Re: ZERO CONTRACT part II

**RJM** Tue Jul 19, 2011 2:53 pm

As I promised.

Adequacy of Consideration

When it comes the issue of adequacy of the consideration, courts normally do not measure the sufficiency of the consideration as it is up to the parties to decide the subjective worth of each promise. For consideration to be construed be acceptable, it must be of some value, even if it is minimal value. The requirement for consideration is why you will sometimes hear of very expensive items being sold for very small amounts of money, such as a house or car being sold for $1. These transactions are essentially gifts, but the token consideration is there to ensure that the agreement is legally binding, in case the donor tries to back out. This is the position of English Law [Common Law].

For the benefit of all us, the facts and rulings

In the case of Thomas v Thomas (1842) 2 Q.B. 851, 114 E.R. 330), decision was made that a woman was allowed to reside in a property for £1 a year.

Facts: On the morning of his death John Thomas orally expressed a desire for his wife to have either the house used as their residence and its contents or 100 pounds, in addition to the other provisions made for her in his will. After his death the executors of his estate entered into an agreement with P “in consideration of John’s desires” whereby P would take possession of the house and in return maintain the house and pay £ 1 per year for the “ground rent”.
P remained in the house for some time; however after the death of his co-executor, D refused to complete the conveyance. D claimed that consideration was lacking. The court entered judgment in favor of P on all counts and D appealed.

Issue: Will a court look into the adequacy of consideration or the reasons for the bargain if there is a real bargain between the parties?

Holding and Rule:

Denman: No. A court will not look into the adequacy of consideration or the reasons for the bargain if there is a real bargain between the parties.
In this case there is an express agreement, the terms of which show a sufficient legal consideration independent of the moral feeling which led the executors to enter into the agreement. The payment of the ground rent is but part of an express agreement and the moral aspect of this contract merely pertains to the reasons for entering into the contract. We cannot be concerned with the means or reasons that one enters into a bargain if there is valid consideration.

Patteson: It would not be proper to adopt the view urged by D. We cannot mix motive with consideration. Motive is not the same thing as consideration. Consideration exists if there is some benefit to P or some detriment to D. The contract includes provisions requiring P to pay ground rent and make repairs.

Coleridge: It is conceded that mere motive need not be stated. We are not obliged to look for legal consideration in any particular part of an instrument. Merely from the fact that consideration is usually stated in some particular part, we may look to any part. In the usual location for consideration, all that is stated is the desire to fulfill the intentions of the testator. But in another we find an express agreement to pay ground rent and repair. I cannot agree with D that this was a voluntary conveyance as the payment of 1 pound annually is valuable consideration.

Disposition: Discharged – Judgment for P.

For more information on the issue of adequacy/sufficiency of consideration you can read these precedent cases;

Mattei v. Hopper, 51 Cal. 2d 119, 330 P.2d 625 (Cal. 1958).
Harris v. Time, Inc., 191 Cal. App. 3d 449, 237 Cal. Rptr. 584 (1987).
Chappell & Co Ltd v. Nestle Co Ltd [1960] AC 87

**RSM** Fri Jul 15, 2011 1:46 pm

RJM + NECK,

It is good that this topic has come back.

According to the law of contract, for there to be a contract it must be supported by consideration. Consideration in this case being simply a benefit flow from each part to a contract. It can be anything, and it need not be adequate.

Lets wait to hear more from RJM

**RJM** Wed Jul 13, 2011 1:42 pm

NEC, first and foremost, you are welcome to the Knowlegde Management Database. I hope your contributions will highly be appreciated - So don't stop!

I think your issue is closer related to the topic "When a Consultant Offer US$ 0 in Financial Proposal" which has discussed in detail.

Just follow the following link for more details https://ppra.forumotion.com/t108-when-a-consultant-offer-us-0-in-financial-proposal

For your case whereby the consultant offer $1 - this is acceptable as there is a consideration contrary to the case referred in the link above.

Just go through. I might come later with court cases to justify offer of $1 will be acceptable.

Cheers.

N.E.C.K Tue Jul 12, 2011 11:03 pm

I am a MEM student who got caught up in the ZERO CONTRACT discussion. From it i raised an issue of my own and needed clarification or directives of how to approach the issue.

------What if the firm's financial submission was worth 1$?

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