business law bbs 3rd year question 2078
Business law BBS 3rd year question solution
12. What is consideration? Explain the rules regarding consideration?
Consideration is an essential element of a contract. It refers to something of value that is exchanged between the parties involved in a contract. In simple terms, consideration is what each party gives or promises to give in return for the other party's promise.
The rules regarding consideration can vary slightly depending on the jurisdiction, but the basic principles are generally consistent. Here are the key rules regarding consideration:
- Legal Value: Consideration must have legal value. It means that it must involve something tangible or provide some benefit to one party or impose a legal detriment on the other party. This can include money, goods, services, a promise to perform an act, or refraining from doing something that one has the legal right to do.
- Gratuitous Promise: A promise made without any consideration is generally unenforceable. Exceptions to this rule include promises made under seal, promises made for moral, social, or domestic obligations, and promises to make a gift.
- Existing or Past Consideration: Consideration must be given in the present or the future. Past consideration, which means consideration given before the contract was formed, is generally not considered valid. However, if the past consideration was given at the request of the promisor and was understood to be payment for a future promise, it may be enforceable.
- Bargained-for Exchange: Consideration must be the result of a bargain or negotiation between the parties. It means that each party must have given or promised something in exchange for the other party's promise. There must be a mutual understanding that the exchange of value is the basis of the agreement.
- Adequacy of Consideration: The law generally does not require the consideration to be of equal value. As long as there is some value exchanged, the courts usually do not scrutinize the adequacy of consideration. However, extremely disproportionate consideration may raise issues of duress, fraud, or unconscionability.
13. Distinguish between bailment and pledge.
Bailment and pledge are two distinct legal concepts related to the temporary transfer of possession of personal property, but they differ in their nature and purpose. Here's a distinction between bailment and pledge:
Bailment
- Definition: Bailment refers to a legal relationship in which one person (the bailor) temporarily transfers possession of personal property to another person (the bailee) for a specific purpose or period of time. The property remains the bailor's, and the bailee has a duty to care for the property.
- Compensation: Bailments can be either gratuitous (without compensation) or for a fee. In either case, the bailee must exercise reasonable care and protect the bailor's property from loss, damage, or theft, except in cases of gross negligence or willful misconduct.
- Ownership: Ownership of the property remains with the bailor during the bailment. The bailee possesses the property but does not acquire ownership rights over it.
- Purpose: The primary purpose of a bailment is to benefit the bailor, such as for safekeeping, repair, transportation, or storage of the property. The bailee holds the property in trust and is responsible for returning it in the same condition it was received (unless agreed otherwise).
Pledge
- Definition: Pledge, also known as pawn or collateral, is a type of security arrangement where a borrower (the pledgor) transfers possession of personal property to a lender (the pledgee) as collateral for a loan or debt. The property serves as security until the loan is repaid.
- Default and Sale: If the pledgor fails to repay the loan as agreed, the pledgee may exercise the right of sale by disposing of the pledged property to recover the debt amount. The sale proceeds are used to satisfy the debt, and any surplus is returned to the pledgor.
- Ownership: Ownership of the property remains with the pledgor during the pledge. The pledgee possesses the property as collateral but does not acquire ownership rights over it unless the pledgor defaults on the loan and the property is sold to recover the debt.
- Purpose: The primary purpose of a pledge is to benefit the pledgee (lender) by providing security for the loan or debt. If the pledgor fails to repay the loan, the pledgee has the right to sell or dispose of the pledged property to recover the debt amount.
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