Consideration is often seen as an integral part in the formation of
contracts. However, the abolishment of consideration is an ongoing debate as
some judges and law practitioners believe that consideration is not a necessary
requirement within contracts. This essay will explore the doctrine of
consideration and whether courts still require contracts to be supported by it.

 

Despite all the alternative doctrines available to replace
the need of consideration in the formation of contracts, the fundamental theory
of consideration deals with aspects of contracts that alternative concepts
cannot adequately deal with. This is supported by Denning LJ in Combe v Combe.1
The case deals with promissory estoppel, where the claimant uses the
concept to enforce her husband’s promise. However, promissory estoppel could
only be used as a defence in that case and Denning LJ stated that the principle
should not attempt to abolish consideration as it is ‘too firmly fixed’.2

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To begin exploring the topic of consideration, a basic understanding
of contract law is required. A contract is an agreement which gives rise to
obligations that are enforceable by law. Contracts can be bilateral which
involves two parties making contractual promises or be unilateral, where
offeror of a promise requires an act in return. However, contracts cannot be
imposed by the law, they are undertaken by contracting parties.

 

Contracts can be approached in two ways; contracts formed as a deed
or contracts made through offer, acceptance, intention and consideration.  A promise made in a deed or given for
consideration is binding and enforceable by law.  A deed is a document which is ‘signed, sealed
and delivered’ however according to section 1 of the Law of Property Act 1989,
deeds are no longer required to be sealed. If a promise is not in a deed, it
can only be binding if it is given for consideration from the promiser to the
promisee.

 

Most contracts are bargains which involves the process of offer and
acceptance. The offer made by an individual must contain a promise however, in
some cases it can be an invitation to treat, such as in the case of Gibson v Manchester City Council3
in which the claimant assumed an advert was an offer however the court held
that it was an invitation to treat. In order to determine whether there was an
offer present, the reasonable observer test is used, which looks at the
intention of the offer as it appears to a reasonable person, not the actual
intention of the offeror. Another component in the formation of a contract is
intention to create legal relations which determines whether there was
intention to enter into a legally binding contract. However, despite the
presence of an offer, acceptance of that offer and intention, a contract is not
binding in law unless there is consideration.

McKendrick refers
to consideration as a ‘badge of enforceability’4
as it distinguishes between which promises are enforceable and which are not.
The doctrine of consideration is offered many different definitions. Pollock5
states that it is ‘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’6
which was accepted by the House of Lords in Dunlop
v Selfridge.7
Other definitions emphasise the benefit and detriment between two parties when exchanging
promises such as the definition held in Currie
v Misa 8
in which Lush J stated that ‘A valuable consideration, in the sense of the law, may
consist either in some right, interest, profit, or benefit accruing to the one
part, or some forbearance, detriment, loss, or responsibility, given, suffered,
or undertaken by the other’.9

There are also numerous rules which govern the law of
consideration. Firstly, past consideration does not amount to consideration as
it occurred before the promise was made. An example of this comes from Eastwood v Kenyon 10
where the guardian of a young girl borrowed money in order to educate her which
would increase her marriage prospect. She promised to pay the money back after
getting married however her husband failed to pay him and as a result Eastwood
sued them. However, court held that it was just a promise and moral obligations
does not compose consideration and Eastwood carried out the acts that would
have constituted as consideration which was educating her. However, past
consideration can be valid consideration in some cases. For example, in Lampleigh v Braithwaite11
, the defendant was sentenced to death and asked claimant to grant a pardon
from the king which the claimant successfully achieved. The defendant then
promised to pay claimant a sum but then went on to refuse to pay. The court
held that claimant was entitled to the sum as his act represented
consideration. The case of Pao On v Lau
Yiu Long12
adds to the idea of past consideration by providing three conditions that must
be satisfied if acts performed in the past can form consideration. This outlines
that courts still require contracts to be supported by consideration. Complex
disputes arise from similar situation and in terms of past consideration, some
are enforceable and some are not however the doctrine of consideration is
fundamental in solving difference in contract law cases as it provides clarity
and takes into account the context surrounding the specific case.  

