The doctrine of consideration is arguably the most controversial doctrine in British contract law since its inception in the twelfth century. Indeed, on the one hand, judges and scholars increasingly criticise the doctrine by deeming it to be unnecessary1, and on the other hand, it still remained a fundamental requirement for the formation of all binding contracts.
According to Sir Frederick Pollock, the doctrine implies that “an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable”.
The consideration doctrine has long endorsed the notions of bargain and consensus. Nevertheless, due to the doctrine’s recent, yet significant amendments, the current status of the doctrine in regard to its original status in contract formation must be assessed.
In doing so, this essay will first examine the initial purpose and scope of the doctrine, and secondly, the impacts of its recent amendments will be identified so as to evaluate the extent to which it has remained loyal to its original purpose and scope. Finally, these points will be discussed in regard to Lord Denning’s assertions on the matter.
Indeed, British courts still regard the doctrine of consideration to be a necessity for contract formation (750)
a) Reasoning for this view à why? (Incorporate cases à when?)
Undeniably, British courts perceive the doctrine of consideration as “a fundamental principle of the law of contract”2, and it could be argued that it is so because consideration offers a mechanism to assess the parties’ intentions to be legally bound by serving three main functions: an evidentiary, a filtering and a cautionary function.
Firstly, the doctrine of consideration fulfils an evidentiary purpose as it provides some evidence that the promisor intended to be legally bound.
This is illustrated by Lon Fuller, as he explains that the courts cannot enforce a mere promise as it is nearly impossible to identify the nature of the promise, and to distinguish “exploratory expressions of intention”3 from intentions to create “legally effective transactions”4. This is reflected in the WilliamsDT1 5 case, where the issue at stake was whether the parties were bound by contract, which the defendant denied. The court identified that consideration was provided on both, and consequently confirmed the presence of a binding contract6.
The British courts suggest that if the promisor derives some kind of benefit from the alleged contract, it is more likely that this one intended to be bound by it.
Consequently, by refusing to enforce unilateral promises; the courts generate a filtering process.
Indeed, Lon Fuller affirmed that “the enforcement of gratuitous promises is not an object of sufficient importance (…) to justify the expenditure of time and energy necessary to accomplish it”7. This point was emphasized by Neil Andrews, who argued that the doctrine of consideration “avoids in millions of situations each year”8 possible conflicts regarding the enforceability of a mere promise.
Scholars here suggest that the consideration doctrine efficiently filters out potential contractual disputes, as people who plan on taking advantage of a unilateral promise are unable to do so.
Finally, the doctrine of consideration also protects the promisor from being bound to informal gratuitous promises9 against his will by ensuring that the contract was done deliberately.
Indeed, this cautionary function is illustrated in the Pillans case10, where Wilmot J strengthened the “deliberative” rationale, as to “put people upon attention and reflection”11 when considering a possible contract.
Lon Fuller furthermore emphasized the cautionary function by explaining that “he who is compelled to formulate his intention carefully will tend to (…) canalize (it)”12. This idea suggests that the second-thoughts generated by the formulation of one’s intentions protect the promisor from being bound to a “rash inconsiderate declaration”13.
This idea has been emphasized by the judgement in the White v Bluett case14 where a father promised money to his son if this one stopped complaining. Here, Pollock CB ruled that the father had no intention to be legally bound since this contract featured no valid consideration from the son’s part.
This implies that judges still strongly perceive the doctrine of consideration as an essential instrument when assessing the enforceable nature of an agreement, as it successfully fulfils its evidentiary, filtering and cautionary purposes.
b) Rate of requirement of consideration and Relate to quote à how far is this quote enforced? Prove what? How does it enforce my point?
Furthermore, it could be conjectured that Denning LJ’s viewpoint accurately reflects the current situation regarding the place of consideration in contract formation.
Indeed, Denning’s consideration “remains a cardinal necessity”15 in relation to contract formation, as consideration’s presence is still mandatory in order to create legally binding agreements.
Moreover, it could be argued that Denning LJ’s statements are also mirrored in the status quo as the consideration doctrine has been challenged multiple times, and nevertheless subsisted. Indeed, in 1937, the Law Revision Committee recommended an abolition of the doctrine16 which was ultimately unsuccessful, as the 1987 Report on the Amendment of the Law of Contract by the Ontario Law Reform Commission17.
This implies that Denning’s assertions about the doctrine of consideration being “too firmly fixed to be overthrown by a side wind” remain valid to this day, furthermore underlining the immovability of the doctrine in contract law.
Undoubtedly, the requirement of consideration in contracts remained mandatory and deeply-rooted in British contract law, but it could be argued that its scope has been fundamentally expanded since its implementation into contract law, about eight centuries ago18.
· Over the years, several adjustments were made to the doctrine of consideration, which dreadfully expanded its initial scope, to the point where it no longer serves its initial purpose.
a) How did it transform the scope of consideration?
Indeed, the two main exceptions to the doctrine of consideration include the doctrine of promissory estoppel and the practical benefit rule.19
Due to these two amendments, which most drastically expanded the original scope of consideration, one could argue that consideration no longer offers a mechanism to assess the parties’ intentions to be legally bound as it no longer fulfils its three initial functions.
