Lord Goff’s view that the doctrine of consideration is ‘unnecessary’ has some essence. The doctrine has been described as constricted and therefore fails to give effect to the promises that should have legal effect. Dunlop pneumatic Tyre Co. Ltd v. Selfridge &co. Ltd 1915. Dunlop agreed to give Messrs Dew, motor accessory agents, discounts on the basis that Dew agreed not to sell Dunlop’s goods for less than the list price, and that if Dew resold the tyres to a trade buyer Dunlop would extract a similar undertaking from them. Dew sold the tyres to store keepers and agreed to give Selfridge certain discounts off Dunlop’s list prices and Selfridge agreed not to sell any of Dunlop’s tyres to private customers at less than the price list. Dunlop sued Selfridge for breach of the undertaking, when Selfridge sold Dunlop tyres to private customers for less than the list price. It was held that Dunlop could not recover the liquidated damages. In this case Lord Dunedin concentrated on whether the plaintiff had provided any consideration for the defendant’s undertaking, however he was incorrect in his assertion. It is difficult to reconcile the doctrine with modern Contract law. If the promise is based on the will of the parties why insist on consideration?
Williams V. Roffey Bros & Nicholls (contractors) Ltd 1990. The defendant building contractors were refurbishing a block of flats for the owners. They sub-contracted the carpentry work to the claiment. The claiment started the work but ran into financial difficulties and there was a risk that they would not complete the job. The defendants were liable to pay a financial penalty if the refurbishment was not completed on time. The defendants agreed to pay an additional sum of money per flat to the plaintiff if they completed the work on time. It was held that the plaintiff could recover the additional sum. The defendants received a practical benefit because the work was completed on time, and they did not have to engage another contractor. This decision was based on consideration but it is debatable whether its link is with reliance.
Many have adopted a similar view to that of Lord Goff’s; its principle critic has been professor Atiyah. In an essay entitled ‘Consideration: a Restatement’ (Contained in essays on contract (OUP, 1986), PP. 179-243) he assaults the doctrine of consideration relaying that the doctrine of consideration is complex and is not as simple as it is often preconceived stating:
‘The conventional statement of the doctrine of consideration is not perhaps as easily reduced to a simple set of rules as it is often assumed…’
Due to the narrow criteria of the doctrine there have been numerous cases where no consideration was found. This suggests that not only is consideration unnecessary, it is inconsistent and almost unreliable. Take the case of White v. Bluett 1853 for instance, a son promised not to bore his father with his complaints if his father did not sue him on a promissory note. It was held that the son’s promise had no economic value and so the son had provided no consideration for his fathers promise. In the case of Foakes v. Beer 1884 the plaintiff had obtained judgement against the defendant for £2,090. However she agreed to allow the defendant to pay her by instalments and not to take any proceedings to enforce the judgement. This attracted interest from the date of the judgement. The defendant paid the debt only, and the plaintiff claimed the interest. It was held that the plaintiff was entitled to recover the interest. Even if the plaintiff had agreed to waive the interest the defendant had not provided any consideration for such a promise. Thus cases occur where no consideration is found, its doctrine appears weak and useless. Is the doctrine of consideration at all necessary?
Lord Goff’s view can be completely rejected; another perspective of consideration is that it is fundamental to the law of contract. Consideration is often seen as a useful tool, it provides evidence establishing the existence of a contract distinguishes gifts and bargains and possesses a cautionary function. Currie v. Misa 1875 P sued D on a cheque given to pay off a pre-existing debt. D argued that P had not provided fresh consideration for the debt. It was held that P was entitled to the money because there was no consideration. Thomas v Thomas (1842) 2 QB 850 Mr Thomas died, Mrs
Thomas paid £1 a year to his executors to live in the house for the rest of her life. It was held the £1 a year was sufficient consideration. Consequently the absence and also the presence of consideration determine the outcomes (judgments) of a case.
Consideration is said to be adaptable and this may well be one of its strengths. The ability to establish whether there is consideration has been described by professor Treitel as ‘inventing consideration’. He state:
“…English courts often regard an act of forbearance as the consideration for a promise even though it may not have been the object of the promisor to secure it… These practices may be called ‘inventing consideration’… In such cases the practice of inventing consideration may help to make the operation of the doctrine of consideration more acceptable…”
Promissory Estoppel is a key principle within contract law and occurs when A makes a promise to B which is intended to be binding and to be acted upon, and is in fact acted upon, then A is bound by the promise even where B has provided no consideration for it. The role of Estoppel is to give is to give effect to a promise that would otherwise be unforceable. Furthermore it has been suggested that estoppel may be a supplement, even supplant, the doctrine of consideration. Combe v. Combe 1951 describes Estoppel as a “shield not a sword” this indicates that Promissory Estoppel can only be used as defence, not a cause of action.
Consideration is a doctrine frequently discussed. Is the doctrine of consideration unnecessary? No, due to its evidentiary function, cautionary function (a check against inconsiderate action), and channelling function – channels for intentions to create legal relations. Consideration gives ‘the badge of enforceability’. However I must conclude that doctrine is unnecessary. Professor Atiyah states:
“The present orthodoxy seems to me unnecessarily cumbrous. It would be a great deal simpler if the courts were willing to treat action in reliance which suffices for estoppel as also sufficient to satisfy the requirements of consideration…”
The doctrine is too narrow failing to give effect to promises that should have legal effect (Dunlop v. Selfridge). The doctrine has also become extremely technical, specific doctrines such as intention to create legal relations; Promissory Estoppel could target with greater precision the reason for enforcing the promise.
Bibliography
Martin. E, Oxford Dictionary Of Law 2003 Oxford University Press.
McKendrick. E, Contract Law, Text Cases and Materials 2003 Oxford University Press.
Ruff. A, Contract Law (3rd ed 2002) Sweet & Maxwell.
Martin, Oxford dictionary of Law (2003) p106
A. Ruff, Contract Law (3rd ed., 2002), pp 24-26.
Martin et al, op.cit., p.106.
McKendrick, Contract Law (2003), pp 185-199.
Treitel The Law Of Contract (10th ed., 1999) pp. 67-68.
McKecdrick, op. cit., p271.
