Question

Facts of case
Knight is the owner of Armour Heights Subdivision. On September 1, he offered in
writing to sell Lot #3 in the subdivision to Archer for $15,000; on September 2, Archer accepted the offer in writing and delivered her acceptance in person to Knight.

On September 4, Knight telephoned Archer to say that he had just learned that a shopping center was going to be built in the subdivision near Lot #3 and that he now wanted to have $22,000 for each of the lots, including Lot #3. Archer, equally excited about the news, agreed to change the price stated in the written contract from $15,000 to $22,000 and wrote her initials on the date opposite the change on both copies of the contract.

Later, Archer tendered a cheque for $15,000 "in full settlement of the amount owing for Lot #3 per our agreement of September 2." Knight deposited the cheque and sued Archer for an alleged $7,000 balance owing.

a. Identify two legal issues to be found in the facts of this case by stating each of them in the form of a question.

b. Name and then state the legal tests that apply to each of the legal issues you have identified. (4 marks – 2 for each)

c. Make an argument for the Plaintiff (1 mark)

d. Make an argument for the Defendant (1 mark)

Answer 1

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a)

a. The issue to resolve is whether any consideration has been received for the change in the price of the lot.

​​​​​​b)

b. Consideration is the mutual gains and losses that the parties exchange through the contract.

In their initial bargain the parties have exchanged consideration. Knight is giving up Lot #3, his detriment, for $15,000, his benefit. Archer is receiving Lot #3 for her $15,000.

Valid consideration must have merchantable value.

The lot has merchantable value; it is bought and sold in the marketplace.

The consideration that moves between the parties need not have the same value. Whether $15,000 is the value of the lot is unimportant; it has some merchantable value and, consequently, is good consideration.

An existing legal duty is something that one is already obliged to do and cannot constitute valid consideration.

Knight is already obliged to sell Lot #3 to Archer. Thus Archer's later promise to pay an extra $7,000 for.Knight to perform the same obligation is not binding.