Methods for Acceptance
The postal rule of acceptance makes an acceptance valid when the post has been made by the offeree. The rule applies when the post is addressed correctly. The rules were stated in Adams v Lindsell (1818) 106 ER 250 case.
The communication in case of email is effective when the email has reached the computer system of the offeror as given by the case of Entores Ltd v Miles Far Eastern Corp [1955]
It has been provided in the scenario that Damien has a business through which he provides transport and accommodation services to people who want to get associated with sporting and other considerable events. He has been contacted with his brother who wants to book a sent for a package which includes luxury transport and accommodation. In these situations it can be stated that an invitation to offer had been made by Bryce to Damien when he inquired about the package as it was not complete and promissory in nature as required under Harvey v Facey. Where Damien sent a mail to Bryce that he wants to provide the package at the rate of $25000 which included luxury travel and accommodation a valid offer had been made by Damien. This is a valid offer as it was stated in Harvey v Facey that an offer has to be promissory in nature and also has to be sufficiently complete. This means that the basic nature of an offer has to outlines such as price, quality and quantity. The offer must also have words which depicts the intention of the offeror. The offer made by Damien is has a price and nature of services to be provided and thus it is complete and has promissory wordings.
The offeree in this case is Bryce. He has made a counter offer of Damien as he has not agreed to the price offered by him. This has rejected the offer which has been made by Damien as a counter offer rejects the former offer. This means that the original offer of Damien cannot be accepted any longer. The terms of the counter offer has a price of $20000 which has been accepted by Damien thus an project-management has been formed between the parties. The agreement was formed when the email of Damien has been received in the computer system of Bryce. Thus in this case both the elements of an agreement offer and acceptance have been met.
Conclusion
Thus it can be concluded form the above discussion that there is a valid agreement between Daniel and Bryce as the elements of offer and acceptance between the parties have been validly established.
References
Adams v Lindsell (1818) 106 ER 250
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Entores Ltd v Miles Far Eastern Corp [1955]
Ermogenous v Greek Orthodox Community of SA economics [2002] HCA 8
Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117
Felthouse v Bindley [1862] EWHC CP J35
Hyde v Wrench (1840) 49 ER 132
Partridge v Crittenden [1968] 2 All ER 421
R v Clarke (1927), 40 CLR 227
Scammell & Nephew v. Ouston [1941] AC 251
Sudbrook Trading Estate v. Eggleton [1983] AC 444
Thomas v Thomas (1842) QB 851
Todd v Nicol [1957] SASR 72
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