Another rule which governs consideration is that
consideration does not need to be adequate but must be sufficient. This is
highlighted in the case of Chappell v
Nestle13
where the court has to decide if sweet wrapper amounted to good consideration
and held it was, as sweet wrappers are evidence that Nestle was gaining a
considerable amount of money even though the competition involved collecting an
item with very little value, it did form part of consideration. In addition, when
an individual refrained from doing something that they had no right to do, it
does not amount to sufficient consideration.14
Furthermore, if a court establishes that there was blackmail involved which
then acted as consideration, it is not enforceable. This demonstrates why
courts still require contracts to be supported by consideration. If the concept
of sufficient consideration was not in existence, parties within a contract
could exploit the law and cause sufficient detriment to one another.

The notion that consideration must move from the promisee is
another rule governs the doctrine of consideration. If consideration is
provided by a third party and not the promisee, then they are unable to enforce
the agreement. This concept is demonstrated in the case of Tweddle v Atkinson15
whereby father of the bride and father of the groom entered into an
agreement to pay the couple a sum of money however, the father of the bride
passed away. Before he could sue, the father of the groom also passed away.
When the groom tried to make a claim against the executor of the will, court
held that he was not a party involved directly in the agreement and the
consideration did not come from him therefore he could not enforce the
contract. This rule is a main reason why courts still require contracts to be
supported by consideration. Within a contract, a third-party involvement can
create issues and complex scenarios that case law and statutes cannot provide
remedies for however, as a result consideration, the involvement of a third
person who is not the promisor or promisee within a contractual setting is very
limited.

Another rule of consideration is that existing contractual
duty will not be accepted as good consideration.  If the duty was already owed, it cannot amount
to consideration for a promise. The case of Stilk
v Myrrick16
outlines this rule as the claimants, seamen, were promised that their wages
would increase, as a few of the other seamen had deserted and the captain had
to return to London and could not do it without their help. Upon their return,
the captain refused to pay the extra amount promised and the seamen sued. The
court held that the claimants were under an existing duty to perform and did
not provide consideration for the extra money as they were only doing their
job, their existing contractual duty. On the other hand, the similar case of Hartley v Ponsonby17
had a different outcome. This case also involved the promise of extra money due
to deserted crew members however the number of deserters were substantially
higher which increased the work load of others considerably. The captain’s
refusal to pay was not accepted by court as a new contract had been formed
between the captain and crew as the voyage had become increasingly dangerous
which rescinded the existing agreement. They provided consideration by working
on the ship therefore they were entitled to the extra payment. The difference
between the judgement in these two cases despite being similar in numerous ways
accounts to the fact that consideration is required by courts to support
contracts. It stops the exploitation of workers but also stops the exploitation
of employers, simply by determining if there is good consideration.

The issues with consideration includes the uncertainty and
openness of the doctrine which almost undermines the rule of law. The case of Williams v Roffey Bros18
does not tie into the judgement in Stilk
v Myrrick.19
The defendants are building contractors who agreed to refurbish a block of flat
and hired claimants to undertake the carpentry work. However, six months after
commencing their work, they realise that they do not have enough money to
complete the job required and asked for more from the defendant. The defendant promises
an extra sum but does not pay the full amount and as a result, the claimant
runs out of money and refuses to complete the job until the payment is
received. The defendant employed another carpenter as the claimant did not
provide consideration, but carried on with their existing contractual
obligation which they undertook. The courts however held that as the defendant
benefited by the claimant continual work which was avoiding the penalty he
would receive for not completing the flats on time, consideration was provided
and defendant was liable to provide the extra sum. Whilst judges claim that the
decision in Williams v Roffey Bros20 is compatible with the judgement made
in Stilk v Myrrick21,
it’s grounds for doubting the doctrine of consideration as defendants in both
cases can be seen as benefitting from the action of the claimant however, the
captain was not asked to pay the extra sum. It creates considerable doubt
around the status principle of Stilk v
Myrrick.22
As a result, if the doctrine of consideration is flawed in some instances,
courts must not require all contracts to be supported by consideration.

