Nominal and sufficient consideration

Nominal and sufficient consideration

Consideration is a concept popularly used in legal matters and it relates to contracts. It refers to anything that has value that a person promises to give another when making a contract (Clarke, 2010). It therefore takes the form of services, physical objects, money, abstinence from future actions and promised actions among many others (Clarke, 2010). In creation of a legally enforceable contract, it entails benefit to the promisor or detriment to the promise. This paper therefore delineates on the accuracy of the statement that “Consideration does not have to be adequate or commercially realistic, nor does it have to be expressed in monetary terms, it merely needs to be “sufficient”.

As stated earlier, consideration requires bargaining between two people and it entails value. Consideration reached therefore does not necessarily have to be money for the contract to be legally binding. Two parties can actually can actually agree to perform or promise to perform certain tasks for the other party without having to be given money. Therefore, this means that consideration does not need to be expressed in monetary terms. In contracts, the value between considerations reached by each party to, a certain contract does not need to be comparable (Clarke, 2010). What really matters is the presence of a consideration and norm adequacy. For example if A offers B $100 to buy B’s car, private jet and mansion, there is consideration in both sides as A’s consideration is $100 while ,B’s consideration is the car, mansion and jet.

Nominal consideration is also recognized and is usually a benefit that lacks sufficient legal value that justifies a contract. In most instances, a question of nominal consideration arises in circumstances where there is doubt, coercion or illegal activity in contractual relationships (Internet, n.d). Such contracts are normally reached or come into existence after each party to a contract is given something of value (Atiyah, 1986). Furthermore, nominal consideration has no relationship with the value of the article or contract in question. For example, a contract of a promise to visit someone after paying your bills is an example of a nominal consideration. Another example of a nominal consideration is $20 consideration for conveyance of a land title deed.

On the other hand, sufficient consideration is a consideration deemed by law to be of sufficient value to support an ordinary contract between two parties (Weitzenbock, 2012). It is also able to support a particular transaction. For a contract to be valid and to be enforceable it is required to be sufficient. It is required to provide some benefits or some detriment to the promise, even though the benefits or the amount needs not to be high. A sufficient consideration is also required to have some material or economic value even if negligible (Weitzenbock, 2012). Such a consideration is not solely in emotional o sentimental value such as following someone wishes. A promise not to sue another person is also allowed between parties and in such circumstances where A has a claim against C, A’s promise not to enforce a claim can be valid consideration for the promise given by C in return. Hence in case C negligently damages A’s property, A’s promise not to sue C for his negligence is consideration for C’s promise to pay for the damage.

It is also important to note that to enforce a legal claim in a sufficient consideration it requires the parties to meet some requirements. One is that the claim is required to be reasonable and not vexatious or frivolous (Weitzenbock, 2012). This means that the consideration should not be unrealistic to the contract. The promisee must honestly believe that the claim will be successful. Even if the claim would actually fail in law, it is prudent for the promisee to have faith that claims have chances of success. Furthermore, the promisee should not have concealed facts from promisor, as this would otherwise affect the validity of the claim (Weitzenbock, 2012). The agreements should be open to both the parties to ensure that no information is concealed as this affects its validity. It is also vital for the promise to demonstrate willingness and intentions to bring proceedings in case the promise is not honored.

Various cases relating to nominal and sufficient consideration have sufficed in courts one of them being Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1. In this case, Rofyfey Bros & Nicholls subcontracted Williams for carpentry work in a block of 27 flats (West law, 2004). However, the agreed price was low to allow the subcontractor to operate satisfactory and to make profit. The main contract had a time penalty in case the contract was not completed in time. However, because of the worry on the defendant, he made an oral agreement to pay the subcontractor additional sum of $10300 at the rate of $575 on every flat that carpentry works was complete (West law, 2004). This therefore, was a nominal consideration as it was not part of the contract. This was meant to ensure that the subcontractor works hard within the stipulated time. After working for seven weeks, the plantif had already finished eight flats and had only been paid $1500. The plaintiff sued for breach or failure by the defendant to humor his promise by paying the additional sum. The judge ruling favored the plaintiff, as the additional sum of money was enforceable as there was sufficient consideration.

The appeal failed on grounds that there was a contract reached. The contract was a promised by the defendant to pay the plaintiff in return for the promise to perform his existing contractual obligations and therefore there was a benefit or detriment. Promising to pay additional funds constituted a consideration and the contract was secured genuinely. Furthermore, the contract resulted to commercial advantage to the defendants, which provides sufficient consideration to support or oblige defendant to pay additional sum. Therefore, payment of additional amount of money to the plaintiff was enforceable. This case is a clear demonstration of application of nominal and sufficient consideration. Nominal consideration is exhibited through the oral agreements that the two parties reached. The additional sum of money promised to the plaintiff was a consideration that was to be enforceable. Therefore, the benefits that the defendant was to accrue from the services rendered by the plaintiff were a promise and a consideration that was binding.

Based on this case that occurred in England, it clearly manifested application of nominal and sufficient consideration. The Australian contract law needs to incorporate these elements in their contract laws to ensure that they provide justice to the various parties that have related cases. This is because promises or agreements made between parties whether oral or written are binding and should be met by the parties that make them.

In conclusion, consideration is a popular concept applied in contract law. It has helped various parties to get solutions relating to matters relating to breaches of agreements. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 is one of the astounding cases that has provide limelight and is used as a point of reference by judges in issues relating to nominal and sufficient contracts. Furthermore, as explained in this discussion, there is no doubt that indeed consideration does not have to be adequate or commercially realistic, nor does it have to be expressed in monetary terms; it merely needs to be “sufficient”. Consideration can be expressed in other forms such as promise, services and not to be adequate or commercial realistic to be enforceable.

Reference lists

Atiyah, P 1986, Consideration: A Restatement’ in Essays on Contract, Oxford University Press

Clarke, J 2010, Australia contract law. Consideration. Retrieved from: http://www.australiancontractlaw.com/law/formation-consideration.html

Internet, n.d, Elements of consideration (4316). Retrieved from: http://www.shsu.edu/~klett/ELEMENTS%20OF%20CONSIDERATION%20ch%2012.h tm

West law. 2004, Williams v Roffey Bros & Nicholls (Contractors) Ltd[1991] 1 QB 1. Case, Retrieved from:

http://www.thomsonreuters.com.au/product/AU/files/720502512/williams_v_roffey_bros _and_nicholls.pdf

Weitzenbock, E 2012, English law of contract: consideration. Retrieved from: http://www.uio.no/studier/emner/jus/jus/JUS5260/v12/undervisningsmateriale/Considerat ion.pdf