Discuss about the Business and Corporation Law for Business Ethics.
Consideration is the value that a party gets in a formal contract in exchange of some promise or value. No contract without consideration can be enforceable by law. It is necessary that consideration cannot be based on past performance. Consideration should be the valid as per the law. Payment of debt cannot be considered as valid consideration (Smith et al, 2013). For example in bank loan, the loan amount is consideration for the party for which party ready to pay the principle amount with the interest and for bank interest is consideration for that they are remitting loan to party. Therefore, consideration refers to exchange of some promise or value by the parties.
Issue Analysis - Jane has Lotus Super 7 sports car. She is going to overseas and due to that reason she offers her car to jack. It is also given that the market value of the car is $25000. Jack accepts this offer.
Rules- As per the language of law, consideration stands for exchange of promise or products having some worth. Consideration can be one thing, which is received by one party in exchange of some promise or valuable. From point of view of Jack, there is nothing performed or promised by Jack, so car cannot be stated as consideration for Jack. Therefore, in this case there is no consideration (Slorach and Ellis, 2016). It is mandatory as per law in the agreement that consideration must be exchanged by the parties.
For example – A completes his diploma in engineering. After completion of diploma, he offers his books to one of his friends i.e. “B”. Market price of books in good condition is $2000. B accepts this offer. In this situation, there is no consideration, as there is no any promise made by B for which A has offered his books.
This agreement is not enforceable by law, because there is no consideration in this agreement and consideration is mandatory for a valid agreement and a valid contract. In this offer, there is no disclosure of the money or price, on which Jane offers her car to jack. Only the market price of product is given in the case. Jack accepts this offer. It cannot be considered that Jane has offered her car for purpose of sell. It is possible that Jane had offered the car is gift. So, in this situation, there is no consideration (Lambiris and Griffin, 2015).
Issue analysis – Jane offer to sale her Lotus Super 7 sports car to jack. She coats the price of offer as $25000. The market value of Lotus Super 7 sports car in the good condition is approximately $25000. Jack accepts the offer of Jane.
Enforceability of agreement – This agreement is enforceable by law. In this contract, all the things of valid contract are clearly mentioned. Consideration is present in this case for both the parties, as both the parties are exchanging some value. In this case, car is consideration for Jack and for Jane, the consideration is $25000 paid by jack. For enforceability of law, it is also necessary that consideration should be legal and this thing is available here. The presence of offer and acceptance are mandatory in an agreement.
Example – “A” offers to sell his books to B at a price of $200. The market price of books are in good condition is $200. B accepts this offer. This is an example of where consider is present since there is an offer and acceptance.
In this case, Jane offers to Jack his car at $25000 and jack accepts the offer. The free consent of both the parties is also available in this agreement (Jones, 2013). Both the parties are willing to do the contract and exchange the consideration. There is no undue influence in given case. All the essential elements of valid contract are present in given case such as free consent, consideration, offer, and acceptance, legal object are present in the contract (Smith et al, 2013). Therefore, after all the evaluation it proofs that the agreement is enforceable by law and valid.
Issue Analysis – Jane offers her sports car to Jack. Offer price that is by quoted by Jane is $2500. The market value of Lotus Super 7 sports in good condition is $25000. Jack agrees to the offer of Jane.
Enforceability of Agreement – In this agreement, the offer price that is quoted by Jane is very low in comparison to the present market price. The offer price of car is $2500 and the present market price is $25000. However, this difference in the prices do not affects the agreement’s legality (Marson, 2013). The reason behind this is both the parties are agreeing to perform this agreement. No party forces another party to perform the agreement. There is free consent of parties are there in the contract. In addition to this, there is no consideration in law of Australia that the value of consideration must be equal to market price of the assets. As per law, the value of same assets may differ from person to person. For example, the value of car may be $2500 for Jane, as she is leaving for overseas. This agreement is enforceable by law, because in this case there is no information that makes this agreement void or voidable.
Example – “A” offers to sell his books to B at price of $15. The market price of books are in good condition is $200. B accepts this offer. In this case, the offer value of books differs from market value of books. But there is valid consideration in the offer and acceptance. For this reason, it may form a valid contract.
The consideration in this agreement is present for both the parties. For Jane the consideration is $2500 that is obtained from Jack (MacIntyre, 2015). At the same time, car is consideration for Jack. Therefore, this contract is valid.
Shipbuilders build a contract with North Ocean Tankers to build a tanker. This contract is done in US dollar but at the time of contract, they do not mention any information about currency fluctuations in future. But when the United States devaluated dollar by 10 percent then shipbuilder asked that buyer pays extra US$ 3 million, if it was not done, then it would stop the construction of tanker midway only. In this situation, the buyer had to pay extra amount because North Ocean Tankers already booked a charter for the delivering the tanker. But after the nine months of delivery, buyer didn’t take any action to recover the excess payment. Now, buyer wants to take action against the excess payment. This issue is to be analysed whether at this time North Ocean Tankers will be successful or not in recovering the excess payment.
