For consideration which, in his opinion, are not

For the formation of a contract the
following elements of a contract need to be established: Offer + Acceptance +
Intention to be legally bound + Consideration.1 The promise can be enforced
in the court if it is either contained in a deed or supported by consideration.2 There
are a few definitions of consideration. According to Patteson J. in Thomas v Thomas the consideration means
‘something of value in the eye of the law’.3 Lord Dunedin in Dunlop v Selfridge described the consideration
as ‘an act of 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’.4 The
most famous definition of the consideration was given in the case of Currie v Misa: ‘a valuable
consideration, in the sense of the law, may consist either in 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.’ 5 It is
fair to say that the doctrine of consideration is a complex one. Firstly,
numerous definitions of the consideration mean that the doctrine of
consideration is interpreted differently. Then, there are several rules in the
doctrine of consideration and there are various exceptions to these rules. Furthermore,
some of the consideration rules can be argued to be unfair and possibly lead to
injustices. Therefore, some people e.g. Lord Goff argued that there is no need
for the doctrine of consideration and it should be abolished, whereas others e.g.
Lord Denning claims that the doctrine of consideration is too fundamentally
entrenched in the English contract law to be eliminated ‘by the side of wind’. It
can be suggested that by referring to the term ‘side of wind’, Lord Denning
meant a number of criticisms of the doctrine of consideration which, in his
opinion, are not sufficient enough to eradicate the consideration element.
Therefore, the first part of the following essay will consider main criticisms
of the doctrine of consideration and more importantly, it will discuss the
extent to which the recent modifications to the consideration doctrine
including the doctrine of promissory estoppel and the notion of the practical
benefit have diminished the need for the consideration element. Then, in the
second part of the essay, it will be demonstrated that the doctrine of
consideration is still crucial to the formation of a contract and the recent
modifications to the doctrine of consideration are simply exceptions rather
than sufficient substitutes to the doctrine of consideration. Therefore, the
following essay will argue that although there are numerous criticisms of the
doctrine of consideration and the recent developments have arguably diminished
the necessity for the consideration element, the extent to which the courts require
consideration in the formation of a contract is still substantial.

Some people may challenge the Lord Denning’s
statement in Combe v Combe because
arguably, the need for the doctrine of consideration has diminished to a
significant extent in the modern contract law cases. For instance, Lord Goff characterised
the doctrine of consideration as ‘unnecessary’.6 Then, Professor Burrows adds
that the abolishing of consideration principle will bring more clarity to the
law on the formation of a contract.7 Additionally,
it can be argued that the doctrine of consideration is not a necessity because
there are precedents in some non-common law countries e.g. France where the consideration
element is not required for the formation of a contract.8 Furthermore, Professor
Atiyah believes that there is no comprehensible doctrine of consideration.9 Atiyah
argues that in reality, the courts need the consideration element to find ‘a
good reason for enforcement of promise’ and the idea of a bargain is not what
the courts are concerned about.10 Chappell and Co Ltd v Nestlé
demonstrates this point because it shows that even a nominal consideration is
sufficient enough to support the agreement.11 Therefore, Atiyah argues that
there are better enforceability tests than the one used in the consideration
doctrine e.g. ‘reliance test’.12 For
example, the doctrine of the promissory estoppel applies the reliance test to
determine the enforceability of contracts.13 The promissory estoppel
principle was defined by Lord Denning in the Central London Property Trust Ltd v High Trees House Ltd: ‘a
promise intended to be binding, intended to be acted upon, and in fact acted
on, is binding so far so its terms properly apply’.14 Importantly, the doctrine of
promissory estoppel allows promises to be enforced in the absence of consideration.15
Therefore, it can be argued that the principle of the promissory estoppel has
significantly diminished the need for the consideration element.

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Furthermore, it can be argued that the
notion of the practical benefit has considerably decreased the importance of the
doctrine of consideration in the formation of a contract. This new controversial
approach was applied in some cases where there were pre-existing contractual
obligations. In Stilk and Myrick it
was desided that when a party promises to do something that they are under
legal obligation to do, these promises can never constitute to a valid consideration
for a new agreement.16 However,
in Williams v Roffey the Court of
Appeal found a valid consideration in the performance or promise to perform of
what had to be performed by an existing contractual obligation because the
court recognised a ‘practical benefit’ for the promisor.17 In Williams v Roffey Russell LJ argues that ‘the court nowadays should
be readier to find its existence so as to reflect the intention of the parties
to the contract’.18
Therefore, the adoption in Williams v
Roffey of a factual rather than a legal definition of consideration means a
shift in the law relating to alteration of a contract.19 Furthermore, after Williams v Roffey in the New Zealand
case of Antons Trawling Co v Smith the
court accepted that a mutually agreed contractual variation can be binding even
if there is no consideration or practical benefit found.20 Although not binding on the
UK courts, this decision demonstrates that the need for the doctrine of
consideration in the common law systems is diminishing. Therefore, it can be
seen that Williams v Roffey represents
a shift away from the bargain view of contract towards enforceability on the
intention of the parties.

