The law or not, it can be discussed

The enforceability
of contracts has undoubtedly proven itself to be a massively integral part of
the law of contract in order to ensure that all parties of a contract are
treated fairly and deservedly. Consideration, or the reason one enters a
contract (broadly defined), has been the main tool used in English contract law
to prove whether contracts are enforceable or not. However, the definition of
consideration and its importance has been put under much scrutiny over the last
few years due to its different meanings and other self-discrepancies. As a
result, debate has persisted over whether consideration should be a valid and
used instrument in the study of enforceability of contracts, or whether it
should simply be abolished as it is no longer necessary in a legal contract. In
order to decide whether or not the notion of consideration should be abolished
from the modern English contract law or not, it can be discussed through analysing
the availability of better and more focused methods of proving the enforceability
of a contract, the wide scope of the notion’s definition and its rules, and
what would potentially happen if consideration was abolished.

 

            Although the notion
of consideration has proven itself to be the most valuable instrument in
determining the enforceability of contracts based on its more than frequent
use, there are alternatives available that may seem to be more focused and
easily used in order to differentiate between enforceable and unenforceable
contracts.

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            One of the alternatives
is the doctrine of unconscionability. The doctrine of unconscionability is a
defence available to a party of a contract which seems to be treated unfairly in
terms of the contents of the contract. Justified by Justice Kay in her decision
in Fry v Lane (1888), “… where
a purchase is made from a poor and ignorant man at a considerable undervalue,
the vendor having no independent advice, a court of equity will set aside the
transaction.” This doctrine therefore applies when consideration is
absent, making it a potentially strong alternative. In Samuel v Newbold (1906), Justice Macnaghten stated that an
unconscionable contract is one which is “unreasonable and not in accordance
with the ordinary rules of fair dealing.” The entrenchment of this doctrine
made perverse contracts, in regard to unfairness, disagreeable in the absence
of consideration. However, in Chitty on
Contracts, where the doctrine of unconscionability is referred to as unconscionable bargains, Chitty states that
there are three limitations to the doctrine. The first is that the bargain must be oppressive to the complainant in
overall terms. The second that it may only apply when the complainant was
suffering from certain types of bargaining weakness. And the third, that the
other party must have acted unconscionably in the sense of having taken
advantage of the complainant. These limitations do not alter or affect the
doctrine’s strength as an alternative, however one might say that something
that does affect it is the fact that it is still a relatively new doctrine.

This poses a disadvantage to its strength as an alternative as it being a new
doctrine means that it does not have a high multitude of cases to prove its
reliability yet.

            Another alternative
available would be economic duress. It is a relatively modern part of English
Law that has originated from decisions such as Universe Tankships Inc. of Monrovia v
International Transport Workers’ Federation, The Universe Sentinel 1983. In the case, the International Transport
Workers’ Federation made multiple demands in regards to various payments and
requested that the ship owners pay 6,480$ to the Seafarers International
Welfare Fund. The ITWF sued the plaintiffs after they recovered the money they
gave to the fund. They believed they could sue due to the fact that they were
acting under an immunity in s. 13 of the Trade Union and Labour Relations Act
1974. The House of Lords found that the defendants had no immunity and used
economic duress in order to corner the plaintiffs, putting them in a position
where they had to make those extra payments, hence the money was recoverable
for the plaintiffs. Lord Diplock stated that “the financial consequences to the
ship owners of the Universe Sentinel
continuing to be rendered off-hire under her time charter to Texaco, while the
blacking continued, were so catastrophic as to amount coercion of the ship owners’
will which vitiated their consent to those agreements and to the payments made
by them to ITF.” The importance of this case is shown as the pressure applied
by the defendant was the main concern in the judgement. This made clear the way
economic duress was used and how the mitigating of it leads to fairness between
the parties of the contract. In this sense, economic duress has proven itself
to be a strong alternative to the notion of consideration. A disadvantage of
the doctrine as an alternative however, is the fact that it is also relatively
new, exposing it to potential loopholes and having a weak arsenal of
precedence, which if it were strong would definitively make it a more reliable
element in the law of contract.

