What is the Doctrine of Consideration? Explain its relationship to theEquitable Doctrine of Promissory Estoppel.

Before we discuss the rules that will be employed to make such a decision it is important that not all legal scholars are in agreement regarding the nature of the Doctrine of consideration. Professor Atiyah who argues there is no coherent doctrine of consideration based upon reciprocity. He goes on to state

“The courts have never attempted to crate a doctrine of consideration…they have been concerned with…whether a particular promise in a particular case should be enforced…it seems highly probable that when the courts first used the word consideration they meant no more than there was a “reason” for the enforcement of a promise. If consideration was “good” this meant that the court found sufficient reason for enforcing the promise.”

Atiyah disagrees that the aim of the courts has been to create a doctrine but simply to find a “sufficient reason for” enforcement in each case individually and not through a set of rules based around the concept of reciprocity. His arguments are controversial and other scholars have rejected his theory on the grounds it does not show the circumstances in which the courts will find what he terms as “a good reason.”  

As it stands the Doctrine of consideration has created a number of rules that if not satisfied the agreement will not be legally binding.

Firstly, past consideration is not considered to be good consideration. If the act is already performed at will and once performed a promise is made, then that promise is not enforceable. Roscala v Thomas (1842)

There is however an exception to this rule that is the act was performed or a promise made at the request of the promisor, and it was understood payment would be made, then the promise to pay is legally binding. Pao On (1979)

Secondly consideration must be “sufficient but not necessarily adequate.” The consideration therefore does not have to be of a proportionate value, Chappell &co Ltd v Nestle Co.Ltd (1960) AC 87, however it must be of some economic value White v Bluett (1853).

The next two sets of rules state that a promise of performance to which you are already bound either through existing legal duties Collins v Godefroy (1831) 1 B&Ad 950 or through an existing contractual obligation with the promisee is not good consideration. Stilk v Myrick (1809) The exception to these rules is a promise that exceeds ones original duty under the law or under the contract to the promisee can be found to be good consideration. Ward v Byham (1956) 2 All E.R. 348 and Pinnel’s case (1602) 5 Co. Rep. 117a resectively.

There are a number of other rulings under the banner of existing contractual duty that must be noted.  Where a promisor asks for more funds to perform an existing duty. From previous examples the general ruling would be that the promisor is not entitled to claim extra that has been demanded.

However if as in the case of Williams v Roffey (1990) the promisee obtains an extra benefit or avoids a detriment from the performance of the promise, even if the promisor was already bound under the existing contract this can be considered good consideration. In Williams v Roffey the Court of Appeal ruled that because the promisee had escaped the detriment of late completion penalties and the detriment of not having to find another subcontractor they had in effect received a practical benefit and Williams was therefore entitled to claim the additional sum.

The antithesis to this scenario would be whether payment of a lesser sum can be considered good consideration even when a practical benefit of a lesser payment to the creditor can be found. Here it is not satisfactory for a lesser sum to be paid, as the debtor provides no consideration for the promise. This ruling id evident in Foakes & Beer (1884) and RE Selectmove Ltd (1995.)

It is necessary for consideration to move from the promisee this is usually only significant in cases involving a third party where two parties have made a promise to one another that affects the third party. Here the third party is not generally entitled to sue upon failure of the promise being carried out, as he has given no consideration to the other party. However this has been re assessed under the Contract (rights of third parties) Act 1999.

The doctrine of consideration is vital to the formation of legitimate contracts and aims to ensure the justness of promises that will be legally binding. However there are cases where traditional common law fails to be able to provide a just legal authority especially when no consideration is found to exist, this is especially prevalent when the promise relates to a future conduct which is intended to be legally binding. . This is where the Equitable Doctrine of Promissory Estoppel comes into play. Lord Denning in the case of CLP v High Trees Hous Ltd (1947.) defined it as

“Where by words or conduct a person makes an unambiguous representation as to his future conduct, intending the representation to be relied on and affect legal relations between parties, and the representor alters his position in reliance on it, the representor will be unable to act inconsistently with the representation if by doing so the representee would be prejudiced.

Promissory Estoppel therefore aims to enforce equitable rights of a party who has suffered some detriment through acting on a promise of the other party. Even though no consideration has been given and therefore no pre existing legal relationship exists.

Where a consideration by its presence or absence has the ability to make rights under an agreement enforceable or extinct, Promissory Estoppel is only able to suspend the rights of a party. This can be seen in the case of CLP v High Trees Hous Ltd (1947) and also Tool Metal V Tungsen (1955.) In both cases the parties were required to give reasonable notice before obtaining their entitlement.

Finally it is widely accepted that unlike consideration, Promissory Estoppel cannot be used to form a contract but only enforces promises to vary existing contracts. Therefore it cannot create a new cause of action. Combe v Combe (1951) 2 KB 215

However this has been challenged in the Australian case Waltons Stores Ltd. V Maher (1988.) The ruling in this case in effect showed that Promissory Estoppel can extend to “the enforcement of voluntary obligations.”

Promissory Estoppel allows the principles of natural justice to be applied in order to mitigate some of the harsh effects of common law rules that may have been inapplicable if relying upon the doctrine of consideration.