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Chapter 8

chapter8. The requirement of consideration.docx

Administrative Studies
Course Code
ADMS 2610
Robert Levine

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1. Nature of consideration: the “ something” that the promisor receives in return for the
promisor’s promise is called consideration- a vital element of every simple contract.
Different forms:
- Payment of money
- Performance of a particular service
- A promise not to do something by a promisor
- Relinquishment of a right
- Delivery of property
Note: no consideration arises unless the promisor gets something in return from the promise, till then it
is an act of gratuitous. All acts of gratuitous does not form consideration and is not a contract
Exceptions to the rule of gratuitous offer:
- Where a gratuitous offer of a service if accepted, must be performed with care and skill,
otherwise, the promisor will be liable for any loss suffered as a result of careless
performance or negligence.(An act of tort)
- In the case of negotiable instruments, a person may be liable on a promissory note or other
negotiable instrument to a subsequent endorser, even though no consideration exists
between them
- A party who endorses a bill of exchange to enable another to negotiate it , may be held
liable on the bill even though no consideration was given as a result of the endorsement.
- Donations are gratuitous offering. If the charity can show that it undertook a specific project
on the strength of the donor’s pledge, then the promise may be enforced. “ substantial
2. Seal as consideration: a formal mode of expressing the intention to be bound by a written
promise or agreement. This expression usually takes the form of signing or affixing a wax or
gummed paper wafer beside the signature or making an engraved impression on the document
- Seal- act of affixing the seal symbolizes the intention to be bound by the agreement.
- Validity of agreement depends on the presence of seal + signature
- A corporation can only act through its agents to carry out its objects. For many kinds of
simple contracts it may be bound by its properly authorized agent without the use of the
corporate seal.
3. Tenders: it involves
- Calling for tenders:the advertisement of the particular needs of the firm to potential
suppliers of the good or services, either by way of newspapers or by direct mail
contact.invitation to submit offers to the firm calling, at its option, accept or reject.
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