Should the "Doctrine of Consideration" be abolished?

Table Of Contents

Executory Consideration:

Executed Consideration:
1) Past consideration is not valid.
2) Consideration must be sufficient but need not be adequate:
3) Consideration as a performance of a legal duty:
4) Part payment of a debt:
5) Pre-existing contractual duty:

Is promissory estoppel a viable alternative to the doctrine of consideration?

Limitations to Promissory Estoppel:

Promissory Estoppel is a shield not a sword:

Vitiating Factors

The future of consideration?

Bibliography:

The Doctrine of Consideration is one of the three essential parts which make up a valid contract, the other two being that of offer and acceptance. In a contract, if consideration is not part of the contract then it will determine whether it is enforceable or not unless it's incorporated into a deed under a seal. This particular requirement in terms of contract law has been put under much scrutiny recently and there have been calls for the abolition of the doctrine. In this essay we will take a look at the functions of consideration, it's purpose in modern law and the possible alternatives were it to be abolished.

Consideration is prone to much criticism as it is said to have a very narrow scope as a definition with many suggesting that the narrowness the doctrine shows is now more about denying legal effect in most promises. The thinking behind this criticism is that many courts bring consideration into cases without a second thought and use it as a tool to guide their judgements. This then leads to it being open to many more avenues such as the Williams v Roffey¹ case where they suggested that practical benefit counted as sufficient consideration. This then leads to unlawful claims as never before had consideration been brought into a pre-existing contract case.

The doctrine of consideration was first brought to the forefront of contract law in the case of Currie v Misa² from the judgement of Lush in which he declared that consideration was:

'some right, interest, profit or benefit, accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other.'

This judgement began the practice of consideration within contract law. Two types of consideration stemmed from this ruling, executory and executed consideration.³

Executory Consideration:

This is when we have the two participating parties and one makes a promise to the other to execute a deal which they have agreed on. For example if X makes a promise to supply Y with some service or good and Y assures X that he will pay him when the job is completed. If X fails to fulfil his side of the bargain then Y is fully entitled to sue. When X completes his task it then turns into executed consideration.⁴

Executed Consideration:

If X and Y have an agreement which one party has fulfilled the part of the deal in which they agreed then it is said that the consideration is then executed and the other party has no reason to renege on their agreement.

In consideration there are generally four rules which steer all judgements on the matter.⁵

1) Past consideration is not valid.

If an act is carried out by A, after the act is carried out B then promises to give A some reward for this. A cannot sue B for the promise he has made subsequently as past consideration is not good consideration.

This rule does however have a couple of exceptions:

Previous Requests:

In general a subsequent promise can be supported with past consideration when if the promiser gave a request for consideration. The case of Lampleigh v Braithwait⁶ where the defendant had murdered a man and requested that the plaintiff do his level best to persuade the King to offer him a pardon. Braithwait did succeed in gaining the pardon and Lampleigh promised to give him £100, he never paid up and Braithwait took him to court. The courts held that although this was past consideration the defendant had requested the intervening of Braithwait and was therefore deemed to be a form of consideration.

Business Situations:

This exception is much more straight forward in its application as if the agreement is taken in a business situation where it is quite clear to both sides that payment is required then past consideration will hold up in court.

The Bill of Exchange Act 1882

⁷ If a job is done and the person who the job was done for doesn't pay for the work until for example a month later, the consideration is still valid.⁸

2) Consideration must be sufficient but need not be adequate:

This is a contentious issue as many feel it is an unfair method of determining a judgement but the ruling which was brought to light in the case of Chappel v. Nestle⁹ where Nestle ran a competition whereby if you sent in 3 chocolate bar wrappers along with 1 shilling 6d then they would send you out a record, Chappel who distributed these records felt that this de-valued the records and took a case to prevent Nestle from running this, they were granted the injunction as it was said that the 3 chocolate wrappers did not prove to be sufficient as Nestle did not comply with s.8 of the Copyright Act of 1956. This was held as the wrappers did provide a value despite them being thrown away they boosted sales which meant under s.8 Nestle were required to inform consumers of the regular retail price. If they were a mere token then they would have no value and Nestle would be eligible to sell these records at the reduced price. This shows that not everything has to be valued in terms of money. In the case of White v Bluett¹⁰, a son attempted to claim that he didn't owe his father who had recently passed or his estate any repayment of a promissory note due to the father and son's agreement that the debt would be written off if the son promised not to contest the fathers will. This promise was not held up in court as good consideration. We then look at Ward v. Byham¹¹ where a mothers promise to keep a child happy in exchange for money from the father was considered good consideration as there is no legal obligation to keep a child happy. In some case, worthless items have in fact been held as good consideration.¹²