Furthemore, the principle of practical
benefit was also applied in certain cases concerning the part payments of debt.
The leading authority comes from Foakes v
Beer: ‘a creditor’s promise to accept part payment of a debt in full
settlement was not binding as it was not supported by consideration’21. However, MWB Business Exchange Centres Ltd v Rock
Advertising Ltd challenges the authority of Foakes v Beer.22 In MWB the Court of Appeal decided that an
oral agreement to defer payments was legally binding, as they found the practical
benefit for the landlord: not having empty premises.23 Therefore, the fact that a few cases applied the
practical benefit principle demonstrates that the need to show a
legal benefit under the doctrine of consideration has moved to a practical
benefit. This evidence consequently challenges the Lord Denning’s statement
that the consideration principle is still a fundamental part in the formation
of a contract.

However, the following essay agrees with
Lord Denning’s statement. Law
Commission 1937 says that the doctrine of consideration is ‘so deeply
embedded in our law that any measure which proposed to do away with it altogether
would almost certainly arouse suspicion and hostility.’24 In the old case of Foakes v Beer the Lord Chancellor, the
Earl of Selborne argued that the fact that the doctrine of consideration ‘has
never been judicially overruled’ since the sixteenth century means the
consideration principle remains the fundamental part to the formation of a
contract.25 Andrew
Kull agrees with that and says that the requirement for the consideration remains
‘one of the most basic propositions of contract doctrine’.26 Then, Hamson argues that
the idea of bargain which is one of the vital parts of the consideration
doctrine has become ‘an integral part of almost every branch of our law of
simple contract’.27 The
Atiyah argument that there is no coherent doctrine of consideration was strongly
criticised by Treitel.28 Treitel
argues that the English Law has always recognised the existence of ‘a complex
and multifarious body of rules known as doctrine of consideration’.29

It can be argued that the reason why the
courts still consider consideration as a vital element of the formation of a
contract is because the doctrine of consideration carries out a few important
functions. The doctrine of consideration emphasizes the importance of formality.30
Therefore, promises of gifts or promises without consideration are not enforced
due to its informal nature.31 There
are 3 important functions of formality, identified by Fuller.32 The
first function is the ‘evidentiary’ one, which presents evidence for the
existence of a contract. 33 The
second function is the ‘cautionary’ one, which ensures that the parties took
time to consider all the terms.34 The third
function is the ‘channelling’ one, which provides test for enforceability which demonstrates
to the courts whether the contract can be enforced or not.35 Then, the doctrine
of consideration prevents the gratuitous promises from being legally enforced.36 Richard
Posner argues that in most cases ‘the costs for enforcement (administrative
costs plus costs of legal error) would exceed the benefits’.37 This
is because the enforcement of gratuitous promises would eliminate trust between
parties who make and accept gratuitous promises.38 Then, the enforcement of
gratuitous promises can be unfair to the promisor who, for instance, can change
his mind.39

Furthermore, it can be argued that the
doctrine of the promissory estoppel is just an exception applied in the
situations where it is difficult to establish the consideration. In Smith Kline Beecham plc vs Apoteh Europe Ltd
Jacob LJ argued that the promissory estoppel cannot be used to create legal
relationship.40 Additionally,
the purpose of the promissory estoppel in English law is not to replace the doctrine
of consideration.41 In Brikom Investments Ltd v Carr Roskill LJ
stressed the fact that using the doctrine of the promissory estoppel in order
to eliminate the need fro the doctrine of consideration would be ‘wrong’. 42
Furthermore, there are a few limitations to the principle of the promissory
estoppel.43 For
example, one of the limitations is that ‘the doctrine can only be used as a
shield, not a sword’.44
This means that the doctrine cannot form basis for the cause of action and can
only be used as a defence.45

Furthermore, Blaire argues that an
extension of the doctrine of promissory estoppel has been fought by the higher
English Courts.46 This
can be explained by the fact that the doctrine was made ‘single-handedly’ by
Lord Denning and Lord Denning is often promotes his personal moral values into
the law.47 Furthermore,
it can be argued that controversial judgment in Williams does not replace consideration with intention. It upholds
the doctrine of consideration as being an equally fundamental part of contract
law.48 In Re Selectmove and Re C the Court of Appeal refused to extend the principle
established in Williams.49 Blair
argues that the CoA is correct ‘both in terms of contract principle and
judicial precedent’.50 The
replacement of a settled, if sometimes harsh, doctrine, with one that is
riddled with inconsistency is less than desirable.51 Therefore, this evidence
supports the Lord Denning’s statement that the doctrine of consideration is
fundamentally entrenched in the formation of a contract and the courts still
require it.

