To to be good consideration if it is

To determine whether, or not
consideration should be regarded as a necessary element in contract law, it is
imperative to establish its importance, or lack thereof. First, we must define
consideration and how it is used to form contracts. Lord Dunedin defined
consideration as “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”1. This means both parties are essentially
making promises to one another; what each side promises are known as the
consideration they are giving. There is no necessity in the law for
consideration to be fair, but it must be sufficient, as evident through Chappell v. Nestle 19592.This case exhibits that consideration
doesn’t need to be adequate as only sufficient consideration is given where it
is stated that “A peppercorn does not cease to be good consideration if it is
established that the promisee does not like pepper and will throw away the
corn”. An exception is with the doctrine of promissory estoppel; which can make
a promise legally enforceable; where a promiser voluntarily makes a promise of
future intention and forgoes the original contractual rights that make it
unable to enforce. This is clear in the case Central London Property Trust Ltd v. High Trees House Ltd (1947)3, where it was ruled that a landlord who had
allowed tenants to pay half-rent during wartime could not then later claim the
rest of the rent for the specified time as he had already voluntarily forgone
his contractual rights. This essay will focus on; whether consideration
can be considered relevant; whether it is clear or convoluted, and if we can
have an efficient system of forming legal contracts without consideration.

 

The importance of
consideration is a greatly debated topic which has led to the question of
whether consideration is relevant in contract law.  To further understand consideration, we may
look to the definition found in Currie v.
Misa4; “A valuable consideration…. may
consist either in some right, interest, profit or benefit accruing to one party
or some forbearance, detriment, loss, or responsibility given, suffered, or
undertaken by the other.” This means that something must be given in exchange
for another. Consideration may be one of the main elements of forming a legal
contract since it differentiates a promise from being unenforceable to
enforceable; this is also known as the bargain theory of contract found in Dunlop Pneumatic Tyre Co Ltd v Selfridge and
Co Ltd. “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.”5 This view of the doctrine of consideration
is, however criticised and classed as unnecessary by Lord Goff, who expresses
that our Law of Contract is deficient due to the inclusion of the doctrine of
consideration.6 Consideration can be classed as unnecessary
for English Employment contracts as suggested by  Hough; he explains that English employment
law has been developing over the years and has resulted in alternative explanations
for the intention to create legal relations in employment law.7 One of these explanations includes the
‘Will Theory’8, whereby a promise is enforceable because
of the promisers will to enter the agreement. They are freely entering the
contract based on their subjective intention, as this is what makes the promise
morally justifiable. This implies that consideration may not be necessary in
explaining contractual intent, which means it would not be an essential element
for forming legal relations. This is evident in the case of Stilk v Myrick9 as
this case is void of consideration because it concerns a pay-rise for staff,
where their duties remain the same, post formation of the contract. In this
case, seamen were given a pay rise by their captain after some crew members
deserted the ship, so it was promised that the wages would be divided between
the remainder of the crew. This presents how there was a change in the contract
without consideration as something was not given in exchange for another.
Therefore, this allows for the possibility that consideration is no longer a
necessary element in contractual intent.

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The doctrine of
consideration has also been argued to be a result of historical development
which has since passed a time in which it can still be classed as relevant. The
Michigan Law Review explains that consideration is not relevant as it does not
have a distinctive ground of enforcement for legal intention, instead it acts
“as a test whether the engagement of the parties is put on the basis of bargain,
or whether it is gratuitous, and so lacking any ground of enforcement.”10 The review explains that consideration is
not necessary to determine the intention of the parties to form a legal
contract. Though the review does mention a counter argument by Dean Ashley; he
explains that the doctrine of consideration is used to satisfy the
identification of reciprocity in the agreement.11 However, the Michigan Law Review argues
that the problem is not due to the irrationality of the doctrine of
consideration, but the lack of scale in the issues it covers due to its
backdated nature and origins.12 This presents the idea that the doctrine of
consideration does have some relevance in contract law as a legitimate means of
testing the reciprocity of agreements in which something is given in exchange
for another; referring back to the bargain theory of consideration.13 This could imply that a modification of the
doctrine of consideration is needed as opposed to a complete abolition.

