The principle of equal consideration and laesio enormis in the law of contracts

Abstract

The principle of equal consideration is one of the basic principles of the law of the contracts. Its essence lies in finding a fair balance in exchange between parties when establishing bilateral (consensual) contracts parties. In the Law of Contracts and Torts this principle has been apostrophed as one of the basic ones. The Law also limited the authonomy of choice and provided the legal instruments for protecting the principle of equal consideration. One of the most significants legal instruments which serve that purpose is laesio enormis. The doctrine of laesio enormis originates from the Roman law and it further developed with time. Before the Law of Contracts and Torts came into force, the rules on laesio enormis from both The 1844 Civil Code of the Kingdom of Serbia and the 1811 Austrian Civil Code applied in the territory of today's Serbia. However, in the period from mid-1950s to mid-1970s special rules applied to contract of sale of real estate in the public property regime. In mid-1970s the laws introduced the principle of absolute equality of mutual consideration when it comes to the sale of real estate property. The Law of Contracts and Torts accepted the principle of proportion between the commitments of contracting parties in a bilateral contract. The legislator opted for the elastic method of establishing the disproportion of the contracting parties' commitments. In order for the rules of laesio enormis to be applied, it is necessary that there is an 'obvious disproportion' between commitments in contracting parties, i.e. disproportion which is evident and unquestionable. It is the Court's role to assess if that was the case in each individual case separately. Although the Law clearly states the obvious disproportion between the parties' commitments has to exist at the time of entering into contract, certain issues connected with the application of this rule have been heavily disputed both in legal theory and in judicial practice. Legal authors' opinion varies on the question if laesio enormis is essentially a deficiency ofwill, and of the nature of its legal consequences.