            Yet
another element in the law of contract that seems to be a strong alternative to
the doctrine of consideration is promissory estoppel. It is a relatively justifiable
doctrine that prevents one party from going back on a promise that is not
supported by consideration. It was developed in Central London Property Trust Ltd v High Trees House Ltd (1947).  An obiter statement made by Denning J stated, “In
my opinion, the time has now come for the validity of such a promise to be
recognized. The logical consequence, no doubt is that a promise to accept a
smaller sum in discharge of a larger sum, if acted upon, is binding
notwithstanding the absence of consideration”. Denning then adds that “this
aspect was not considered in Foakes v
Beer”. In hindsight, the doctrine of promissory estoppel seems to be a
reliable and fairly strong alternative to the notion of consideration. However,
its main weakness is seen to be that it is used “as a shield, not a sword”.

This means estoppel can only be used in acts of defense against the other party
when said party is going back on a promise. However, if English Law were to
adopt the estoppel method used in Australia, it can be used as an action, albeit,
a sword. In Waltons Stores (Interstate)
Ltd v Maher (1988), where both parties agreed that Maher would demolish an
existing building and build a new one in which Waltons would occupy. When 40%
of the construction of the new building was done, Waltons withdrew from the
plan and Maher brought action through promissory estoppel. The court found that
the element of urgency and Maher’s assumption that Walton’s execution of the promise
was a formality made Walton’s conduct unconscionable and therefore was estopped
from going back on the promise of completion. However, Brennan J has stated
that even if the UK adopted Australia’s form of actionable promissory estoppel,
it would serve a different purpose from the action of consideration as
consideration protects the expectation interest of the party, whereas estoppel
protects the reliance interest. That makes it less of a viable option to
replace the doctrine of consideration.

 

            A strong concern regarding the notion
of consideration that has led to its constant debate of importance and
abolishment, is the definition of the word; or rather the uncertainty that has
arisen over it. The definition given by Sir Frederick Pollock, which was
approved by Lord Dunedin in Dunlop v
Selfridge Ltd (1915)
AC 847, 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.” This technically means that there must exist a
bargain between the two parties in the formation of the contract, according to
the rules. This is because the definition implies that the value act or
forbearance is bought, or simply that it is done or suffered by one party at
the request of the other. This makes consideration a matter of mutuality.1 The
other definition is the benefit/detriment theory that says, “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.”2 This
makes things foggy as one definition says that both parties can give
consideration. The reason this causes confusion is because one of the rules of validating
consideration in a contract is that consideration must move from the promisee.

In Tweddle v Atkinson (1861) EWHC QB
J57, an agreement between two fathers of a bride and groom died before they
could make their payment to the couple as a wedding gift. The groom sued the
executor of the will and tried to enforce the contract as a third party,
however the court denied his appeal and ruled in favour of the executor due to the
fact that he could not provide any consideration to enforce the contract as he
was not part of the formation of the contract. This case was a benchmark in
officiating the rule of “consideration must prove from the promisee”. Although
it is a straightforward rule and has no issues with its interpretation, it
sometimes has led to unfairness in trials. However, the rule has been amended
by the Contract (Right of third parties) Act 1999. The act enables the third
party to sue on either the condition that it is mentioned that he is allowed to
do so by the parties of the contract; or the contract purports benefit to the
third party and the contracting parties intend that it be enforceable.

The
other issue that has fueled debate over consideration is the various rules that
have been implemented to guide us in determining whether or not a contract is
enforceable. Consideration typically has 4 distinct rules. One of them being
that consideration must be sufficient, and need not be adequate. The rule was
developed in Pinnel’s Case (1602) 5
Rep, 117, where the claimant had sued the defendant for not paying the full
amount disclosed, even though the claimant had agreed to accept less. The court
found that part payment of a debt is not considered valid consideration for the
claimant to forbear the amount due. This rule of sufficiency was confirmed in Chappell
& Co Ltd v Nestle Co Ltd 1960 A.C. 87, where Nestle had a sales
promotion that for 1 Shilling 6d and 3 chocolate bar wrappers, one could get a
record. One of the records was owned by Chappel by copyright and they sued
Nestle since they were selling the record below the actual price. Although the
wrappers were simply thrown away as they were utterly useless, the court found
that they were valid consideration and Chappel were allowed the injunction. However,
in the case of White V Bluett (1853)
LJ Ex 36, where there was a promissory note between Bluett Sr. and Jr. that Jr.

