Elements of a Contract

Topics: Contract, Contract law, Offer and acceptance Pages: 5 (2040 words) Published: August 14, 2013
Ques1. “Considerations must be sufficient but need not be adequate”- discuss. In Contracts, What is "Consideration"?
In order for any contract to be enforceable, courts generally require three things:  mutual assent (agreement to the contract terms), a valid offer and acceptance, and consideration.  Consideration in law is one of the three main building blocks of a contract. It can be anything of value, which each party to a legally binding contract must agree to exchange if the contract is to be valid. If only one party offers consideration in contract, the agreement is not legally a binding contract. In its traditional form, consideration is expressed as the requirement that in order for parties to be able to enforce a promise, they must have given something for it. Something must be given or promised in exchange or return for the promise. A contract must be met with or supported by consideration to be enforceable, also, only a person who has provides consideration can enforce a contract. What Does “Adequate Consideration” Mean?

In order for a contract to be enforceable, the consideration that is exchanged must be deemed “adequate”.  This means that the mutual exchange must involve a fair price in comparison to the promise that is being made.  For example, if A promises that B that they will sell them their house worth $50,000, and B offers to pay only $100, this consideration is probably not going to be “adequate”.  However, if B offers to exchange services that are roughly worth $50,000, then the consideration would be considered adequate.  (Note that consideration need not be money, but can take the form of anything that has legal value.) Although consideration must provide some benefit to the promisor or detriment to the promisee, these do not however have a great deal. Providing something is given in return for a promise, it does not matter that it is not much, or not what the promise would usually be considered worth. Courts would not inquire into the adequacy of consideration so long as there are some. The reason for this rule is due to the old idea of freedom of contract, which required that the parties themselves should be allowed to make bargains that suit them without interference from courts. The first rule of the doctrine of consideration is that consideration must be sufficient but it need not be adequate. That is to say, the courts will not enforce a promise unless something of value is given in return for the promise. This is what is meant by saying that consideration must be ‘sufficient’. On the other hand, the courts do not, in general, ask whether adequate value has been given in return for the promise or whether the agreement is harsh or one sided. This is what is meant by saying that consideration need not be ‘adequate’. So if a house worth Tk1,00,00,000 is sold for Tk100 that is sufficient consideration, even though it is manifestly inadequate.

Ques2. “All contracts are agreements but not all agreements are contract”- discuss. Definition of contract
According to section 2(h) of the Indian Contract Act: " An agreement enforceable by law is a contract." A contract therefore, is an agreement the object of which is to create a legal obligation i.e., a duty enforceable by law. From the above definition, we find that a contract essentially consists of two elements: (1) An agreement and (2) Legal obligation i.e., a duty enforceable by law. We shall now examine these elements detail. 1. Agreement. As per section 2 (e): " Every promise and every set of promises, forming the consideration for each other, is an agreement." Thus it is clear from this definition that a 'promise' is an agreement. What is a 'promise'? the answer to this question is contained in section 2 (b) which defines the term." When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal, when accepted, becomes a promise." An agreement, therefore, comes into existence...
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