3 In 1995 Helikon Furniture Co appointed Gaede as its indepe

3.         In 1995, Helikon Furniture Co. appointed Gaede as its inde­pendent sales agent for the sale of its products in parts of Texas. The parties signed a one-year contract that specified, among other things, the commissions that Gaede would receive. Over a year later, although the parties had not signed a new contract, Gaede was still representing Helikon when it was acquired by a third party. Helikon’s new management allowed Gaede to continue to perform for the same commissions and sent him a letter stating that it would make no changes in its sales representatives “for at least the next year.” Three months later, in December 1997, the new managers sent Gaede a letter proposing new terms for a contract. Gaede continued to sell Helikon prod­ucts until May 1997 when he received a letter effectively reducing the amount of his commissions. Gaede filed a suit in a Texas state court against Helikon, alleging breach of contract. Helikon argued in part that there was no contract because there was no consideration. In whose favor should the court rule, and why?

Solution

Consideration is the benefit that each party in the contract gets from the other party. Here the parties are Helikon Furniture and Gaede.

Presence of consideration makes a contract or an agreement as deemed to be legally binding.

Here the consideration for Gaede is sales commissions and the consideration for Helikon is the services of Gaede as a sales agent.

Here Helikon cannot argue that there was no consideration. None of the parties in this case was legally obligated to perform. Secondly, the terms of the agreement says that the consideration will be in the form of sales commission and not in the form of gifts. In other words there is no promise to give gift to Gaede in this contract. Thirdly, the bargained for promise is tangible and measurable (sales amount achieved by Gaede) and is not illusory.

So, as per contract law, there is a consideration. So the court will rule in favor of Gaede.