Nudum Pactum: Everything You Need to Know
Nudum pactum is a Latin term that translates as "naked agreement." In law, it is an agreement in which there is no consideration.3 min read
Nudum pactum is a Latin term that translates as "naked agreement." In law, it is an agreement in which there is no consideration. This means the agreement is not legally enforceable by law because it is not "dressed" with consideration, as legally required. As a nudum pactum is not legally binding or enforceable, it's best to be avoided.
What Is a Nudum Pactum?
A nudum pactum may be in verbal or written form. These agreements may not result in legal action, since they are naked contracts. This means that the agreements do not fall within the specific categories of agreements that can provoke legal action. However, an agreement may create a modification of or exception to an obligation already in effect.
However, if the contract is under seal, it is considered valid. In addition, some contracts exist, which, as a result of their forms, carry a consideration, including bills of exchange, sealed instruments, and promissory notes. These are considered valid even though no official consideration exists within them.
English law does not enforce any nudum pactum. An exceedingly large amount of agreements (bare agreements, that is) are made daily, and it does not make sense if every one of them were to be established as binding contracts. As an example, Joe and Ann agree that Joe will sell his truck to him in three months. However, during those three months, he decides not to sell his truck after all and withdraws from the promise. Legally, there has been no breach of contract, as no consideration was made.
In particular, government contracts need to be wary of conducting any actions under a bare agreement. To put it simply, a contractor will most likely not be compensated for goods or services. As opposed to valid contracts, there will be no legal recourse available from the Court of Federal Claims or the Boards.
This issue often occurs when the contract includes at least one "availability of funds" clause. If your contract contains one of these clauses, it is considered a bare agreement until the contracting party receives the funds and then supplies the contractor with appropriate notice of the availability of funds. In short, it's best not to supply any goods or deliver services until you'd received written notice of the availability of funds, as you are unlikely to ever receive your payment.
Examples of Nudum Pactum
To be effective, a contract must be based upon a consideration. For example, an agreement by a party with no interest in the exchange, to pay a certain fee if an exchange occurs, is legally invalid, unless it is supported by the appropriate consideration. A new contract must be premised on a consideration in the release of an existing debt for commissions as a result of an agreement for the sale of real estate.
- If Alice were to show a house to a party that is interested in renting from the owner, an agreement made by the owner to pay Alice for her service lacks consideration if made after the fact. If a broker had agreed to conduct an exchange of property and had earned commission through a previously made valid contract, any agreement made afterward (for example, a claim that the broker was not entitled to a commission) is without consideration. However, a broker cannot claim entitlement to commission in the same situation if the broker actually did not perform any services, and cannot prove that he or she was excused from providing such service.
- As another example, if an agent agrees to reduce commissions through a misstatement, it is considered to be lacking consideration. An agreement made under a mistaken belief to pay a commission also lacks consideration, as no service had been conducted, and thus the broker's recovery is not valid.
- If a defendant entered an agreement to pay the plaintiff the appropriate amount of their services, and no agreement existed that stated the monetary amount should be determined by the defendant, such an agreement does not contain mutual consent or consideration and is not legally enforceable.
- If a property owner withdrew a broker's authority to sell the property and informed the broker that they would be compensated as if they had made the exchange, and then the owner sold the property through their own efforts, the agreement made to the broker is without consideration.
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