Essay: Contract Law / Australia

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Contract Law / Australia

The term "Contract Law" has the ability to almost immediately make someone thing of lawsuits and litigation. For the most part, contracts are thought of as being very formal documents written up with language that is difficult for the average person to read and much less understand. However we may feel about contracts, we must not deny that they are a part of our everyday lives. Almost every aspect of what we do in modern life requires a contract today. Take, for example, eating in a restaurant (you get the menu, eat, then you get the bill; even the credit card you pay for that meal with is a contract) and purchasing a plane ticket to see relatives (which you probably also bought with a credit card). These are both examples of common everyday contracts that normal, everyday people get themselves into without even really realizing it (unless you don't pay for the meal, ticket, or credit card bill). They do not think twice about it. They do not wonder what the ramifications are if they do not live up to their end of the bargain. There is the old adage, which states something to the effect of: "All contracts are agreements but not all agreements are contracts," and this is exactly correct -- especially when it comes to the doctrine of consideration, which will be discussed in this paper.

To be bound to an agreement or a promise normally means that some kind of consequence will follow if the promise is not kept. While the breach of a moral promise can result in general disapproval -- whether by friends, family or employers, the breach of a legal promise can result in imprisonment, fine, community service, and/or damages -- depending on the severity of the breach and who is judging it. Knowing that some broken promises -- when breached -- can result in harsh consequences, the question therefore arises: What promises should the law enforce? And, how should one know when he or she is breaking the law when he or she breaks a promise? This is where the doctrine of consideration comes in. The doctrine of consideration was created with the purpose of allowing two parties to know -- without doubt -- that they were entering into a legally binding promise and that, with that legal promise, they were allowing the law to make sure that the contract is not ever breached.

In a perfect world, we wouldn't need the muddle of the doctrine of consideration. After all, it may befuddle some, questioning how the law can enforce some promises and not others. The answer seems pretty clear -- at first. We wouldn't sue someone for not bringing something to the potluck dinner when they knew perfectly well that it was a potluck dinner. They stayed and they ate anyway, even though they didn't contribute anything. We wouldn't sue because there would be nothing really to gain (except for maybe someone not ever showing up to a potluck empty-handed ever again). However, when there is more at stake, this is when the doctrine of consideration comes in. That means that the law must enforce those promises that are worth something as opposed to those that are really not worth anyone's time.

In English contract law, which is the system in Australia, consideration is one of the three main components of a contract. Consideration can be anything that is worth something -- whether it is a physical item or whether it is a service, which each side agrees to exchange if the contract is to be considered valid and legal. That is to say that if only one side of the agreement offers something for consideration, the agreement is not considered a legally binding contract; it is invalid. To think about the doctrine of consideration in its more traditional form simply for understanding purposes, consideration is expressed as the requirement that in order for each side to be able to enforce a promise, they must have given something for it; this is known as "quid pro quo" (in other words, everyone must bring something to the table; something has to be given -- or promised -- in exchange for a promise.) A contract must be "met with" or "supported by" consideration in order for it to be enforceable. Another aspect is that only an individual who has given consideration can enforce a contract. That is to say that if an agreement is made up of a promise that isn't supported by consideration, then the agreement is not going to be a legally enforceable contract. The lack of consideration is one reason for saying that the courts will not recognize a promise. This is particular to English common law (Khouri & Yamouni 2006) and it is quite a quite of confusion with both professors and law students.

Many believe that the doctrine of consideration still has its place in law today, while others do not. The main argument for consideration is that is offers a valuable service to law when it comes to determining which promises should be imposed and which are to be deemed unnecessary. In the past, consideration was used to distinguish between binding promises and those that were simply viewed as gratuitous, on the basis of bargain style relationships, and to protect individuals from getting themselves into legally binding promises made in thoughtless or unintended ways (e.g., perhaps one person is just joking around while the other is not; if there wasn't anything of value offered on both parts, then the contract is not legally viable).

Because not all contracts can be enforced by a legal system, rules must exist to govern contracts and the parties going into them. The rules will help to identify which contracts are enforceable by law and which ones are not enforceable by law. Consideration is the main part of what distinguishes gifts (gratuitous legal acts) from contracts. Consideration has four rules governing it: 1) consideration must be sufficient, though it doesn't need to be adequate ("adequate" meaning having any economic value, though this has not been completely defined as of yet, which part of the issue with consideration); 2) consideration cannot be from the past; and, 3) consideration must move from the promisee.

The term "consideration" simply means what a person must pay for the other individual's obligation. It is completely based on the idea of reciprocity. The case of Curie v. Misa establishes the definition of consideration that is still used today. "Valuable consideration…is…some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other" (Yamouni & Khoury 2006).

We should recognize that the law seems to lack requirement for adequate consideration. One may also believe that there are others ways in order to distinguish between enforceable and unenforceable promises -- such as contractual intention, one commonly used example. But then again, contractual intention can also be considered rather indistinguishable.

Westerners were the first to come up with "contract law" and it was out of the mutual distrust of people -- nothing else. If everyone trusted everyone else, why would we need to make promises legally binding -- or, better yet, why would we have to make promises at all. We would just do it or expect it -- not questions asked. Generations and generations ago, people were untrustworthy just as they are today. People did what they could to take care of themselves, just as they do today, which is why consideration needed to be part of the law then. In theory, consideration makes a great deal of sense, but when it comes down to the complex and perplexing nature of judging or putting value onto consideration, all sense seems to go out the door. It would seem that simply writing a promise or a contract out and having both parties signed it, whether or not they were both bringing something to the table, would be easier and still lawful.

It can be argued that one of the best aspects of consideration is that consideration makes it so people know when they are getting into a contract with someone else. It is a clear act and nobody can say that they weren't aware of what was happening when they were going into the promise. The idea of relying on a person's word and intention as the basis of a binding agreement is much too difficult to ever prove (but it can be argued that proving or judging consideration is just as difficult). How can one prove what his or her intention was? We can all state what we intend to do, but what we intend to do and what we do or want to do are very different things.

The whole controversy about consideration is that it seems to just be an antiquated law that frustrates people more than it helps them. The parties may believe that they are capable of working reasonably… [END OF PREVIEW]

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