Business Law

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  • Topic: Contract, Contractual term, Gentlemen's agreement
  • Pages : 2 (438 words )
  • Download(s) : 25
  • Published : March 28, 2013
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Consideration is an essential element of a valid contract. The four main ingredient of a contract is the offer, the acceptance, the consideration and the intention to create legal relation. Consideration refers to what one party to an agreement is giving or promising in exchange for what is being given or promised by the other contracting party. There are certain rules that govern a valid contract.

THE ISSUE:
The issue in the case is whether the agreement was legally binding upon Dream Design or whether it failed for want of consideration.

THE LAW:
If the promise merely fulfils an existing contractual duty to the promisor, he does not provide consideration to buy the buy promisor’s promise. In the case,

Atlas Express Ltd. V.Kafco (Importers and Distributors) [1989] 3 W.L.R. 389 K entered into a contract with W to supply W with baskets. The baskets were to be delivered by A and a rate was agreed upon between the party. After the first delivery A demanded more money from K before making any further deliveries to W. K unwillingly agreed to pay the extra money and A continued with the delivery. Later on K refused to pay the extra money to A and A sued K. It was held that A had not given consideration to K to buy K’s promise of extra money. A could not say that making the delivery was the consideration, as A was contractually bound to make these deliveries under the original contract. With the case of Dream Design the consideration will not be sufficient where a contractually duty already exist. The fact is that Parma Steel and Dream Design agreed on a written contract dated October 22, 2009 for the supply of fabricated steel at a cost of $165 per ton for “Grade60,000 and $156 per ton for “Hard Grade.” In this case Parma Steel could not say that making the deliveries was the consideration, as Parma Steel was already contractually bound to make these deliveries under t he original contract. According to Tucker J. there was no consideration for the new...
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