Law of Consideration in Contract †Free Samples to Students

Question: Discuss about the Law of Consideration in Contract. Answer: Introduction: The main aim of contract law is to enable the self-governing parties to have the power to use contracts to advance their shared objectives. The principle of formation of contract has been interpreted through various elements. The formation of a contract entails a process that is objectively viewed.[1] This means that a small child or a mentally incompetent person does not have the capacity to appreciate and truly understand the obligation and promise of a contract. Capacity as an element of a contract is the ability of the parties to join legally binding contracts. Legal incompetence and incapacity are employed as legal doctrines to protect the parties that lack the ability to understand the agreement terms. Besides, a contract joined by a person that does not have legal capacity is deemed void and only enforceable at the preference of the party that the law aims to protect. Contrastingly, a void contract cannot be enforced since it does not exist in the view of the law. Legal incapacity can be determined from insanity, drunkenness, infancy, and the contractual powerlessness of corporations. Mental incapacity and infancy have the same law regarding the voidability of contracts. In case of insanity before the contract formation then the contract is absolutely void. However, when the party was not legally insane at the time of the contract formation the contract might not be deemed voidable. As for corporations, they have implicit power to enter in contracts as long as it relates to the accomplishments of the stated purpose of the corporation. Hence, a contract can only be considered legally valid if both parties had the capacity to comprehend the details of the contract. The consideration element of the principle of contract formation is also as important as capacity. Each party of a contract should be able to give and receive something of value. Consideration is the value given by each member of a contract which can be a promise, an act, or a forbearance of a legal relation. Consideration should have adequacy and sufficiency.[2] However, there is a difference between the two factors whereby adequacy indicates that the amount paid is the appropriate value and sufficiency shows that the consideration should be legally valid. Conversely, a contract can be binding if the promissory receives in return a consideration that is legally sufficient and the return consideration should be legally detrimental to the person who offers. A consideration detriment is usually mostly benefits the other party. There is also the mutuality of obligation which ensures that both parties are bound by the contract. The consideration given to another party should be legally sufficient for the individual to be obligated. Giving up a right and promising future performance constitutes of valid considerations. Nevertheless, past acts of contractors that do not have legal obligation such as those done as favors may not be viewed as consideration for the present promises.[3] A party who voluntarily did something to the other party as a favor cannot claim it as consideration. Hence, the exchange of consideration is what differentiates a contract from a promise making it a vital element of contract formation. References: Klass, G. (2018). Interpretation and Construction in Contract Law.SSRN Electronic Journal. Mughal, M. (2012). Law of Consideration in Contract.SSRN Electronic Journal. Ibid.