Assignment: 01 Law: 200 Section: 06 Instructor: Barrister Ishtiaque Ahmed Student Name: Nazia Haider Student ID: 0920207030

Assignment topic:

consideration must be sufficient but need not be adequate

Introduction:
Section 25 (explanation 2) provides that, An agreement to which the consent of the party is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the court in determining the question whether the consent of the promisor was freely given. Judges do not have the training or expertise to determine the economic value of the bargained for consideration. Courts would have to base the determination of adequacy on witness testimony and different judges would come to different conclusions of value. For the courts to determine the adequacy would make this area of law uncertain. Certainty particularly n contract law is important. Some case analyses are given below for our explanation:

1st case:
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87 is an important English contract law case, where the House of Lords confirmed the traditional doctrine that consideration must be sufficient but need not be adequate. Chappell & Co. owned the copyright to Rockin shoes (by The King Brothers). Nestle was giving away records of it to people who sent in three wrappers from 6d chocolate bars, as well as 1s 6d. The Copyright Act 1956 s 8 said a 6.25% royalty needed to be paid on the ordinary retail selling price to the owners of copyrights. Nestle said 1s 6d was the ordinary retail selling price, but Chappell & Co argued that it should be more and sought an injunction for breach of CA 1956 s 8. In this way the question arose as to whether the wrappers were consideration for the records. Upjohn granted an injunction. The Court of Appeal reversed the decision and Chappell & Co appealed. Judgment The majority of the House of Lords (Lord Reid, Lord Tucker and Lord Somervell) held that the wrappers were part of the consideration, and so Nestle was in breach of the Copyright Act 1956, by failing to pay royalties reflecting the extra cost of the wrappers. Lord Somervell allowed the appeal. Viscount Simonds and Lord Keith delivered dissenting judgments.

2nd Case:
Fry v Lane (1888) 40 Ch D 312 is an English contract law case relating to exploitation of weakness, allowing escape from a contract. Facts JB and George Fry worked as a plumber and laundryman, earning 1 a week. But they had the reversion of their Uncles estate, subject to the life tenancy of their Aunt. They sold it in 1878 to Mr Lane for 170 and 270 respectively. They were advised by an inexperienced solicitor who also acted for Mr Lane. When the Aunt died in 1886, the interests were each worth 730, and in 1878 it would have been 475. Judgment Kay J cited Evans v Llewellin[1] and Haygarth v Wearing[2] saying equity most commonly interferes in favour of an expectant heir, in his youth, or a poor man with imperfect education. Where such circumstances are shown the onus is on the purchaser to show it was fair, just and reasonable (Lord Selborne LC, Aylesford). The undervalue was so gross as to amount of itself to evidence of fraud.

3rd Case:
Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (C.A. D.C. 1965), was a court opinion, written by Judge J. Skelly Wright, that had a definitive discussion of unconscionability as a defense to enforcement of contracts in American contract law. As a staple of first-year law school contract law courses, it has been briefed extensively. It flows from interpretation of the Uniform Commercial Code 2-302 (1954) and is relevant for the Restatement (Second) of Contracts 208.

Facts The case involved Walker-Thomas (Washington, D.C. at 7th St. & M St) extending credit from 1957 to 1962 to Williams for a series of furniture purchases. The contract was written in such a way that no furniture could be paid off until all of it was. When Williams defaulted on the contract in 1962, Walker-Thomas tried to repossess all the furniture sold since 1957. The District of Columbia Court of Appeals ruled that the lower

court could rule the contract unconscionable and refuse to enforce it, and returned the case to the lower court to decide whether or not the contract was in fact unconscionable.

Judgment Skelly-Wright J held that the case needed to be sent back to trial to determine further facts, but in doing so held that a contract may be set aside if it was procured through unconscionable means. ...we hold that where the element of unconscionability is present at the time a contract is made, the contract should not be enforced.... Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.... In many cases the meaningfulness of the choice is negated by a gross inequality of bargaining power.... The manner in which the contract was entered is also relevant to this consideration. Did each party to the contract, considering his obvious education or lack of it, have a reasonable opportunity to understand the terms of the contract, or were the important terms hidden in a maze of fine print and minimized by deceptive sales practices? Ordinarily, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain. But when a party of little bargaining power, and hence little real choice, signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all the terms. In such a case the usual rule that the terms of the agreement are not to be questioned should be abandoned and the court should consider whether the terms of the contract are so unfair that enforcement should be withheld. Significance This case is often used by professors to question their students' ideology or presumptions. It is also used as a case study in some modern economics classes. The parties may have settled out of court. ------------------------------------------------------------------------------------------------------------