Possibly because this is my first post and I want it to be informative instead of speculative, I've chosen a topic I've done before.
Defining consideration is the easy part in any discussion on the topic. Such stuff can be found in any textbook -
Consideration is one of the four key elements in traditional contract orthodoxy (along with intention to create legal relations, offer, and acceptance);
It derives from the principle in
Currie v. Misa;
It need not be adequate (
nestle);
It operates such as to enforce bilateral dealings between parties as the law of contract is unconcerned with gratuitous promises;
Performance of an existing duty is not consideration;
etc, etc.
A more detailed explanation of the doctrine would be better found elsewhere, by eminent authors infinitely more qualified than I would ever be.
My interest in the functioning of this doctrine, however, has been sustained mainly by the debate concerning the viability of this doctrine today. There are issues within the doctrine that has resulted in a 'split' in the case-law.
Establishing perspective, notice must be taken of the crucial debate underlying much of contract law itself, the debate between realisism and contractual orthodoxy. The economic efficiency school of thought shall be disregarded for now. Realism is the school where so-called individual justice and flexibility is encouraged, whereas contractual orthodoxy relies on the traditional view of contract law as a series of enforceable bargains between two parties dealing at arms-length. As such, the latter view espouses certainty, yet has been criticised as being overly rigid and leading to injustice.
How does the doctrine of consideration fit into this debate? Firstly, perhaps the most eminent realist of all, Professor Atiyah, has attacked the traditional doctrine in his writing (see
P.S. Atiyah, “Consideration: A Restatement” in Atiyah, Essays on Contract (Oxford 1986)). It is an insightful article and one which deserves close attention, highlighting the defects of traditional contractual theory in the application of the law today.
One can also point to the doctrinal split between the cases of
Williams v. Roffey and
Ward v. Byham, against another line of authority represented by
Re Selectmove, Foakes v. Beer and
Stilk v. Myrick. On their individual facts, the concept that specific performance does not constitute consideration is attacked. Practical benefit, instead of material consideration, is also debated. However, once we look past these microcosmic issues, the clash begins to assume a wider significance - practical benefit can be seen as the courts choosing flexibility and individual justice, whilst the strict adherence in the latter three cases are evidence of judicial respect for contractual certainty. Furthermore, this split in case-law is unacceptable. Every judge at first instance is now confronted with a difficult choice when faced with consideration cases - which line of case-law should I use? Such a defect in a fundamental area of contract law is to be lamented.
The choice between justice and certainty is one which all of us as students have to make. Individual and social justice is indeed a noble aim and one the law should try and achieve, but at what cost? The benefit of certainty in the law is that contracting parties establish, in the pre-contractual stage, the terms of the contract and the consequences of breach. Allowing a court to impose a later 'practical benefit' test, thus
modifying the law in place at the time the contract was made, eliminates this certainty. Why, then, would I have any incentive to contract at all, if my position within the contract is liable to change? Without contractual certainty the law of contract would arguable fall into disuse. This is all food for thought, and one will have to make valued judgments based on what you think the law should be.
So, consideration is established to have many defects. What, however, are the alternatives?
1. Abolish consideration, expanding the scope of 'intention to create legal relations'.
This is a option many authors canvass. The pitfalls of consideration have been established in the last 100 years, and perhaps starting anew would allow the law to develop in a stabler fashion. Furthermore, the mechanisms and rules are already in place as this doctrine is as established as consideration is.
The drawback of such a move is that intention to create legal relations does not fully protect the 'bargain principle' inherent in the law of contract. Consideration is necessary because it provides tangible evidence of a transaction and an exchange of benefit / loss. Using intention to create legal relations as a test raises the spectre of judges having to decide material facts as to whether there was indeed any intent. In oral transactions it is easy to say 'Yes, I meant this to be legally binding' but no one can possibly know if such a statement is retrospective except the party himself. In written transactions the burden of proof is on the defendant to prove that the document is a forgery - there is an assumption of legality which is unfair on the defendant.
2. Estoppel
This is the most developed argument for replacing consideration, because the reliance-based model for damages is well-established in tort law, and estoppel has, in cases such as
High Trees, contravened the orthodox requirements with notable success.
However, estoppel would be strained too much if it were to fully take on the mantle which consideration fills now. There is an obvious conflict and divergence between the seperate models of contractual enforceability - expectation and reliance based. The damages are different. Secondly, estoppel has been held to work in only special cases. It is very plausible that forcing estoppel to act as a single enforceability model for consideration would be the equivalent of taking a solution and turning it into the problem it was meant to solve. Finally, there, once again, is a lack of concern for the bargain principle that underlies contract law.
3. Abolition of consideration altogether
Frankly, this option is absurd. Nobody in his right mind would postulate that we make gratuitous gifts enforceable. It is a fundamental tenet of the contractual system that something has to be given for something and that gives rise to enforceability. Gratuitous gifts are better governed by e.g. the law of Trusts because contract should not, and rightly so, ever take issue with gratuitous promises.
I hope this has been of help. Til the next time.