In addition, many seem to suggest that consideration is
no longer a required necessity of contract law. Lord Goff described contract
law in England as being ‘hampered’ by the ‘unnecessary doctrine of
consideration’.23
Due to the discontent with the function of consideration as a result of
decisions made in Williams v Roffey Bros24,
a common idea that the doctrine should be replaced is becoming
increasingly popular. There are many alternatives suggested, one of which is promissory
estoppel which prevents individuals from going back on a promise which was not
supported by consideration. It was developed by an
obiter statement made by Denning J in Central
London Property Trust v High Trees Ltd25
which was based on decision in Hughes
v Metropolitan Railway.26
27
However, promissory estoppel cannot be used as a “sword” but rather a “shield” 28 so
it cannot be used as it performs a different function to consideration.  

Another alternative to consideration is intention to create
legal relations. This particular doctrine objectively tries to determine if
there is a legal contract or not by looking at the intentions of the parties
involved. An advantage of replacing consideration with this doctrine is that
there is legal certainty which attempts to enforce contracts. On the other
hand, the disadvantage of using this doctrine is the issues concerning the
enforcement of gratuitous promises and the problems surrounding the area of
which promises are enforceable.29

Economic duress is another
alternative for consideration. It is a defense, used
in contract law by a party to argue against the formation of a binding contract
between two parties. In order to verify economic duress, a party must show that
a continuous contract exists between the plaintiff and the defendant, the
defendant threatens to terminate the preexisting contract and the plaintiff
under this duress accepts the defendant’s terms and enters the contract.30
Purchas LJ stated that ‘The modern cases tend to depend more upon the defence
of duress in a commercial context rather than lack of consideration’.31

 

Another alternative
is the Material Benefit Rule. It is an ‘alternative
basis for enforcement of promises in the absence of consideration. In a handful
of cases, courts have chosen to enforce promises made in recognition of prior
benefits received’.32
‘A promise made in recognition of a benefit previously received by the promisor
from the promisee is binding to the extent necessary to prevent injustice’.33

 

Despite all the choices presented, I believe that courts
should require contracts to be supported by consideration. However, when facing
difficulties with the doctrine of consideration, it should be adapted and
include other doctrines such as promissory estoppel which may define the future
of contract law.

1 1951 2 KB 215

2 1951 2 KB 215

3 1979 1 WLR 294

4 Ewan McKendrick, Consideration and Form (3rd edn, Palgrave 1997)

5 Sir Frederick Pollock, Principles of Contract: A Treatise on the
General Principles Concerning the Validity of Agreements in the Law of England (8th
edn, Stevens and Sons 1911)

6 1915 1 AC 847

7 1915 1 AC 847

8 (1875) LR 10 Ex 153, 162

9 (1875) LR 10 Ex 153, 162

10 Eastwood v Kenyon (1840) 11 Ad&E 438

11 Lampleigh v Braithwaite (1615) EWHC KB J17

12 Pao On
v Lau Yiu Long 1979 3 ALL ER 65

13 Chappell v Nestle 1960 AC 87 

14 Paul
S Davies, The Law of Contract (OUP
2016)

15 1861
EWHC QB J57

16 1809
EWHC KB J58

17 1857
7 EB 872

18 1990
2 WLR 1153

19 1809
EWHC KB J58

20 1990
2 WLR 1153

21 1809
EWHC KB J58

22 1809 EWHC KB J58

23 White v Jones 1995 2 AC 207

24 1990 2 WLR 1153

25 1947 KB 130

26 (1877) 2 App Cas 439

27 ‘Promissory Estoppel’ accessed on 4 January 2018

28 Combe v Combe 1951 2 KB 215

29 Mindy
Chen-Wishart, ‘Consideration and Serious Intention’ (2009) Singapore Journal of
Legal Studies
4 January 2018

30 ‘Economic
Duress’ (Legal Information Institute, Cornell Law School) accessed 8 January
2018

31 Wallter Van
Gerven ‘Aditional Requirements: Cause, Consideration and Form’ (2010) accessed 8 January 2018

32 J H Verkerke,
‘Contracts Doctrine, Theory and Practice’ vol 1 (CALI eLangdell Press 2012)

33 J H Verkerke,
‘Contracts Doctrine, Theory and Practice’ vol 1 (CALI eLangdell Press 2012)

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