Lord Cairns’ judgement in Hughes v Metropolitan Railway (1877)20 is at the root of the doctrine of promissory estoppel which states that a unilateral promise may be enforceable if the promisee has acted upon that promise21.
The second amendment made to the consideration doctrine is the practical benefit rule22. Indeed, the initial rule, as defined in the Pinnel’s case23 (1602), as well as in Stilk v Myrick24 (1809), stated that an undertaking in the form of a pre-existing contractual duty would not be considered good consideration because, since the duty was pre-existing, there was no added benefit to the promisor25.
However, the practical benefit rule recently reconsidered the original rule. Indeed, in Williams v Roffey Bros26 (1990), Glidewell LJ ruled that when there is a practical benefit to the performance of a pre-existing contractual duty, it is considered valid consideration27.
It could be argued that both amendments enable the legal enforcement of unilateral promises, and dismiss the promisor’s intentions to be legally bound.
Indeed, the doctrine of promissory estoppel contradicts the evidentiary and cautionary functions of the consideration rule by enabling informal gratuitous promises to be enforced if the promisee has acted upon them, and therefore binds the promisor without taking into account this one’s intents, nor consent.
Moreover, the practical benefit rule also runs into opposition with the evidentiary and cautionary functions of the consideration doctrine by finding good consideration in the performance of a pre-existing contractual duty. In other words, the practical benefit rule finds consideration where it lacks a benefit to the promisor and a detriment to the promisee28.
Once again, the practical benefit rule contradicts the original functions of the consideration doctrine as it disregards the promisor’s intentions to be legally bound by enforcing unilateral contracts.
Consequently, the filtering function gets dismissed too, as the consideration doctrine no longer filters out potential contractual disputes, since people who plan on taking advantage of unilateral promises, such as are now able to do so.
Finally, one could argue that several judges agree with this claim.
Indeed, according to Sir Frederick Pollock, “the doctrine of consideration has been extended, with not very happy results, beyond its proper scope”29.
More recently, in White v Jones30 (1995), Lord Goff described British law of contract as being ‘hampered by the presence of an unnecessary doctrine of consideration’31.
These recent challenges brought by judges to the consideration doctrine suggest that, due to its recent amendments, the doctrine of consideration fails to serve its three original functions, hence, the doctrine no longer fulfils its initial purpose, as it no longer offers a mechanism to assess the parties’ intentions to be legally bound.
Moreover, it can be noted that the judges’ disapproval of the doctrine of consideration is due to the fact that it features fundamental contradictions.
Indeed, the intrinsically contradicting judgements of Stilk v Myrick32 (1809) and Williams v Roffey Bros33 on the definition of a valid consideration and the need for a consensus between contractual parties embody the gradual but profound inconsistencies of the consideration doctrine.
The absence of consensus amongst judges regarding the vitality of consideration in contract formation implies that the doctrine features fundamental contradictions, which furthermore highlights its dispensable nature34.
b) Relate to quote à how far is this quote enforced?
Due to those profound inconsistencies, the current situation can be distinguished from Lord Denning’s assertions about the doctrine. Such affirmations could thus be perceived as only being partly valid today.
Indeed, Lord Denning’s affirmation that the doctrine “remains a cardinal necessity of the formation of contract”35 implies that the consideration rule has not been subject to any type of change since its beginnings in contract law. This is only partly true, as the courts still constantly require it for contract formation, but in reality, the purpose and scope of the doctrine itself have undergone fundamental expansions. Indeed, the consideration rule features relatively recent judgements that contradict its initial purpose, as they often dismiss the intentions to create legal relations, and more generally, the notion of consensus between both parties.
This implies that Lord Denning’s statements about the doctrine of consideration remaining “a cardinal necessity” to contract formation as well as being “too firmly fixed to be overthrown” still apply today, but only to a moderate extent. This is due to the fact that, on the one hand courts still constantly look for consideration in the process of assessing the parties’ intentions to be legally bound, but on the other hand consideration has lost legitimacy as it no longer effectively fulfils its initial purpose of ensuring that both parties wish to be legally bound.
In conclusion, it is undeniable that the doctrine of consideration has been and remains a fundamental requirement for the formation of all binding contracts. However, over the years, several judges promoted what they believed was fair over general consensus the doctrine has seen its scope significantly expand, from the promotion of legal certainty to the occasional endorsement of the exact opposite, thus, giving rise to contradictory outcomes. Truly, the doctrine’s initial inception was meant to accurately assess both of the contractual parties’ intentions to be legally bound, yet, its recent developments gave rise to cases where judges dismissed those intentions, hence, betraying the doctrine’s original functions and purpose.
These contradictions are deemed to have generated unpredictable outcomes and stripped contractual parties of all legal certainty and protection in the process of forming binding agreements.
Therefore, Lord Denning’s assertions about the immovability of the consideration doctrine remain valid to this day, but only to a moderate extent. Indeed, consideration is still a requirement, yet the requirements of a valid consideration have undergone significant change, thus, losing legitimacy in the eyes of judges and scholars.
Finally, a way of regaining that legitimacy, and more importantly, ensuring the respect of the intentions of the contractual parties to be legally bound, would be to look to other civil law systems which place the notion of consensus at the centre of the formation of binding contracts (such as the German civil law) as inspiration for a needed reform to the doctrine of consideration.