The importance of consideration in contracts
The initial issue in the case is to determine the existence of a binding agreement between Sam and Josie.
When two or more parties exchange promises with each other for a consideration an agreement is formed between them. When such parties have the intention of legally binding the other to the agreement than such agreement becomes a contract. A contract can be either written r formed orally. In w written contract the terms are signed and verified by the parties and in oral the terms are discussed and agreed verbally. A contract cannot be formed without its essential elements such as offer and acceptance, consideration, capacity, intention and clarity.
In order to initiate a contact one party must make an offer. An offer has to different from an invitation to a treat. An offer indicates the intention to form a legal relationship whereas invitation to offer indicates intention for negotiation. In the case of Partridge v Crittenden it was held by the court that when only an invitation to an offer exist it is not legally binding on the parties. The offer has to be accepted before it has been revoked by the offerer. An offer can be revoked after the expiration of period, by rejection of the offer, death of the offerer and through a counter offer. The revocation has to be notified to the offeree to take effect.
Only the party to whom an offer has been made can accept it. The offer has to be accepted without any kind of alterations to it or else it is regarded as a counter offer and not an acceptance as ruled in the case of Hyde v. Wrench. When such case occurs the offer which was made originally ceases to exist. In order to be valid an acceptance has to be communicated properly. Generally acceptance is said to be comlete when it is communicated to the offerer. However according to the postal rue as per the case of Adams v. Lindsell, an acceptance if made by post is complete when the letter is sent by the offered and goes out of his control.
The contract must have a valid consideration which does not have to be adequate. It also has to be taken into account that the parties had the intention of binding each other to the terms of the agreement.
As per the case of Partridge v Crittenden as discussed above the painting which was placed in the studio of Joise can be regarded as a mere invitation to an offer and not offer itself thus he has no obligation to sell it. With respect to the painting the offer made by Josie was to expire on February 21 midnight. The painting was sold to Wendy the next day for a higher price. However according to the postal rule Sam completed the acceptance before 21 February and the revocation was not conveyed to him
Conclusion
Thus Sam has a binding contract with Josie as all elements are satisfied.
The rule in Pinnel’s case
Was there a contractual breach between Sam and Josie and any other remedy available for such breach? ‘
A contract is said to be breached when one party of the contract does not abide by the terms of the contract and causes hardship to the other party. The party who has suffered due to the breach and is a party to the contract can claim damages for the breach of contract made by the other. The concept which the court uses with respet to the award of damages to the aggrieved party was provided by the case of Addis v Gramophone. The court provided in this case that the intention of law is to place the aggrieved party in a position where he would have been if the contractual rights would not have breached or the contract did not exist in the first place.
Two majority kind of remedies can be applied by a person which are monetary compensation, specific performance, equitable remedies, injunctions and rescission. The defendant in the case of Lumley v Wagner, had been prevented from signing with another party through an injunction. With respect to specific performance the court in the case of Nutbrown v Thornton ordered the defendant to deliver the machine in question to the plaintiff. In the case of Car & Universal Credit v Caldwell, the court allowed the aggrieved party to rescind the contract because of fraud by the other.
In this case as discussed above there was a proper contract between Sam and Josie. Even though the offer was revoked it was not conveyed to Sam and he accepted it through the postal rule. However the painting was sold to a third party by Josie at a higher price. In this case it is clear that Josie has breached the contract which she had with Sam even though it was not intentional. She is liable to pay compensation to Sam as discussed above or Sam may claim specific performance or may even rescind the contract. With specific performance and injunction Sam may order the stop of sale of the paining and force the sale to himself.
Conclusion
Sam can claim the above mentioned remedies due to the breach.
Consideration is one of the most important element which with a valid contract cannot be constituted. This section of the paper discusses the case of Penny v Cole which is also famous with the name of the Pinnel’s Case. The case is in relation to the importance of consideration in general contact. In this case it had been provided by the court that when a part payment has been received in relation to a debt it cannot be considered that the original debts has been extinguished. Th provisions provided by this case a very simple in relation to considerations in contracts. Generally this rule is sensible and fair. But one rule for all problems is deemed to bring hardship and criticism. The problem arises when the rule starts to appear unfair in relation to certain cases. This paper would discuss the unfairness which might arise by applying the general rue in all situations. The rule would be applied in certain circumstance in order to bring out its defects.
Sensibility and fairness of the rule
In the case of Penny v Cole the plaintiff sued the defendant with respect to an amount of $810 with respect to a bond debt. It was argued by the defendant in this case that he paid $526 to the plaintiff even before the debt was due and this sub was accepted by the plaintiff as a full settlement for the debt. The court through common pleas held that the plaintiff in this case had total rights to recover the full amount of debt from the defendant even when he had an agreement to settle for a less value. The court ruled that the part payment of the debt cannot be used to forebear the total amount.
In the case of Foakes v Beer the ruling made in the pinnel’s case was used successfully. A sum amount to $2000 was owed by the defendant to the plaintiff with respect to the courts decisions. The parties reached an agreement that the defendant would pay $500 immediately and the rest of the amount would be paid latter. Although interest in general was carried by the judgment debts no discussion had been initiated on this. A claim from interest was made by the plaintiff even after all the installments had been made by the defendant. In this case the court held that the plaintiff was entitled to receive the interest. The decision was made by applying the principles used in the case of pinnel as the attained agreement was deemed to be a part payment. The court held that the consideration of not accepting the total amount was not good.