This leads us to
the next evaluation of the doctrine of consideration to determine whether the
doctrine is clear or convoluted. Consideration is a complex doctrine; however,
it is important to decide whether this is due to its detail and coherence or as
a result of an unclear and convoluted element for forming contracts. The
doctrine of consideration has many rules and categories, such as the
distinction made between bilateral promises with ‘Executory Consideration’, and
unilateral promises with ‘Executed Consideration’. There is also the rule of
past consideration; this refers to the rule that any promises made after an act
will not allow the subsequent act to be classed as consideration.14 This is presented in Re McArdle15; where
a house was inherited by siblings, one of whom decided they would take care of
the house and restore its condition. Following this, the remaining siblings
were asked to contribute to the costs incurred from restoring the condition of
the house. They were not legally obliged to pay these sums as this would be
considered as past consideration as the attempt to enforce the promise was
subsequent to the enforcement of the act which was the inheritance. This may
make it hard to identify, for every case, whether it classifies as past consideration
or not. A rule of consideration that can be quite troublesome is that
‘Consideration must be sufficient, but it need not be adequate’. This means
that the consideration given does not need to be fair, it just needs to be
consideration. This is made clear through the case of Thomas v Thomas16;
where a stipulation in a contract with a widow meant that she would be able to
remain in the family home after her husband’s death, provided she paid
peppercorn rent of £1 a year. The Courts ruled in favour of this, although
executers of the will were not pleased. Another complexity of the doctrine of
consideration includes the measure of consideration evident in White v Bluett;17 which
was deemed by the Courts as void, due to an unquantifiable measure of consideration.
The details were that a young man would receive money or a bribe in return for
not complaining about his father’s will. The Courts felt this was too nebulous
and so the consideration was not upheld. There is also the rule about
part-payments of a debt; which is not classed as consideration except for with
deeds, composite creditors’ agreements and where the doctrine of promissory
estoppel is held.18 There are many more rules within
consideration; which present the doctrine as convoluted as there are rules and
exceptions as well as, categories within the doctrine. Modern English contract
law may require a more streamlined system as this can frustrate the system and
lead to an influx of appeals if the complex system is misinterpreted or if
other problems arise due to this.

 

To decide whether
or not to abandon consideration altogether, we must evaluate whether it is
necessary in English Contract Law or if there is a more efficient and clear
alternative. To do so, we can look to German Law, where consideration is not an
element of forming a legal contract. German Contract Law contains no legal
concept of consideration; if all parties conclude then they are all obliged to
perform their parts. The German system includes ‘Offer & Acceptance’
whereby a valid offer must be made and accepted, and ‘Freedom of Contract’
where a party has the freedom and capacity to enter the agreement, as long as
no third parties are affected or have their rights breached.19 German contract law also has limitations
such as ‘Violation of Statutory Prohibitions’ which means a contract is void if
it goes against a statute. Contracts will also be void if they are contrary to
good morals; this is one of the reasons that consideration is not required as
there will not be a need for a rule for reciprocity as everything will be done
on the basis of good morals. Unlike English Law, German Law makes any contract
that includes an undue advantage void, to prevent the exploitation of
vulnerable peoples or circumstances. There is also a necessity for the terms of
the contract to be possible, similar to the ruling in English Law on White v Bluett;20 where
the court ruled that the terms were too nebulous. This system of forming
contracts functions without the need for considerations. This presents how it
is possible to have contractual intent and form contracts without the doctrine
of consideration.

