Consideration (contract Law)

"The picture [of the doctrine of consideration] is one of incoherence and some uncertainty...The law would be rendered more intelligible and clear if the need for consideration were abolished and gratuitous promises that have been accepted or replied upon were held to be binding, (subject to the normal contractual rules relating to, for example, the intention to create legal relations...)". Professor Burrows - Understanding the Law of Obligations p197

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The doctrine of consideration is a very incoherent and uncertain area of contract law. The doctrine encompasses much conflicting case law, and is subject to a great deal argument and debate. One area of difficulty is that it is difficult to establish the exact function(s) of the doctrine. As case law has developed over the centuries, the doctrines of offer and acceptance, and intention to create legal relations can be seen to have merged somewhat with that of consideration, and have been 'made to perform some of the same functions' , making the law cluttered and confused, with 'far too many doctrines chasing a limited number of problems'. The decision in Williams v Roffey Bros & Nicholls (Contractors) Ltd alters the function and makes it uncertain. Russell LJ, in his judgement, states that its function should be to 'reflect the intention of the parties to the contract', but is this not leaning more towards the doctrine of intention to create legal relations? This decision, whilst highly controversial, and unreflective of the orthodox understanding of consideration, is one which echoes the current uncertainty surrounding the roles and functions of consideration within the modern contract law.

The decision in Roffey is a good example of the incoherence in the first principle of the doctrine of consideration: that consideration must be sufficient, but need not be adequate. Roffey is such a prolific case in contract law partly due to the fact that it, does, in part, overrule the decision in Stilk v Myrick ¬¬¬, in that it establishes the principle that the promisor only need to confer a practical benefit, not necessarily a benefit in law. However, not even this principle is completely certain; In re Selectmove Ltd demonstrates that this approach has not been carried through in all aspect of the doctrine of consideration. The courts' approach to the definition of 'value' and 'benefit' has been inconsistent, therefore leaving the modern law unclear and uncertain. Their interpretation has been one of the most difficult tasks in analysing the doctrine of consideration, and to this day remains unstable. In, for example, the case of Cook v Wright , the court held that there was consideration despite the lack of a benefit to the promisor, and lack of detriment to the promisee. Another example is in the contrast of the cases of Bainbridge v Firmstone and White v Bluett . The former gave an extremely subjective interpretation of 'benefit', whilst the latter, on the other hand, took an objective approach to the interpretation.

The case of White v Bluett leads to another uncertain area of the law. A son not complaining about father's distribution of property was held not to be sufficient consideration for father's promise not to sue son for an outstanding debt to him - the son had 'no right to complain', therefore not providing any consideration. This decision has been criticised for two reasons: firstly, that it Ignores the fact that the father got a 'practical benefit' - ie he had been freed from son's complaints; and secondly that the son did act to his detriment: he doing nothing wrong in complaining; therefore did have a 'right' to complain. As mentioned, recent cases, for example Williams v Roffey Bros, have decided that a practical benefit is sufficient consideration. This is demonstrated in Pitt v PHH Assent Management Ltd , where it was held that there was consideration on three grounds. It is the first and second that are relevant to White; both of these grounds are based on the principle that the defendants were freed from the 'nuisance value', which seems to contradict the judgement in White, although it is important to note that in the case of Pitt, 'nuisance' consisted of a threat of litigation, which distinguishes it from White, as it makes the 'nuisance' more serious. To address the second criticism, the son's giving up his of 'right' to complain could be compared, as a detriment, with the nephew's right of 'drinking liquor, using tobacco, swearing and playing cards or billiards for money' until he was 21, in the American case of Hamer v Sideway . The uncle promised to pay his nephew $5,000 for giving up his rights to engage in activities as listed above; this was held to be enforceable as the nephew had a legal right to perform these activities, thus in giving them up he provided consideration. Of course, US case law is not binding on English law, however, the precedent is often considered to represent English law, and thus the decision in Hamer is relevant to White in that it forms sufficient grounds for criticism of the court's interpretation of 'detriment'.

