Good Case Study On Law Of Obligations

The Name of the Class

The Name of the School
The City and State
Contract Law
In order to advice Olivia, it is necessary to define consideration in a contract, part payment of a debt and the doctrine of promissory estoppels. A consideration in the law of contracts refers to an item that has value that one party promises another in a legally binding agreement. It must be something of value and not necessary money. Therefore, a consideration refers to where one valuable thing is exchanged for another; it can be in the form of benefit, profit, interest, or right given to one party or some forbearance, detriment, responsibility or loss, given, suffered, or undertaken by the other.
In relation to Dream Rentals’ agreement with Olivia the terms of the contract is that in return for Dream Rentals providing a horse drawn carriage for the wedding Olivia will have to pay £3,500. This is a binding contract because all the essential requirements of a contract are present namely offer, acceptance, consideration, mental capacity of both parties, both parties have agreed to do as they have promised and the promise is legal. The issue in this case is in the consideration aspect of the contract. Dream Rentals approached Olivia and sought to change the contract by increasing the cost of the horse drawn carriage to £3,500 to which Olivia willingly agreed. However, before this change in the contract, the consideration for Olivia was £3,000 while Dream Rental’s consideration was the horse drawn carriage.
The issue is whether the consideration is still in existence in the contract between Olivia and the Dream Rentals. It must be considered whether this is a new binding agreement and whether the change of the price was supported by consideration. There are two outcomes to this case; one is that Olivia will have to pay the extra amount because both parties have offered considerations. The other outcome is that she will not pay since only party is offering a consideration.
Richards states that ‘Sufficient does mean that consideration needs to be adequate’ If one party merely performs an existing contractual duty in return for a promise then the consideration is sufficient. Here it would mean that Dream Rentals are not merely performing an existing contractual duty to provide a horse drawn carriage and that Olivia is paying extra for this. Olivia does receive a benefit for the extra payment that she has agreed to make. Her promise to pay extra is binding as it is supported by sufficient consideration by Dream Rentals. In other words, the contract is still binding because both parties are offering something of value in return for another valuable item. Dream Rental’s consideration is the well-feed horses while Olivia’s consideration is an extra £500. Dream Rental promised Olivia that they would lend her the horse drawn carriage as long as she pays extra money.
However, if one can prove that the promise was freely made and that Olivia was receiving a defective benefit, or obviously a disbenefit, for the extra payment she agreed to make, the agreement will not be supported by consideration and will not be binding. This principle will not apply in Olivia’s case as the promise of extra payment was freely given. It was suggested by Dream Rentals rather than offered by Olivia, so Olivia only owes Dream Rentals £3,000 as originally agreed. In this case, only one party is giving a consideration and that is Olivia. Her consideration is the new amount of £3500 while Dream Rentals do not offer her any consideration for the extra £500. This because she will receive the same horse drawn cartage whether the cost animal feed had increased or not. If Dream Rentals had agreed to exceed their public duty in return for extra payment then the agreement would be binding, as it would be supported by consideration.
After the party, Olivia told Dream Rentals that she would only pay £2,500. Dream Rentals agreed to accept this figure in the settlement of the debt of £3,000. Olivia only paid the amount they had agreed earlier. ‘Payment of a lesser sum on the day in satisfaction of a greater sum can be any satisfaction for the whole’. The rule in Pinnel’s case states that debts are not payable in full unless consideration is given, i.e. payment in a different fine, at an earlier time, at a different plate if at the debtor’s request. Here Olivia paid a greater amount in satisfaction of a lesser amount and Dream Rentals did not appear to have received any benefit. Under the rule in Pinnel’s Case the balance of the debt remains due i.e. £500 as Dream Rentals’ promise to accept, less in satisfaction of the debt was supported by consideration.
Dream Rentals should not try to claim the balance of the money from Olivia but she may seek to use the defence of promissory estoppels. Promissory estoppels can only be used as a defence to a cause of action. It can only be used as a shield not a spade.
Promissory estoppels can be used as a defence where, “If one party, by his words, leads another to agree that the strict rights arising under the contract will be insisted upon, intending that the other should follow on that belief, and he does act on it. Then the first party will afterwards not be allowed to insist on the strict legal rights when it would be equitable for him to do so”
Based on the criteria as set out above, Dream Rentals has agreed to enforce its strict legal rights; it has agreed to accept more. However, the promise was given freely by Dream Rentals, it was given reluctantly, believing that it (Dream Rentals) had better accept this as it would likely not receive any more, therefore it would not be equitable for Dream Rentals to go back and ask for more. Olivia would therefore be able to successfully plead promissory estoppels as duress to a claim for the balance of the money, which Dream Rentals say are due. The advice to Olivia therefore is that Dream Rentals will not be able to claim the balance of the monies due, i.e. £1,000.
In relation to Zane, Olivia remembered that he owed her £300 and instead of paying her back in monetary form he could perform magic at her sister’s wedding. Zane agreed to perform in return for not having to pay the £300. In this case, Olivia needs to be advised whether this is a binding contract or not, in relation to consideration. Zane owes a debt to Olivia and under the rule in Pinnel’s Case, as described above, if a debt is being paid later, at a differing time or sum at the request of the debtor this can be sufficient consideration. Here Olivia is requesting Zane to repay his debt in a different form, which is not money i.e. by performing for the evening at her sister’s wedding. Sufficient of consideration means, that what Zane is offering Olivia is a change for a promise, this promise must have an economic value but that the value of the promise does not have to be equal to the original consideration. “A contracting party cannot stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisor does like pepper and will throw away the can.” Therefore, it does matter that Zane would only have charged £150, whereas he owes Olivia £300, as consideration must be sufficient but does also need to be adequate. Similarly, there is presence of considerations from both parties, for Zane his consideration is the performance at Olivia sister’s wedding while Zane promises that the performance will clear the debt that Zane owes her.