AYN456 Business and Corporations Law

Issue

To determine whether Bruno must pay all the amounts claimed by Rubin.

Rule

Consideration is the value of the promise that a promisee gives in lieu of the promise made by the promisor, either to do or not to do something (Poole 2016). Therefore, it must have a certain value in the eye of law, even if it is not sufficient as seen in the landmark case of Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87 where peppercorns were considered to be a sufficient consideration amount in regard to a contract.

There are situations when a promisor could agree to accept a lesser consideration amount in regard to an adverse circumstance of the other party, which however, shall apply till such circumstance persists. The original consideration shall become payable once such adverse situation ends and the other party becomes regains his earlier condition to pay the initially agreed consideration as seen in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723. In such situation, the promisor shall not be entitled to recover the amount that was paid less while that adverse situation persisted, thereby overruling the case of Foakes v Beer (UK CA 1884). In this case it was held that the agreement to receive lesser sum of money as a further negotiation in terms of a debt, followed by part payment of it does not amount to a good consideration, thus subject to a subsequent legal action. Exception to this rule state that earlier part payment made in regard to a debt is good consideration, especially when the parties draw a benefit from such part payment. 

Application

Here, Bruno was being unable to pay the entire agreed lease amount to Rubin due to the adverse situation that arose due to the COVID-19 pandemic, which incurred lesser income to everyone. Thus, Rubin agreed to accept a lesser lease amount until the overall situation changed or Bruno’s financial condition improved. Bruno was asked to pay $5000 instead of the initially agreed amount of $15000 as annual lease rent. On a later occasion, Rubin cannot claim the rest of the $10,000 that Bruno paid less due to his financial condition, also as agreed between them.

Nevertheless, with the improvement of Bruno’s financial situation as he got hold of a big client that paid him sufficiently to afford to pay the earlier agreed consideration price of the van that is $15000, he shall be liable to pay so, instead of the lesser amount. The agreement to receive a lesser amount was only due to his poor financial condition due to the pandemic as Bruno lacked clients. However, Rubin could hold him liable to pay the original amount as soon as his condition improved.

Conclusion

Therefore, Bruno shall be liable to pay the initial agreed amount of annual rent of the van as soon as he got a major client that enabled him to afford the full rent, however, he could not be asked to pay the shortfall of the year 2020 that Rubin consciously agreed to forego.

Issue

To determine whether June shall be legally entitled to the Macbook that was promised by Neil in exchange of her supplying enough cakes and pastries.

Rule

An agreement is formed between a promisor and a promiser when they agree to do something in lieu of something. An offer is placed by an offeror which is accepted by an offeree, thus forming an agreement. Such agreement is based upon a consideration, which is the value of the promise that a promisee gives in lieu of the promise made by the promisor, either to do or not to do something (Poole 2016). Therefore, on execution of an agreement or a promise made by the promisee, the promisor shall be liable to pay the promised consideration amount, unless it was illusory and uncertain as seen in Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130.

Application

Here, Neil promised June that he shall give her a MacBook if she supplied sufficient cakes and pastries to his coffee shop in summer. Based on this promise made by Neil, June worked 20 hours a week to make sufficient cakes and pastries for Neil’s coffee shop, indicating that it incurred him a good amount of money by selling those cases and pastries made by June. Thus, an exchange of offer and agreement between them proves the existence of an agreement along with the promise of exchanging a consideration amount, thus suggesting a valid contract between them.

Conclusion

Therefore, June shall be legally entitled to the Macbook that was promised by Neil.

References

Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130

Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87

Foakes v Beer (UK CA 1884)

Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723

Poole, J., 2016. Textbook on contract law. Oxford University Press.

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