would have to repay his father the sum of money he lent him. His father died
before he could repay him and White executed Bluett’s will, consequently suing
Jr. for the due payment. Bluett argued that it was not necessary to make the
payment if he stopped complaining about his fathers’ plans with the
distribution of his estate in his family. The court found that him not
complaining was not sufficient consideration and therefore he was not absolved
of making the outstanding payment. This makes things strongly unfair as, in the
case Chappell & Co Ltd v Nestle Co
Ltd 1960, chocolate bar wrappers were deemed sufficient consideration,
whereas in White V Bluett (1853), the
forbearance of Bluett’s complaining about his father was deemed insufficient. The
idea of ‘practical benefit’ as a means of consideration was clearly not
exercised in White V Bluett (1853)
and, even if we were to consider the benefit/detriment theory, the son would
have a detriment in the case which would be the refrainment of his complaining.

Another case that led to a fair amount of disagreements regarding consideration
and the little need for adequacy of it in itself is Foakes v Beer (1884). In this case, it was found that “the common
law will not question the fairness of the consideration, as long as the parties
agree to it willingly”.3
Beer made no mention of interest in the contract, however after Dr. Foakes made
the payment, Beer bought an action for the interest. Foakes was liable to pay
the interest as part payment of a debt is not considered valid consideration
for a party to forbear a balance. This rule was developed in Pinnel’s Case Another rule of
consideration is that past consideration is not good consideration. This rule
is straightforward as well, yet it does not cause any issues or debate; since
consideration is the benefit that causes the action or inaction of the promisor
that proves he or she is legally bound, then typically consideration is truly
not meant to be past. Past consideration is mainly defined as consideration
wholly performed before the promise was made, meaning it was not made in response
to a promise. For example, in Roscorla v
Thomas (1842) 3 QB 234, where the claimant bought a horse form the
defendant. After the sale, the defendant told the claimant that the horse was
free of vice. When the claimant discovered that the horse was not free from
vice, the claimant sued the defendant. The court found that the promise of the
defendant that the horse was sound and free of vice did not constitute as valid
consideration, as it was made after the contract had been concluded. This means
that the promise of the horse being sound could not possibly be the reason the
claimant entered the contract.  As
opposed to that, the rules of consideration haven’t received too much
criticism, proving them to be relatively fair and forward. As opposed to the
statement in question, the meaning of consideration is fairly convoluted due to
its widely interpretative definition, however it definitely does have meaning
and is certainly not only relevant, but has proven itself vital over the course
of many cases. It has, over its natural course, formed itself into a quotidian
doctrine in the law of contract.

If consideration was abolished, it seems clear
that the courts would have to think up a new legal doctrine in order to determine
which promises are to be enforceable and which aren’t. The courts ultimately
would see no difference in the enforcement of promises. Whichever promises were
made enforceable in the past would be parallel with any future promises of the
same nature, and vice versa. Bringing in the argument from the last paragraph,
consideration has become so entrenched in the modern law of contract that it
seems its abolishment would either prove to be futile, or downright impossible.

Although there exist viable alternatives, they each have their fair share of
restraining factors and therefore make it all the more difficult to abolish
consideration from the modern contract law. This makes the idea of abolishing
consideration from contract law a difficult, all the while redundant chore.

 

In conclusion, the definition of consideration
has to an extent, become convoluted. Moreover, it has repeatedly been seen as
unreasonable in certain cases mentioned. Furthermore, there are clearly various
alternatives to consideration that are still evolving with modern law and are
becoming more and more viable with each different case. However, to abolish it
from the modern law of contract would be futile as well as difficult due to its
deep entrenchment in the modern law of contract. It is still widely used and
has proven itself fair in most of the cases it has been involved in as an
instrument of determining the enforceability of contracts. The best option that
can be taken is enfeeblement of consideration as the main doctrine of
determining the enforceability of contracts. This would grant judges the
opportunity to look at cases more holistically as they would have an array of
legal doctrines that can prove enforceability, or lack thereof, of a contract.

 

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