Given how uncertain and incoherent the doctrine of consideration is, it would be logical to argue that 'the law would be rendered more intelligible and clear if the need for consideration were abolished, and gratuitous promises that have been accepted or relied upon were held to be binding'. One argument in favour of this is that at present the courts have, in many cases, 'invented' consideration. Whilst this has benefitted the appropriate parties in such cases, it is worrying trend, assigning perhaps too much power to the courts, and thus resulting in severe inconsistency. The abolition of the doctrine would, as pointed out by A. G. Chloros would assume, therefore, that 'the general principles of the English law of contract are sufficient to validate agreements', which would 'be valid if there was consensus ad idem'. From this, it is clear that gratuitous promises would be binding where they have been accepted or relied upon. This would be an important qualification, in the direction that many judgements have already been swaying - in their 'invention' of consideration, for example in Ward v Bytham , where the judges displayed a variety of interpretations of 'consideration'. Denning LJ rejected the defendant's argument that the claimant had not provided consideration, by holding that the claimant's performing of her existing legal duty was sufficient to provide consideration, and that the father was conferring a benefit, just as he would have if he had have paid a neighbour to look after child. Denning LJ later expressed this view again: 'A promise to perform and existing duty is, I think, sufficient consideration to support a promise, so long as there is nothing in the transaction which is contrary to the public interest'.

This opinion was not shared by the CA judges in Ward, and so here the 'invention' of consideration is truly illustrated, as the judges still managed to find consideration, but by looking elsewhere. They were content to find 'ample' consideration on the facts of the case, namely from a letter sent from the father to the mother, containing the promise, although, even here, there were still various interpretations, or 'inventions' of consideration. The first was by interpreting the letter as a waiver of the strict legal position between the parties; however, this is not the same as supplying consideration. A second interpretation would be that by promising to keep the child 'happy' - a term specified in the letter - and allowing the daughter the choice of where to live - again, specified in the letter - the mother was doing more than her legal duty, thus providing consideration. However, the first fact is rather dubious: how does one determine the child's happiness? Referring to Bret v JS , it is clear that 'natural affection of itself is not a sufficient consideration'.

By abolishing the doctrine of consideration, it is easy to see that, in a case such as this, where the judges clearly thought that the just and fair decision, the policy decision, was that the father should make the payments to the mother, the same conclusion would be reached, but by more 'intelligible and clear' grounds, and without the need to invent consideration.

This vital step in the law of contract would also bring English law into line with other countries. For example, under US law, in some states, a gratuitous promise can be enforced if the party to whom the promise was made relied on the promise. Other states no longer require consideration for certain types of promises'. That the law is in vital need of abolition, can be seen in a statement from A. G. Chloros: 'If in the past it served a useful purpose in that it enabled English law to pass from the stage of the contractual writs to a general law of contract its survival at the present time is an anomaly.'

A. G. Chloros also explores the idea of the creation of new, clear, legislation to govern contract law, and under his proposals, he has managed to set out a clear section for each of the troubling issues under the doctrine of consideration. This would certainly give contract law the more structured approach that it is in such clear need of. It could be argued that this would create undesirable rigidity in the law, but this is clearly countered by the fact that the legislation would, of course, still be subject to the normal rules of statutory interpretation. It would, thus, allow judges to interpret the law whilst sticking closely to established rules, rather than to go too far in 'inventing' the law.

In conclusion, it has been demonstrated that the abolition of the doctrine of consideration would take nothing away from English law, which case law currently 'shows up the uncertainty of a system which purports to establish general rules in the course of dealing with specific cases'10. Each area of consideration is more uncertain and inconsistent than the next, and to, instead, rely on clear principles and the coexisting doctrines of for example, the intention to create legal relations, would make the law a lot more intelligible, with a clearly defined structure.