The doctrine of consideration has come under increasing fire in recent times due to its somewhat intractable nature and inconsistencies, however it can be argued that much of the ill effects it had engendered in the past have been mitigated through developments of the law in the fields of economic duress and promissory estoppel. Furthermore it is suggested that consideration provides a valuable service to law in determining which promises should be enforced and which are to be regarded as gratuitous. Although the current state of the law may be described as lacking a clear governing principle due to the idiosyncrasies of these doctrines in application, it is arguable that the law’s current functioning is presently acceptable in serving a number of principles which are integral to a strong law of contract such as (relative) certainty, giving effect to the intentions of the parties and providing adequate protection to both parties of the contract.
The requirement of consideration in the formation of contracts was seen to serve a number of functions in the past namely: to distinguish between binding promises and those which can be considered gratuitous, on the foundation of bargain style relationships and to protect people from binding themselves legally with promises made in a frivolous manner. However these functions were undermined by developments such as the law’s lack of requirement for adequate consideration, as it can hardly be considered a bargain if a promise in enforced in return of nominal consideration such as a peppercorn or even worthless chocolate wrappers which were to be discarded in any case as per Chappell v Nestle. It could also be suggested that an alternative system based upon contractual intention rather than consideration would serve the purposes of distinguishing between enforceable and unenforceable promises as it has been stated that the question of consideration is a formality as in the use of a seal or the agreement to give a peppercorn, Vantage Navigation Cpn v Suhail and Saud Hahwan Building, serving as nothing more than evidence of an intention to form a legal relationship. However it could also be argued that contractual intention is itself an unhelpfully vague concept and would result in a lack of certainty in commercial matters. It can be said that consideration is beneficial in that it has a number of set rules which can allow parties to adequately judge when a contract has been entered into.
The main argument against consideration however definitely lies in the accusation that it is a blunt instrument which serves to frustrate the intentions of the parties which are dealing with each other in a perfectly reasonable and equitable manner. It can however be suggested that there have been a number of developments which have mitigated this effect. Firstly with regards to the definition of consideration itself the requirement for a benefit seems to have shifted from the need to show a legal benefit, to simply a practical benefit. This was seen in the case of The Eurymedon, whereby there was a difficulty in establishing how a third party stevedore could benefit from an exemption of liability clause which was part of the contract between the shipper and the carrier. The court held that the practical benefit of having the goods unloaded could provide consideration for a collateral contract between the stevedore and the shipper enabling the stevedore to benefit from the exempton. This, it is submitted, is an example of how some of the ill effects of the doctrine of consideration have been mitigated by the courts willingness to find consideration, even minimal and already legally obligated benefit, in a commercial context. It can also be argued that in such situations to discard consideration in favour of a term such as contractual intention would simply be replacing one vague and unhelpful concept with another and that the cause of contractual certainty in a commercial setting would not be served by such a change.
There is also the question of how consideration interacts with the concept of a renegotiation, and whether it still serves a useful purpose in the scrutiny it places upon such dealings. Originally there was Pinnel’s Case which stated that consideration had to consist of a benefit to the promisor or a detriment to the promisee and that a promise to undertake something already legally obliged to the promisor was not good consideration as it cannot be said to be a benefit if it is already due. This was said to protect creditors from unfair coercion on the part of their debtors.
Similar policy considerations were taken into account when deciding Stilk v Myrick, as at the time it was thought that allowing people to threaten to breach a contract unless they received more remuneration would not serve commercial (and indeed military, considering the historical context of the case) purposes. The effectiveness of this approach can be partially supported if D&C builders v Rees is examined, where it is shown that a person cannot coerce another into making a promise to accept less through manipulation of the economic circumstances. However in response to this it is suggested that such an application of the doctrine of consideration definitely supports the title of blunt instrument as it serves to frustrate what can be perfectly intended and equal negotiations in response to changing circumstance.
