Negotiations to Contracts. What Happens When the Parties Agree to Increase the Price?
Contracts are funny things. They require an offer, acceptance and consideration. That seems simple enough, except that many people conducting business don't appreciate the necessary formalities. It is rare to see a valid claim of no consideration, but they arise every once in awhile. One client I had received a claim from a company in Texas, for a breach of contract. I looked at the written document and surprisingly, there was no consideration. I pointed out this problem to the Texas attorney, who proceeded to tell me that consideration wasn't required any more. He was wrong.
Marc Ward is reporting on a similar case. The parties agreed on a price for the sale of a franchise. Later the parties apparently amended the agreement to require the Defendant to pay more. Contract amendments require separate consideration, and there was none. When the defendant refused to pay the extra money, the Plaintiff sued. The defendant claimed there was no consideration for the amendment, and the court agreed. Presumably the defendant would be entitled to the return of any payment made in excess of the original purchase price.
One argument would be that the parties didn't really have a contract in the first instance, and the parties were still negotiating. I don't know if the parties argued this point, but sometimes it is hard to tell when the parties have an agreement (contract.)
Consideration doesn't need to be much - anything of value will do. The important thing to remember is that when negotiating or amending contracts, the parties need to exchange something of value. The values do not need to be equal, but they must be present - and preferably the consideration is recited in the agreement or amendment.
Gavin Craig