Nevertheless, the law specified in Pinnel’s case has been under criticism in various cases, the creditors are allowed to rescind on the promise and also entitled to claim the remaining amount by it. In the case of Couldery v Bartrum, Jessel it was stated by MR that under the provisions of common law of England, a creditor are allowed to do anything with respect to the satisfaction of their debt and even settle it for a lesser amount. So, a person can take a horse or a canary based on the accord and satisfaction but because of the individualities of the common law, the person could not accept the 19 shillings and 6 pence.
The rule has been subjected to many alterations due to its high criticism.. The loan is considered to be cleared as soon as an acceptance is reached by the creditor to receive a amount which is lesser than assured, when the equal is attended by something diverse in kind, for example, a chattel. Additional exclusion to this rule is the compensation of a lesser amount in diverse currency or at a diverse place which can be thought as legally binding release on condition that the similar is made at the demand of the creditor. The deception done on a third party is also considered as an exclusion from this rule.
Nevertheless, the main exclusion to the Pinnel’s case is regarded as the doctrine of promissory estoppel. The concept of promissory estoppel shows the unfairness of the Pinnel’s case in certain cases. This concept was brought up in the landmark case of Hughes v Metropolitan Railway Co and was used latter in the case of High Trees also known as the case of Central London Property Trust Ltd v High Trees House Ltd. In the previous case notice of six months had been provided by the tenant for taking responsibility of the repairs otherwise, this would cause the lease to be forfeited.
Circumstances in which the rule may be deemed unfair
A compromise was initiated between the tenant and the landlord with respect to the purchase of ownership of the said property by the tenant. The repair work were not carried on by the tenant as he thought he would no have to do so when he is the owner of the property. Although, the talks did not achieve a result at the last moment and further an eviction notice was given by the landlord to the tenant. The notice was based on the fact that the repair work was not carried on however the court applied the principle of promissory esstopel and sopped the eviction of the tenant.
In the High Trees case, the defendant leased an apartment at a rent of £ 2,500 from the plaintiff but due to the war conditions the defendant had crisis in getting all the flats occupied, results in losses for him. Therefore, an agreement between the parties were enforced were it states that the rent will be lowered to half until the war situation changes. After the war was over and the entire situation returned to its normal the plaintiff, asked the defendant for increased rent and sued him. The decision of the court was upheld. In the statement made by Denning J. said that if the plaintiff had asked the defendant to pay the full rent from the time the rent was reduced, the plaintiff would fail because the parties to the agreement believe that no strict legal rights won’t be enforceable.
Promissory estoppels are the principle that applies for the job that will be done on a future date. In the case of Foakes v Beer, the court decided as per the decision in High Trees case, the same was decided in the Pinnel’s case where Denning J. gave the judgment. To apply for the promissory estoppels it is important that the promisee should act as per the promise made by the promisor to the promisee because if the promisee acts on the promise no harm can be happen.
The judgement stated in the Pinnel’s case says that part payment cannot be allowed to be forgone and the same in case of promissory estoppels is not allowed. This is done so because it would hold the reliable position between the promisor and the promisee. Therefore, if the decision of the Pinnel’s case were applied in the casr of the High trees then the plaintiff would have been successful in getting the rents of the period, which he had previously cut short and so this would have been unfair. Thus, to safeguard the interest of the promisee, the promisor cannot go back on their promise and has estopped.
The decision and the comments of Denning J. has been criticized in the High Tress case but it had been very important for the judges and helps as a solution to the problem arised in the Pinnel’s case. In the case of Legione v Hateley, it was held that promissory estoppels is a part of the law of Australia and has provided the methods of its use. Therefore, to apply the principal of promissory estoppel there has to be two conditions which is necessary to be fulfil, Firstly, the promise should be brief, clear and explicit and lastly, the promise has made the other party in a disadvantageous position.
Thus, it is to be concluded that the rule established in the Pinnel’s case was not liked much as it was required that the individual should make payment of less than what was required to be made. Doctrine of Promissory estoppels is the exception to the rule which was laid in the Pinnel’s case.
References
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Andrews N, Contract Law (Cambridge University Press, 2nd ed, 2015)
Blum BA, Contracts: Examples & Explanations (Aspen Publishers Online, 4th ed, 2007)
Carter JW, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007)
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Macdonald E, and Atkins R, Koffman & Macdonald’s Law of Contract (Oxford University Press, 8th ed, 2014)
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Adams v. Lindsell (1818) 106 ER 250
Addis v Gramophone [1909] AC 488
Car & Universal Credit v Caldwell [1964] 2 WLR 600
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130
Couldery v Bartrum (1881) 19 Ch D 394
Foakes v Beer (1884) 9 Apps cas 605
Hughes v Metropolitan Railway Co [1877] UKHL 1, [1877] 2 AC 439
Hyde v. Wrench (1840) 3 Beav 334
Legione v Hateley (1983) 152 CLR 406
Lumley v Wagner (1852) 42 ER 687
Nutbrown v Thornton (1805) 10 Ves 159
Partridge v Crittenden [1968] 1 WLR 1204
Penny v Cole [1602] 5 Co. Rep. 117a.
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