To conclude, the following essay has
explained why the consideration is still fundamental to the formation of a
contract. Moreover, the criticisms of the doctrine of consideration as well as the
possible alternatives to the doctrine of consideration were assessed. It is
fair to say that although the doctrine of consideration is difficult to
eliminate entirely, the doctrine is in need of reforms. For instance, the Law
Revision Committee 1937 scrutinised the doctrine of consideration and proposed
changes to it.52 For
example, there is a suggestion to replace the consideration with a test of
intention and the consideration will be retained as a requirement at the formation
of the original contract.53 In
addition, although the bargain of consideration should be retained, it will be
better to recognise other good reasons for non-contractual enforcement.54 Furthermore,
an effective reform would be to supplement consideration with a promissory
estoppel doctrine.55

1 Peter Gilles, Consise Contract Law
(Federation Press 1988) 7.

2 Dena Valente, Enforcing Promises: Consideration
and Intention in the Law of Contract accessed 7th January 2018, 7.

3 Thomas v Thomas (1842) 2 QB 859, 114 ER 330 (QBD).

4 Dunlop v Selfridge (1915) AC 847 (HL).

5 Currie v Misa (1875) LR 10 Ex. 153, LR 1 App Cas 554 (HL).

 

6 White
v Jones 1995
UKHL 5, 1995 2 AC 207 (HL), 263.

7 M. Chen-Wishart, ‘In defence of consideration’ 2013 Vol. 209 (13)
Oxford University Commonwealth Law Journal 209, 210.

8 Barry Nicholas, French Law of
Contract (Butterworths, 1982) 118.

9 Ewan Mckendrick, Contract Law:
Australian Edition (Palgrave Macmillan, 2015) 90.

10 P.S. Atiyah, Consideration in
Contracts: a Fundamental Restatement (first published 1965, Australian
National University Press, 1971) 7.

11Chappell & Co Ltd v Nestle Co Ltd
 1960
AC 87 (HL).

12 Richard Stone, The Modern Law
of Contract (Routledge, 2015) 132.

13 (n 12)
133.

14 Central London Property Trust
Ltd v High Trees House Ltd 1947 KB 130 1947
KB 130, 1956 1 All ER 256, 62 TLR 557 (KBD).

15 (n 12) 119.

16 Stilk v Myrick 1809 EWHC KB J58, 170 ER 1168 (KB).

17 Williams v Roffey Bros
& Nicholls (Contractors) Ltd 1989 EWCA Civ 5, 1991 1 QB
1 (CoA).

18 (n 2) 21.

19
Roger Halson, ‘Case Comment: Sailors, sub-contractors and consideration’ 1990
Law Quaterly Review, 2.

20 Antons Trawling Co. Ltd v
Smith (2003) 2NZLR.

21 Foakes v Beer 1884 UKHL 1 (HL).

22 Matthew
Burton, ‘Practical benefit rides again: MWB business exchange in comparative
perspective’ 2017 Vol. 46 (1) Common Law World Review 69, 73.

23 Richard Farnhill, Contract
variation just got easier – mitigating the risk of inadvertent change accessed 10th January 2018.

24 The
Editorial Committee, The Law Revison Committee’s Sixthe Interim Report (Vol. 1
No 2 1937) accessed 3d January 2018, 101.

25 (n 21).

26 Andrew Kull, ‘Reconsidering
Gratuitous Promises’ 1992 21 J. Legal Studies, 39.

27 Hamson, ‘Reconsidering Gratuitous Promises’ 1938 54 L. Q. REV., 235.

28 McKendrick
(n 9) 90.

29 Ibid.

30 Dawson,
‘Fuller, Consideration and Form’ (41 Colum. L. Rev, 1941) <. http:>
accessed 5th January 2018.

31 ibid.

32 ibid.

33 ibid.

34 ibid.

35 ibid.

36 Kull
(n 25) 52.

37 ibid.

38 Chen-Wishart
(n 7) 221.

39 Chen-Wishart (n 7) 223.

40 Jill Poole, Textbook on Contract Law (OUP, 2016) 157.

41 ibid.

42 ibid.

43 Stone
(n 12) 121.

44 Combe v Combe 1951 2 KB 215 (CoA).

45 Stone
(n 12) 124.

46
Ann Blair, ‘Minding your own business – Williams v Roffey re-visited:
consideration re-considered’ 1996 Journal of Business Law, 5.

47 ibid.

48 Blair (n 40) 4.

49
Blair (n 40) 6.

50 ibid

51 ibid

52
(n 24),  102.

53 Ibid.

54 Hamson
(n 27) 247.

55
Blair (n 40) 7.

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