What is the doctrine of consideration? Explain its relationship to the equitable doctrine of promissory estoppel.
James Moore
What is the doctrine of consideration? Explain its relationship to the equitable doctrine of promissory estoppel
In order for an agreement to become a legally binding contract, the common law position is that there must either be a formalised deed or some form of consideration between the parties. The doctrine of consideration is based upon the idea that a promisee must give or promise to give something in return for the promise or unless the promisor has obtained or been promised something in return. The traditional concept of consideration is an objective one as only the things the parties said and did are taken into account, rather than their actual intentions. However, recent judgements have placed more emphasis on the intentions of the parties when deciding if consideration has occurred as can be seen by Lord Justice Russell’s statement. ‘The courts nowadays should be more ready to find its existence so as to reflect the intention of the parties’ This does not reflect the traditional relationship between consideration and intention to create legal relations but Russell’s LJ view does illustrate the continuing debate surrounding the actual meaning and function of consideration within contract law in the twenty-first century.
Consideration must occur in the present and not in the past for a contract to have legal effect, but the consideration does not need to be adequate. The consideration offered must be sufficient and move from the promisee in order for the courts to conclude a promise had been made and as Professor Treitel states, it must have ‘some economical value’. Part payment of a debt however, does not constitute good consideration for the entire debt. The conventional view within contract law is that the performance of a contractual duty can constitute consideration, but the performance of an existing legal duty and performance of an existing contractual duty owed to the promisor does not amount to consideration unless a ‘practical benefit’ to the promisor arises. In the case of Williams v Roffey Bros & Nicholls Ltd, the defendant argued that consideration was not evident so the agreement was unenforceable but the court ruled that additional benefit received by the promisor does amount to consideration, which does raise the question as to how this case differed from Foakes v Beer. The ruling in In Re Selectmove Ltd differed to that in Williams v Roffey Bros & Nicholls with the court referring to Fokes v Beer instead and concluding that fresh consideration must occur for every new agreement that is made between parties. These cases highlight the necessary requirements for consideration to exist, with Williams v Roffey being an extension of the doctrine of consideration and Re Selectmove offering no consideration because a whole new agreement was established, which amounts to a new offer which requires fresh acceptance.
