Example Of Case Study On You Be The Judge: Consideration

Contracts are regulated under two bodies of law, namely the common law or contracts and the Uniform Commercial Code (UCC). Accordingly, the first step in analyzing a contract is to determine which law applies. The common law refers to the judge made case law that has developed over time. The common law generally applied to contracts for services, real property, employment and intangible assets (Blum, 2013). On the other hand, the UCC refers to the standardized and continuously updated regulations of commerce that were drafted and promulgated by the American Law Institute to serve as a model for courts to use in place of the common law for certain contracts (Goldberg, 2007). The UCC normally applies to sales of tangible goods and securities such as stock (Goldberg, 2007). In the case of Kim and Son, the alleged contract is for repayment of financial loses. Accordingly, the UCC would not be applicable but rather the common law must be used to determine the outcome.
In order for a contract to be legal enforceable under the common law, it must have: mutual assent (an offer and an acceptance); consideration; and no defenses or a legal reason that a court would find voids the agreement (Blum, 2013). In the case of Kim and Son, there appears to be mutual assent. To be sure, Son offers to pay Kim for his loses, and Son accepts. There are seems to be no defenses to the agreement. Son was not forced to make the offer; moreover he did not misrepresent himself in making the offer, and the offer was not for an illegal purpose. The question that remains, however, is whether or not there was consideration. It is important to note, if the UCC applied, a contract could be formed in whatever manner would illustrate that there was sufficient agreement between the parties, even if some specific terms were left open.
Consideration in the common law refers to a negotiated change in legal position between parties (Blum, 2013). In other words, consideration is a bargained for promise to act that either provides a benefit to the person making the promise or a detriment to the person accepting the promise. Consideration, for instance, can include: doing something you are not legally obligated to do or promising to do something that you are not legally obligated to do. A court, in determining whether consideration exists, will consider what was bargained for and whether any bargained results in a legal benefit or detriment (Blum, 2013). Moreover, if a court finds the existence of an illusory promise, it will deem that there is no consideration. An illusory promise is one that is so indefinite that is cannot be enforced; or where the fulfilment is optional or discretionary (Castro & Ricks, 2006).
Applying the common law’s position on consideration, it is clear that the court was correct in finding that there was no consideration. Notwithstanding the fact that the “agreement” was made when both Son and Kim were extremely inebriated, there does appear to have been a bargained for promise to act. Unfortunately, the promise does not lead to a detriment for Kim. Investment is an inherently risky business with not guarantee that you will get a return on whatever you invested. It is all quite possible that even one’s best efforts my result in a loss. Kim knew or should have known this when he entered into agreement with Son. Consequently, there is not much he can do once his investment was lost. Therefore, his promise not to sue Son is not a detriment to him, in fact not suing Son is a benefit because he would most likely lose the lawsuit. To be sure, under the terms of the agreement, Kim gets money back that he is not entitled to and saves himself the expense of having to pay for the attorneys and costs to bring a lawsuit. Under the law, there is no change of legal position and therefore no consideration. Second, Son’s promise to Kim is illusory. According to the plain words written on the napkin, Son promises to pay “to the best of his ability.” So while Kim is bound to not sue; there is no accurate way to measure what Son’s “best ability” is. It could mean a year’s effort or, in the alternative, half an hour during lunchtime. Son has not really limited his options and thus is not bound to anything. Accordingly, there is no consideration.

References

Blum, B. (2013). Examples and Explanations: Contracts (6th ed.). New York, NY: Wolters Kluwer Law & Business.
Castro, W.R., & Ricks, V. D. (2006). “Dear sister Antillico”: The story of Kirksey v. Kirksey. Retrieved on February 17, 2015, from http://ssrn.com/abstract=899002
Goldberg, V.P. (2007). Desperately Seeking Consideration: The Unfortunate Impact of U.C.C. Section 2-306 on Contract Interpretation. Retrieved on February 17, 2015, from http://www.moritzlaw.osu.edu/students/groups/oslj/files/2012/04/68.1.goldberg.pdf