Rules of Law:
In this case below law is identified, which can be applied:
Duress is a condition in, which the individual is threatened to enter into a contract. In the current time, Duress includes the violence and illegal threats but courts have the different economic duress to increase the validity of claim. When an individual enters into this type of contract then it has the power to terminate contract. Along with this, the basis of duress includes the free consent and it operates based on the common law. Apart from this, undue influence is also a contract or condition, which affects the mutual consent of the contractors. This condition helps the individual in taking the advantage of trust during a contract (Wild et al 2014). Furthermore, it includes the situation where one party has the better position over the another party. This contract and condition doesn’t involve the duress’s threats but at same time it involves the uncontrolled pressure of the party.
Duress to the person:
Duress of the person can be expressed by the threat of violence. In this type contract, a person or individual comes by the fear of threat of physical violence. This type situation has the needs to prove that pressure was the reason and what was the cause behind entering into contract (Mann and Roberts, 2011). If the individual is not able to prove the reason then the contract can set aside by the court on the basis of threats.
Duress to goods:
The threat of damage or crush the property may duress. Along with this, threat to seize and detain the goods through the wrongfully is also called the duress. Apart from this, when a person or individual enters into contract through the pressure and pay extra money for the recovering the goods in terms of avoid the seizer and damage of goods (Trevino and Nelson, 2010). For this type of situation courts recognized that, the concerned party has no alternatives and they can claim for the duress.
Economic duress occurs in the situation, when the threat of the contract cancellation situation occurs. But if they want the contract to continue then on party agrees on the other parties demands. Apart from this, doctrine of economic duress is a specific and separate doctrine, which helps in the providing solution for the difficulties in the commercial transactions at the time of contract formulation (Fried, 2015). In this case, the doctrine of economic duress will be applied because at the time of contract formation, they don’t make any consent about the currency devaluation.
Along with this, doctrine of economic duress covered the different aspects such as someone enters into the contract for the threat to damage the financial interest and other different kinds of the threats (Chandler, 2015). Therefore, doctrine of economic duress include the some essentials, in particular case that shipbuilder makes pressure on the North Ocean Tankers to pay excess payment to take the delivery of tanker, which is illegal (Spark, 2013). Moreover, shipbuilder also maker a pressure on the North Ocean Tankers that for completion of tanker buyer make the excess payment, if it will not done the work of the tanker will be stopped in mid only. This pressure of shipbuilder forced the North Ocean Tankers to enter into a contract, which is illegal.
Shipbuilder company made a contract with the North Ocean Tankers. After the half construction of tanker shipbuilder told to North Ocean Tankers that they pay an additional sum of US$3 million to meet the losses from the devaluation of currency by 10 per cent by the United States if it will not done then the construction of the tanker will be stopped at the mid. If the contract is cancelled by the client because tanker is not ready it would affect the reputation of company and this can might the reason of heavy claims. Moreover, this increases the cost of the North Ocean Tankers because they additionally make a contract with a charter company for the delivery. On the basis of above discussion, it can be concluded that North Ocean Tankers made an additional payment to shipbuilder under the duress so, now North Ocean Tankers is the able to recover its excess payment after the nine months as per the provisions of the contract law.
The major issue in this case is that the shipbuilder puts the pressure on the North ocean tanker and threatens them that they pay the amount i.e. $3million and if not then they breach the contract midway and stop further work. North ocean tankers had already entered into a contract with a charter company for the delivery of tanker. Therefore, at this time they pay the extra amount to the shipbuilder to avoid the loss of business and reputation. After the nine months, North ocean tanker can go to the court for indemnify loss because North ocean tankers made the payment to shipbuilder in the duress and due to intimidation. In this case, North ocean tankers can be successful in the recovery of excess payment.
For this particular case, evidences can be collected from the Kolmar Group AG Vs Traxpo Enterprises Pvt Ltd. Case. In this case, the contract was done for the supply of methanol, but Traxpo refused the supply of goods on the predetermined price and offer to Kolmar Group that if company wants to take the supply of methanol for this company, then they should pay extra price. Therefore, company accepts the new prices if it is not done as the company stopped the supply of methanol (Andrews, 2015). At this time, Kolmar Group have the requirement of the supply of methanol so, under pressure Kolmar Group accepts the contract in terms of new higher price. After sometimes, this case was taken to the court and it was held by court that Kolmar Group made promise of the paying the higher price under the duress and tort of intimidation. Therefore, applicant was entitled to recover the excess payment.
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