Contract law - consideration

Reply Sun 26 Jan, 2014 12:38 pm
MUS wishes to launch a programme to renew its IT facilities. It has engaged Geeksrus Ltd, a specialist in the design of applications systems, to create and customize ‘BLUR’, an intranet system for managing the university’s student information. The contract price is agreed at $2,000,000 to be paid in several instalments.

To finance this project, MUS has appealed to its alumni for donations and financial assistance. Upon learning of MUS’s needs, Zac offers to arrange for UOME Bank to extend a loan to MUS at preferential rates. Ernest, the IT manager of MUS in charge of the project, is happy to receive such an offer from one of MUS’s alumni. With Zac’s help, the negotiation of the deal proceeds smoothly and UOME bank is agreeable to lend MUS $1,500,000 for a fixed term of 2 years at the rate of 3.00% p.a. Just before the appointed date of signing the loan documents, Zac informs Ernest that he should obtain a commission of about 0.5% for arranging the deal. Ernest responds that he cannot make the decision at this stage though he says that Zac’s proposition sounds reasonable to him and should not be a problem. Soon after, the relevant documents are signed and the loan duly disbursed but since then, nothing has been said of any commission payable to Zac.

(b) Advise Zac if he has a case against MUS in respect of the commission.

what are the issues and complications?
Is there any consideration? valid contract?
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Reply Wed 29 Jan, 2014 10:43 am
B) Technically Zac has a case, but thats due to it being a verbal contract that he entered into with Ernest in regards to the commission, although I would say it doesn't sound as though that Ernest actually agreed to pay Zac a commission, add to it that MUS appealed to it's alumnis for donations and financial assistance, Zac has a very weak case at best in respect to a commission. As a lawyer I'd advise Zac to let this go as he has no real case.

In regards to issues and complications, once again it all goes back to the fact that it was a verbal conversation/agreement and that Ernest never actually agreed to paying Zac a commission he only said it sounds reasonable, also add to it we can regard the original contract to be what is binding and I can guess that in that contract it says nothing about a commission for Zac so he's out of luck there, add to it we can take the wording of his conversation with Ernest as just discussing a probability rather than an actual contract it can be argued that there wasn't even a verbal contract, although if there were the consideration would be there, another problem/complication would be that it seems that Ernest isn't the big man on campus to be making such a deal.
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