Published On: Wed, Mar 11th, 2015

Consideration in contracts, examples of Nigerian cases

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While working in New York, Dr Kaine is offered employment at the Anambra State University Teaching Hospital. His employment letter states that the contract of employment may be terminated by either party with one month’s notice.

Dr Kaine subsequently negotiates for provisions to be made to transport his entire family with him to Nigeria. Flight tickets are paid for him, his wife, six children and younger sister.

On arrival in Nigeria, he is requested to sign an undertaking to refund the cost of the flight tickets, if he were to leave the employment of the state government within three years. He signs the undertaking and commences work at the teaching hospital.

After two months of working, however, Dr Kaine submits a notice of resignation. He has been offered a more lucrative job with a private hospital in Abuja and has already agreed to start working with them in the next one month. The Anambra State Government immediately issues a letter, demanding a refund of expenses incurred in relocating his family to Nigeria. The letter adds that, in the alternative, he may remain in employment for one year, which would be considered adequate for the costs of the flight tickets.

In view of this, what is Dr Kaine’s legal position?

For a contract to be valid between two parties, there must be an offer and an acceptance. Something must be given by one party, while the other party responds with something of value. What is exchanged may be money, a product, a service or a promise to perform a certain action. In law, consideration is the thing of value that is exchanged by parties in a contract. For a party to be able to enforce a contract, he or she must have furnished some consideration in support of it. When goods are sold, for instance, the seller’s consideration is the transfer of ownership of the goods to the buyer. While the buyer’s consideration is the payment of money to the seller. Hence, it is said that “consideration must move from the promisee”.

The case above involves several legal issues:

1.The place of consideration in the    formation of a contract.

2.The validity of past consideration.

3.The adequacy of consideration.

The definition of consideration was established in the case of Currie v. Misa by Justice Lush. He said that “a valuable consideration in the eye of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other… So, it is irrelevant whether one party benefits but enough that he accepts the consideration and that the party giving it does thereby undertake some burden, or lose something which in contemplation of law may be of value.”

In this matter involving Dr Kaine and the Anambra State Government, an offer of employment was made, the terms were negotiated and an agreement was reached. Each party made a promise to provide certain value. On the side of the state government, it was the employment package with the added benefit of transporting the entire family of Dr Kaine. On the side of the doctor, it was his services in employment at the teaching hospital. It is sufficient to say that both parties provided consideration and thereby had a valid contract.

Unfortunately, a dispute has arisen on account of Dr Kaine’s resignation. It is quite clear, from the terms of employment, that he could terminate his services with a notice of one month. However, there is the unresolved issue of transportation costs incurred in relocating nine members of his family to Nigeria. The demand for refund is based on the undertaking the doctor was made to sign.

On moral grounds, it would seem that Dr Kaine had indeed made a promise to either work for a minimum of three years or refund the cost of the flight tickets. However, a moral responsibility is not seen as consideration in the sight of the law. In return for such an undertaking, there must be a reciprocal value provided by the state government. The terms of the contract had already been concluded before Dr Kaine’s arrival in Nigeria and the making of that undertaking. It therefore follows that the promise to refund was not based on any additional value to be provided by the state government. Merely extracting a promise afterwards is an attempt to rely on past consideration, which unfortunately, is not enforceable.

In the case of Bendel State v. Okwumabua, which had similar circumstances, Justice Uwaifo declared that “the best that can be said of the so-called undertaking given by the defendant in reply to the request is that it was a subsequent promise. The question is, as regards this promise, what was the consideration for it to make it a binding contract? In my view, there was no consideration.”

Finally, it may be the opinion of some, that for costs incurred in a transaction, there should be commensurate value returned. In other words, the consideration received must be adequate. In this situation, the state government considered that the doctor’s service for one year would be the right compensation for their expenses. Nevertheless, in the absence of fraud, duress or misrepresentation, the courts will not question the adequacy of consideration. Neither will they declare a contract invalid because one party got a better deal than the other.

Dr Kaine is well within his rights to resign, having fulfilled the terms of his contract by taking up the employment. In the words of Justice Kalgo, “once consideration is of some value, in the eye of the law, even the courts have no jurisdiction to determine whether it is adequate or inadequate.”

Principles and cases are drawn from Sagay: Nigerian Law of Contract

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Consideration in contracts, examples of Nigerian cases