There is also a certain inconsistency in the fact that it was possible to accept nominal consideration, such as the wrappers previously mentioned and economically worthless consideration such as a hawk, or a cloak as mentioned in Pinnel’s Case but not the nominal benefits of guaranteed performance, or part payment of a debt. Thankfully this was rectified through the recognition of the doctrine of economic duress combined with the previously mention recognition of practical benefits over those which were purely legal. The current state of law is reflected in the case of Williams v Roffey, where it is stated that the practical benefit of avoiding a penalty clause or the disadvantage of contracting with another person for the duty to be performed or even if the damages would for breach of contract would not benefit the promisor as much as actual performance can serve as consideration provided the promise is freely negotiated and no economic duress occurs.
This begs the question how is economic duress determined? It was described in Pao On v Lau Yiu Yong as a coercion of the will which is assessed by taking into account the circumstances surrounding the promise. It is submitted that it is a given that there will be a difficult distinction to be made between situations involving legitimate usage of a strong bargaining position (as two parties negotiating at arms length inevitably must pursue their own interests) and an inequitable and unfair coercion. However it could be stated that it is to the law’s benefit to maintain flexibility on such distinctions and that the law of contract is perhaps served by the more general coercion of the will definition which allows it to decide on a case by case basis.
So at this point it appears that consideration is no barrier in such cases to the implementation of the contractual intentions of promising parties and that a combination of seeking practical benefits combined with the safeguard of economic duress mitigates the prior problems plaguing the doctrine of consideration with regards to renegotiation, however there is another situation which must be examined, that of part payments of debt. Currently the law refuses to recognise a partial payment of a debt as valid consideration for a promise to absolve the entire obligation.
This was unequivocally decided in Foakes v Beer and further confirmed in Re Selectmove. This again would appear to be justified along the lines of protecting creditors from unfair pressure and upholding the principal that consideration must consist of some form of benefit to the promisor or detriment to the promisee. The esoteric argument put forth in Foakes v Beer is that a partial payment cannot ever been seen as a benefit over a legal right to the full sum. This, it is submitted is a rather short sighted view, as it doesn’t take account of the surrounding circumstances which could result in a massive practical benefit for the promisor, for example if the debtor owed multiple debts and was on the verge of default and the bird in the hand argument.
It also appears to be one which is in conflict with the laws development in Williams v Roffey as it could be suggested that the two obligations are simply mirror images of each other, paying more for the same is roughly equivalent to accepting less. Also again the argument must be raised that if a peppercorn or something equally useless can be considered a benefit, why not a sum of money? These arguments would seem to suggest that the doctrine of consideration is unsatisfactory in dealing with such situations and it would indeed be so if it weren’t for the development of the doctrine of promissory estoppel, an entirely separate concept from consideration but one that has a resounding effect upon consideration’s impact upon the law.
Promissory estoppel was espoused in the case Hughes v Metropolitan RY, the particulars being that in the presence of an certain and fixed promise on which the promisee placed reliance when, considering the circumstances, it would be inequitable for the promisor to exercise his/her strict legal rights that said promisor would be estopped from doing so. This has application in cases of part payment of debts, serving to remove the consideration requirement provided the above criterion are met and this was confirmed in CLP v High Trees. Promissory estoppel must be specially pleaded and it was not raised when Foakes v Beer was decided thus could have changed the outcome of that particular case dramatically. However at this point it must be asked has the requirement for consideration been completely undermined by this rival doctrine? Coombe v Coombe authoritatively puts this question to rest by stating that promissory estoppel cannot give rise to a cause of action, it is a shield rather than a sword, and despite the inconsistencies surrounding this statement (for example proprietry estoppel giving rise to causes and Denning LJs dica in High Trees) this appears to be the accepted principal. It can therefore be stated that Estoppel is concerned with the alteration of legal relations based upon equity, whereas consideration is restricted to a role of determining when legal relations are created, a role it appears to fulfil acceptably.
In conclusion consideration plays a much diminished role in the modern law of contract thanks to the mitigating effects of modern legal developments but still plays an important part in determining whether legal relations have been entered into. Despite the inconsistencies and apparent lack of concrete principles to serve as foundations it can be argued that the current patchwork of doctrines works in practice. The maxim if it isn’t broke, don’t fix it would seem to apply in this situation.