Consideration under Contract Law
A consideration is a bargained-for value that has legality given by a person promising to perform or abstain from performing certain acts. Consideration is important in formation of a contract. It is composed of a promise to desist from committing an act, and a promise to perform certain acts (Frey 2001). A promise between two parties signing a contract is sufficient consideration for each party. In a contract between two parties –bilateral contract-, they must all exchange mutual promises to enhance the contract. According to Frey (2001), a unilateral contract occurs when one party will make a promise. In return, he expects a performance from him. The consideration for the performance is the promise, whereas the consideration for the promise is performance. A consideration must be of a value that can be determined. A promise for affection or love cannot be a consideration mainly because we cannot determine the value of either love or affection.
The elements of consideration are that a consideration is required to move with the desire the party making the promise. Anyone can provide a consideration even if he or she happens to be a third party. Frey (2001) suggests that anyone that is new to the consideration has the right to sue the contract performance. A consideration given in the past, present or past is legally sufficient. A party can give consideration in the past, present or future. A promise by one party to perform a certain act in the future is a consideration. The law requires that a consideration must have a value attached to it. The law, however, insists on the existence of consideration, not its adequacy.
Gaede had a one-year contract with Helikon Furniture Co. that allowed him be the company’s sales agent in some parts of Texas. The contract signed included the amount of the commission that Gaede would receive after carrying out a sale. Over a year later a new contract was not signed between Gaede and SK Investments, Inc that had acquired Helikon Furniture Co. Gaede, however, continued to represent the company as a sales agent after the managers assures that they would not make any changes in its sales representatives. Three months later the managers sent Gaede a letter that proposed new terms of the contract. SK Investments, Inc. later reduced Gaedes commission. A lawsuit was filed at the Texas State Court by Gaede suing and SK Investments, Inc. for a breach of contract. In its defense, SK Investments, Inc. stated that there was no legal contract between the company and Gaede since there was no consideration. Gaede is his case insisted that the company had reached an agreement with him when it sent letters to him. This to him was a definition of a legal contract.
Based on the arguments by the two parties the judge ruled that indeed there was the presence of a contact between the two parties. This was a unilateral contract between SK Investments, Inc. and Gaede. SK. Investments, Inc. had promised not to make any changes in its sales representatives for at least a year. The company, however, made changes to the commission that Gaede received whereas the contract had not even lasted a year. The company reduced the amount of the commission that Gaede received. This was a breach of contract by SK. Investments, Inc. The reduction in the commission for Gaede that took place in May 1977 was illegal in the eyes of the law.
My opinion on the verdict is that the ruling was fair. SK Investments, Inc. had promised not to change the terms of contract in a period of not less than one year. This was not so since the company reduced the commission. It did this with the knowledge that a year had not even passed after the new agreements. A breach of the contract is evident only if there is consideration between two parties (Frey 2001). After the summary of judgment in the trial court, the case went to the appellate court for conclusiveness.
Work cited
Frey, Martin A, and Phyllis H. Frey. Essentials of Contract Law. Albany, NY: West/Thomson Learning, 2001. Print.
