The law of contracts are designed to determine whether promises are enforceable or not. In order to be valid, all elements of the contract must be satisfied. A contract consists of the following elements: offer, acceptance, consideration, legality, capacity and writing (when applicable).
Occasionally, disputes start over whether or not all elements have been established. These disputes have created an enormous body of case law which serves to clarify the requirements for contractual elements. This body of case law stretches back literally hundreds of years. In the case of Kirksey v Kirksey (1845), a dispute developed over such consideration. The Supreme Court of Alabama had to determine if a landowner encouraging his sister-in-law to live on his land constituted consideration.
Kirksey v Kirksey: The Case
The plaintiff was the defendant’s sister-in-law. After the death of her husband, she received a letter from the defendant in which he encouraged her to move from her current location to his farm. He promised that if she moved he would allow her to live in a house on his property.
She took the defendant’s offer and moved into the house on his land. Two years later, the defendant ordered the plaintiff to leave the property. As a result, she brought suit against the defendant and argued that the promise extended to her was an enforceable contract.
What’s the law say?
In order for a contract to be enforceable, there must be adequate consideration.
Consideration roughly equates to value. Consideration is present when the parties of a contract exchange things which are of equal value. Take, for instance, a house. It’s valid consideration when a house is sold for its market price. It’s an exchange of equal value.
If you sold a house for below its market value (we’re talking well below, like $1) there’s a strong case to be made arguable consideration hasn’t been established. This is also why when a young adult promises his car for a juvenile bet, it’s not enforceable. Or, if you sell your house for $1, the value is so disparate, consideration wouldn’t be valid.
Court Rules in Favor of Kirksey (the Defendant)
The court (the Supreme Court of Alabama) ruled that the promise made by the defendant was unenforceable because, even though the plaintiff uprooted herself and relied on the defendant’s word, no consideration had occurred.
The main reason the defendant wanted the plaintiff to move was so he could be closer to her and her children following the death of her husband (the defendant’s brother), and so the plaintiff essentially exchanged her physical “closeness” for her stay on the property. And so even though the plaintiff’s reliance on the promise was reasonable, she did not offer enough in return in order to produce valid consideration.
Though the message of this case may seem almost childishly self-evident to us today, it represents an important development in the law of contracts since it added clarification to the element of consideration.
Applications in Modern Day
Ultimately, Kirksey v Kirksey established a clarification for consideration and this should be thought of with B2B industries, purchases and acquisitions. Take something like Elon Musk buying Twitter for more than its market value. If the proposition was limited to a tweet, it’s quite possible the deal wouldn’t have gone through. In fact, the whole “bot debate” could’ve been thought of as evidence of a lack of consideration. However, as it played out for Musk, it certainly wasn’t enough.
If you are a small business owner, similar deals can quickly turn into unending pain points if you’re not careful. For instance, if you’re starting a web design firm and fail to callout the number of “revisions” you’re allotting or the specific number of hours, you could wind up in a never-ending dispute with the of what’s considered “complete.” However, this is also why, many people can overcharge for services. If both parties sign the contract, it acknowledges consideration from both parties as to what amount of “money” the “service” is worth.
In law, it’s impossible to know the boundaries up front. We depend on edge cases and unique scenarios to add more and more clarification. Kirksey v Kirksey is one example of this process!
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