05_Consideration - Contracts 01 Consideration PART V...

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Contracts 01 – Consideration P ART V C ONSIDERATION I B ENEFIT /D ETRIMENT R EQUIREMENT A Definition In order to be enforceable, a promise must, inter alia, be supported by valid consideration. The authorities on consideration implicitly give effect to two requirements: That a benefit or detriment be incurred; and That there is a link between that benefit or detriment and the promise it is alleged to support Definition: a valuable consideration may consist in either : a) Some right, interest, profit, or benefit accruing to one party; or b) Some forbearance, detriment, loss of responsibility given or undertaken by the other ( Currie v Misa per Lush J). In most cases, the consideration given in return for a promise will constitute both a benefit to the promisor and a detriment to the promisee (eg, by giving money to the promisor). Examples of benefit to the promisor: Having services rendered Receiving money, goods, or property Being offered a promise to do either of these, or to refrain from doing something that disadvantages the promisor Note that if B makes a promise in return to A’s promise, this will confer a benefit on A because A will have enforceable legal rights against B, and it will also be a detriment to B because B will be obliged to perform the promise ( Pecke v Redman ). B Reliance A distinction is drawn between an act performed as the agreed price of a promise (valid consideration), and an act performed in reliance upon a promise (not valid consideration). Acting in reliance does not provide any benefit to the promisor, whereas performing the agreed price of a promise is furthering the interests of the promisor. According to reliance theory, contractual and non-contractual promises should be distinguished by determining whether the promise has been relied upon by the other party. An argument that this theory has a role to play in defining valid consideration was firmly rejected by Kirby P and McHugh JA in Beaton v McDivitt ; reliance is insufficient to circumvent the consideration requirement. © Jaani Riordan 2004 Page 1 of 15 http://www.jaani.net/
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Contracts 01 – Consideration Beaton v McDivitt: Facts McDivitts heard that their land may be rezoned and that this would lead to substantially higher rates being payable They decided to subdivide their land in order to minimise rates payable They agreed that Beaton would occupy part of the land they proposed to subdivide, rent free; they also agreed to transfer the land when the rezoning took place However, this never happened Beaton took possession of the land, built a house and an access road, and remained on the land for several years When the McDivitts and Beaton had a falling out, the McDivitts ordered Beaton off the land Beaton sued to enforce the promise that the land would be transferred Issue Did Beaton provide consideration for the McDivitt’s promise to transfer the land that satisfied the bargain requirement? Reasoning
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This note was uploaded on 08/17/2010 for the course BUSLAW 730-202 taught by Professor N/a during the Three '07 term at Melbourne Business School.

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05_Consideration - Contracts 01 Consideration PART V...

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