The Doctrine of
Consideration can be considered as clear and organised, covering a large scale
of cases. Alternative to a complete abandonment to the doctrine, consideration
may need to be modified or streamlined to ensure that it is less complex, as it
has done so previously. In the case of Williams
v Roffey Bros21, Williams was contracted to work on 27
flats, however the Roffey Bros needed work to be completed on another 18 houses
after another contract had ended. They offered Williams extra money to work on
the flats, so they could reach their deadline. He could only complete an
additional 8, which meant the agreement could be terminated as he did not complete
all 18. However, the Court ruled that they would have to pay him a sum of the
money for his work. This redefines the rules set out in Stilk v Myrick.22 This widened the scope for consideration
and modified the doctrine. This represents the ability for the doctrine of
consideration to be altered through evolutionary means instead of abolishing it
completely, as suggested by Chen-Wishart.23

 

Overall, I would conclude that there is a complexity in the
doctrine of consideration which makes it seem quite convoluted, and it is not
relevant for every law of contract case, however, there is no need to abandon
the doctrine completely. Instead it should be modified to ensure it stays
relevant and that any gaps in the doctrine can be covered. Chen-Wishart24, presents
a strong argument for modifying consideration, due to the evolutionary changes
that we have already seen through cases such as Williams v Roffey Bros25.
Following the discussion about whether consideration can still be considered
relevant, it is clear that the doctrine of consideration still plays a big role
in the formation of contracts and intention to form legal relations. Although,
there are some exceptions within employment contracts, as there are now new
explanations for contractual intent in employment law such as the ‘Will Theory’26. This
means that, similarly to German Contract Law27, the
doctrine of consideration is not legally necessary for the formation of
contracts. However, consideration is still a necessary and relevant measure of
reciprocity in determining contractual intention. Furthermore, the assessment
of whether or not the doctrine of consideration is clear or convoluted is where
we determine that consideration does need some modification as it does not
cover the whole scope of cases. It is also considered to be complex due to the
many strands of consideration, its exceptions, and classifications. This makes
it hard to give valid consideration and so a more streamlined and clear system
would be better. To further add, in determining whether we should completely
abolish the doctrine of consideration or simply modify it, it was clear that
modifying it would be best. Due to consideration still being relevant in most
cases, it does have an importance in forming legal contracts. Therefore, this
presents how it is not imperative to complete a radical and drastic change to
the law of contract. Although flawed, the doctrine of consideration is still
relevant in modern contract law and it is therefore necessary to improve it,
rather than abolishing it completely.

1
Dunlop Pneumatic Tyre Co Ltd v Selfridge
& Co Ltd 1915 AC 847 at 855

2
Chappell v. Nestle 1959
2 All ER 701

3
Central London Property Trust Ltd v.
High Trees House Ltd: 1947
KB 130

4
Currie v. Misa 1875 AER 686

5
Dunlop Pneumatic Tyre Co Ltd v Selfridge
and Co Ltd: 1915 AC 847 at 855.

6
White v Jones 1995 2 AC 207, at 262–3.

7
B. Hough and A. Spowart-Taylor, ‘The Doctrine of Consideration: Dead or Alive
in English Employment Contracts’ 2001 2

8
Ibid, at 16

9
Stilk v Myrick 1809 2 Camp 317

10
Michigan Law Review Association, “I’s the Doctrine of Consideration Senseless
and Illogical?’ 1913 425

11  Clarence D. Ashley, Doctrine of
Consideration, 26

12
Ibid, at 426.

13
n7, at 3.

14
Jill Poole, Textbook on Contract Law (13th Edition, published 2016)
124, 129

15
Re McArdle 1951 1 All ER 905

16
Thomas v Thomas (1842) 2 QB 851

17
White v Bluett 1953 23 LJ Ex 36

18
Jill Poole, Textbook on Contract Law (13th Edition, published 2016)
145

19
Annual Survey of international and Comparative Law, 1996 vol 3, 111-116

20
White v Bluett 1953 23 LJ Ex 36

21 Williams v Roffey Bros 1991 1 QB 1 at
8-10, 16-17; and 23

22
n8

23
Mindy Chen-Wishart, ‘A Bird in the Hand: Consideration and Contract
Modifications’ 2010 112

24
n23

25
n21

26
n10, at 425.

27
n19

x

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