3) Consideration as a performance of a legal duty:

This is a matter of whether consideration or some form of remuneration for the performance of a duty which the person is legally obliged to perform regardless. The leading case in this rule of consideration is Collins v. Godefroy¹³, this is where Collins who was a witness for Godefroy in a case was put on standby for several days and when he eventually was called to give evidence, he then presented Godefroy with a bill for his attendance in court. Godefroy refuted this claim as it was a legal duty for Collins to attend as he had been subpoenaed.¹⁴

4) Part payment of a debt:

If a person pays less than the initial amount which was agreed upon then new consideration is required. This may also come in the form of additional consideration along with the original agreement. If this is not adhered to then the contract will be voided regardless of a creditors agreement to accept less than the initial settlement unless something new has been given as consideration to the agreement. In Foakes v. Beer¹⁵, Dr. Foakes owed Mrs. Beer £2,090 plus interest. The two participating parties agreed subsequently that the money owed to Mrs. Beer would be paid in instalments of £500 with no mention of the above mentioned interest. This was deemed to be void as this would be not good consideration and unenforceable as part payment was not acceptable consideration to forego the whole of the debt. The most famous case in relation to part payment of a debt is the Pinnel's case¹⁶ where Cole owed Pinnel £8 10s. Pinnel requested that Cole paid £5 2s 6d. a month before the full payment was due. It was then claimed by Cole that it was agreed upon that the rest of the payment was cleared as he had paid the advance to Pinnel. The court held that Pinnel could not claim the rest of the debt. While they admitted that part payment of a debt of the original debt was not good consideration and didn't constitute a waiving of the balance. However, Pinnel did benefit from the advance of the payment which the courts did deem to be good consideration. The court stated:

"Payment of a lesser sum on the day in satisfaction of a greater sum cannot be any satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to the [claimant] for a greater sum..."

This is stating that although part payment is not sufficient in most cases, payment of a sum lesser then the initial agreed is valid if some additional consideration is provided.¹⁷

5) Pre-existing contractual duty:

This is a case where if the letter of the law is followed then technically to have to charge somebody extra, whether it is extra costs or the work takes longer than expected, after an original contract is agreed would not be allowed unless the party who is going to be charged extra receives something in return however there is some precedence to suggest that courts tend to be flexible or overlook this issue in consideration. This happens more often than not in long term contracts where the cost of a fully concluded contract is very hard to predict and a certain amount of leeway is allowed for either party.

The problem with the doctrine of consideration now is that of where does it fit into modern contract law and what purpose does it serve? In my opinion the Nestle case had thrown up more questions than it answered such as "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."¹⁸ Surely this is a far too watered down version of the doctrine and leaves it open to much argument. The promiser could argue in my opinion that the peppercorn was a mere token such as they did in the Nestle case and if so the peppercorn can be thrown away. It was questioned in the case of Williams v. Roffey Bros. & Nicholls (Contractors) Ltd. by McKendrick who says that consideration is "too easy to find"

[...]

¹ Williams v Roffey Bros [1990] 2 WLR 1153

² Currie v. Misa [1875] LR 10 Ex 153

³ http://thelawdictionary.org/executed-and-executory/

⁴ The Law of Contract Fourth Edition J.C. Smith

⁵ Fergus Ryan Contract Law (Round Hall Nutshell)

⁶ Lampleigh v Braithwait [1615] EWHC KB J 17

⁷ http://www.lawteacher.net/lecture-notes/contract-law/consideration-lecture.php

⁸ Fergus Ryan Contract Law (Round Hall Nutshell)

⁹ Chappel v Nestle [1960]AC 87 House of Lords

¹⁰ White v Bluett [1853] 23 LJ EX 36

¹¹ Ward v Byham [1956] 1 WLR 496 Court of Appeal

¹² Fergus Ryan Contract Law (Round Hall Nutshell)

¹³ Collins v Godefroy [1831] 1 B & Ad 950 King's Bench Division

¹⁴ Fergus Ryan Contract Law (Round Hall Nutshell)

¹⁵ Foakes v Beer [1884] 9 A.C. 605

¹⁶ Pinnel's Case [1602] 5 Co. Rep. 117a

¹⁷ White v Bluett [1853] 23 LJ EX 36

¹⁸ Emily Finch and Stefan Fafinski Law Express Contract Law (3rd Edition Pearson)