Chapter8

Chapter Overview

  • Title: Contemporary Canadian Business Law Principles & Cases

  • Authors: John A. Willes, John H. Willes, Carol A. Willes, Frances M. Willes

  • Edition: Thirteenth Edition (2024)

Chapter Objectives

  • Understand mutual benefit in contracts.

  • Define consideration as a representation of this mutuality.

  • Recognize exceptions to the consideration requirement.

  • Explain the role of estoppel in the case of gratuitous promises.

Consideration in Contracts

  • Definition: Consideration is something valuable in the eyes of the law that a promisor receives in exchange for a promise.

    • Example: "I will do this if you do that."

    • Essential for a contract to be binding.

Forms of Consideration

  • Types of consideration include:

    • Money

    • Services

    • Promises not to act (forbearance)

    • Giving up a right

    • Delivery of property

    • Reciprocal promises (promise for a promise)

Gratuitous Promises

  • Definition: A promise made without consideration, thus non-enforceable under law.

    • A gratuitous promise lacks legal value if no exchange occurs.

Exceptions to the Consideration Rule

  • Gratuitous Services: Must be performed with care if accepted.

  • Negotiable Instruments: Promissory notes can bind individuals even without prior consideration.

  • Charitable Donations: May be enforceable if a specific project is based on the pledge.

Adequacy of Consideration

  • Courts generally do not assess the adequacy of consideration.

    • Value agreed upon is a matter between parties, not judges.

    • A record of intentions can strengthen enforceability of promises.

    • A minor token may suffice to form a binding agreement.

Seal as Consideration

  • A seal indicates a commitment to a written promise or agreement.

    • Affixing a seal can negate the need for additional consideration.

    • Traditionally involved wax seals, now considered in digital contexts (e.g., electronic signatures).

The Click as Consideration

  • Current legal interpretations are assessing whether a mouse click serves as consideration.

  • Potential for courts to validate this as an equivalent of a traditional seal.

Past Consideration

  • Definition: Past consideration is not valid; must be present or future consideration.

  • Previous benefits or payments received do not qualify as consideration for new promises under the law.

Nature of Consideration Required

  • Consideration must be legal.

    • Cannot involve illegal acts or violate public policy.

  • Contracts are void if they violate applicable statutes.

Tenders

  • Distinction between an offer and tenders.

    • Tenders invite proposals but do not bind the seller to accept any offers.

    • Can withdraw tenders prior to acceptance if no firm commitment is made.

Quantum Meruit

  • Definition: A remedy to recover costs for services/materials requested without a specified price.

    • Often invoked in services where no price has been agreed upon prior to service delivery.

Debtor-Creditor Relationship

  • Debt is satisfied when the payment is made in full.

    • Any agreement to accept less than what’s owed is typically a gratuitous promise and not enforceable.

    • New consideration is required for a modified promise.

Exceptions under Law

  • Offers regarding less than full payment can be validated under specific cases, including:

    • Signed written agreements under seal

    • Acceptance of non-money compensation

    • Parts of common law and equity reflecting flexible approaches toward consideration.

Estoppel

  • Definition: Prevents a person from retracting a promise if another party has relied on it.

    • Enforceable even without consideration in certain circumstances.

  • Key factors for establishing estoppel:

    • Intention for promise to affect the relationship

    • Reliance by the other party leading to a change in position.

Checklist for Considerable Contracts

  • Evaluate:

    • Is consideration present?

    • Is it legal under the law?

    • Is mutual consideration existing in both directions?

    • If any requirements fail, consider exceptions (e.g., seal, donations).

Summary

  • Consideration is crucial in contracts; gratuitous promises need formal backing (written/sealed) to be enforceable.

  • Legal value must exist, but the actual value is not strictly quantified.

  • Courts often determine reasonable price where consideration is unclear.

  • Estoppel serves as a defense in instances of reliance on non-binding promises.