Contract Law : Peculiar Circumstances

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Contract Law : Peculiar Circumstances

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Contract Law : Peculiar Circumstances

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Question:
Describe about the Contract Law for Peculiar Circumstances.

Answer:

1. Introduction
It is not enmesh in controversy that consideration, as a matter of course, plays an anomalous role in formation of a contract. There is, infallibly, some truth to the widely agreeable protestation that consideration in a contract must not only be adequate, but must also be sufficient.
Issue
The challenging question, however, embedded in the whole discussion of consideration is whether a past consideration is legally valid and sufficient.
Rule
The doctrine of past consideration emanates from the idea that consideration must be given after a promise is made (Roscolla v Thomas, 1842). In the case of Harrington v Taylor (1945) P was assaulted as a result of voluntarily assisting D from being knocked by W. Later D promised W that he is going to pay him for the damages but D did not pay the full promised amount. It was held by the court that a past consideration is not a valid consideration, however the court noted of the moral imperative on D to compensate P. It can thus be stated that where the consideration is given based on a predated activity or occurrence of an event that is past it is generally regarded as not good consideration (Eastwood v Kenyon, 1840).
Application
The rule was also successfully applied in Re McArdle (1951) where two siblings undertook to repair a house and later it was stated that after the sale of the house of their late father they will be paid a sum of $480 as consideration of the repairing the house. It was held that the promise to make payment was made after consideration had been provided it was the past consideration was not valid.
It has also been argued that where there are two parties in a contract and after the formation of the contract one party promises that the other that they will give him or her an extra benefit in the contract, it has been held that the consideration for that promises had already been fulfilled and therefore the past consideration will not be valid (Paul 2007).
Conclusion
Essentially, it can be observed that the rule of past consideration appears to very strict from a majority of application of the precedents discussed above. It appears that the common law did not give room for exception to this rule. However there is truth in the words that the law of equity is not cast on stone and it is subject to exceptions.
Issue
The other major issue is whether the rule that past consideration is not good consideration still applies or has since been overridden by other decisions. Indeed the strictness of the principle in past consideration has since been overridden as shall be demonstrated below.
Rule
In as early as 1652 it was held that where the promisor had expressly agreed that the other party supplies goods to him and ,the goods are actually delivered, a promise that is made after the goods are delivered shall be regarded as binding (Lampleigh v Braithwait,1615). It is apparent from the above case that there must be an express authority from the promisor that a certain act be undertaken. It should be borne in mind that the promise that is later made must be related to the act that the promisor had given express authority to (Stone 2011). Any act that was not followed by the express authority of the promisor is deemed not consideration for the later promise.

Application
The case of Privy Council in Pao On v Lau Yiu Long (1979) which appears to be the leading case when discussing the exception of the rule in past consideration, has been widely accepted across various jurisdiction and regarded as one of pervasive importance. In this case, Pao On and Fu Chipo agreed that Pao On would retain 60%of the acquired shared until 1974. Later on in 1973 Pao refused to continue to retain the shares unless he was indemnified for the value of the retained shares. The holding of this case established that for a past consideration to be valid there are three essential ingredients that were necessary. Firstly, the act must be one that was done at the request of the promisor. It can be deduced that it was the defendant himself who had agreed that Pao retain the shares.
Secondly, it was held that the parties must have had it clear and understood that the act was one which was capable of remuneration. It can also be discerned here that they both agreed that the act would be compensated by the provision of a guarantee. This second test has been held that it in most instances gives the court an onerous task showing the consensus ad idem (meeting if the minds) of the parties (Pavis 2007) It has been suggested that an objective test should be taken to determine if a reasonable person in the same position as the parties would infer that the act was one capable of being remunerated. In Re Casey’s Patents (1892) the claimant promoted patents that belonged to the defendant and when the work was almost completed the defendant promised to pay the claimant but he actually failed to pay. The court held that there was an understanding between the parties that the acts were to be remunerated and therefore the consideration even though past is valid.
Thirdly, that if the promise was made prior to the performance of the act, the promise would also be enforceable. This implies that the promise should be that one if made in the ordinary sense of contract law it will be capable of enforcement.
In the practical commercial world it has been held that a new contract that has been formed between a creditor and a debtor concerning a debt that is time bared relies on the a past consideration and can therefore fall within the panoply of the exceptions that state that past consideration is good consideration (Richard 2011). On the other hand In the English law negotiable instruments such as cheques have also been held to rely on the doctrine of past consideration. It is imperative to note that most cheques are normally cashed after the performance of an act and hence the consideration can be regarded as a past consideration (Sarah 2003).
Conclusion
The discussion above has dissected the principle of past consideration and discussed all the facets from its inception when the harsh common law doctrine applied and strictly considered past consideration as not good consideration to the present equitable past consideration which though not good consideration it can be allowed in peculiar circumstances. From the foregoing it can be plausibly concluded that the principle of past consideration has not entirely been overridden as it is subject to exceptions.

References
Eastwood v Kenyon (1840) 113 ER 482 at 485
Harrington v Taylor (1945) 36 SE 2d 227
Lampleigh v Braithwait [1615] EWHC KB J 17
Oudhton, P, 2000, Sourcebook on contract law, Cavendish Publishing
Pao on v Lau Yiu Long [1979] 3 All ER 65
Re McArdle (1951) Ch 669
Re Casey’s Patents (1892) 1 Ch 104
Roscorla v Thomas. (1842) 3 QB 234
Richard, P, 2007 Law of contract, Pearson Education Limited
Richard,S 2011, The Modern Law of Contract , Routledge
Taylor, R, & Taylor, D 2011, Contract Law ,Oxford University Press 2011
Worthington,S 2003, Commercial law and commercial practice, Hart Publishing

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