Rejection by counter-offer & Consideration

Question 1

How can an offer be terminated through rejection?

Answer 1

An offer can be terminated by an outright rejection of the offer or by modifying the conditions of the offer resulting in a counter-offer.

Question 2

What is consideration?

Answer 2

Every agreement comprises a promise to do or not to do something. Promises are legally binding only if there is an exchange of ‘something for some other thing’. This ‘something or some other thing’ is called consideration. It is some benefit or profit accruing to one party or some detriment or loss suffered or undertaken by the other party.

All contracts require consideration to be legally binding with the exception of deeds.

Question 3

What are the types of consideration? (Give examples)

Answer 3

The 3 types of consideration are:

1. Executory - The promise to do something in the future
2. Executed - Where one party makes the offer or acceptance in such a way that he has fulfilled his liability under the contract.
3. Past consideration - Not a good consideration
   Past consideration can be considered a good consideration if 2 conditions are satisfied
   (a) The other party must have requested the act be performed
   (b) Both parties must have contemplated at the the time of the contract that payment be made.

Question 4

What is the 1st rules of consideration? (Give examples)

Answer 4

Consideration must be real - This means that consideration, however small must be of some value. It. should not be illusory and must be capable of being performed.

Question 5

What is the 2nd rule for consideration?

Answer 5

Past consideration is not good consideration - When an act has already taken place in the past and a promise is made in exchange for that act subsequently, there is no value given for the promise. Consideration must be given in return for the promise or act of the other party; an act done and a promise given later cannot form good consideration.

Question 6

What is the 3rd rule for consideration?

Answer 6

Consideration must move from the promisee - This means that the person to whom the promise is made must furnish the consideration. The promisee must show that the consideration ‘moved’ from him. A third party cannot derive any benefit or incur any liability on a contract to which he is not a party to. If a person has given nothing, he cannot enforce the promise, if it is not kept. This is known as the doctrine of privity of contract; only parties to the contract can sue and be sued. An exception to this would be the Contracts (Rights of Third Parties) Act.

Question 7

What is the 4th rule for consideration?

Answer 7

Consideration must be sufficient but need not be adequate - Parties to a contract have the freedom to negotiate or decide on the bargain. As long as some value is given, it does not matter whether it is proportionate in value to the thing given in return.

Legally the word ‘sufficient’ is not the same as ‘adequate’. Sufficient is an amount negotiated by the parties and as long as the parties are satisfied with the price, it does not need to be proportionate to the actual value of the item. The court will not interfere with the parties negotiations. Adequate however, refers to a price that could actually be close to the market value of the item.