"The requirement of consideration is an unnecessary complication in the formation of contracts."

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Elements of the law of contract

Zone A examination paper

Question 1

“The requirement of consideration is an unnecessary complication in the formation of contracts.”

        Consideration is probably regarded as one of the most controversial issues in the law of contract.  The traditional and/or orthodox doctrine is based on the principle of “reciprocity”, which seems to suggest that a promise given should be exchanged for something in return.  

        The requirement of Consideration was established since the sixteenth century in Common Law.  The first mention of which had been in the form of quid pro quo, inter alia, a promise for a promise, and later, it was acceptable that even a detriment or forbearance like fulfilling the promise to marry such as in the case of Shadwell v Shadwell[1860] would be sufficient consideration.  Consideration was first associated with debt such as in the Pinnel’s case and had subsequently spread to other simple contracts.  

        This has been criticized by Lord Mansfield in 1756, and was in view that it could only be treated as evidence of the parties’ intention and held that a moral obligation should be sufficient consideration.  It was only in the case of Eastwood v Kenyon[1840] that Lord Denman confirmed that the law  required some factor additional to a defendant’s promise, which is, consideration, whereby the promise becomes legally binding.  

So, if a party makes a promise and the other party offers nothing in return, such a promise will be nudum pactum or gratuitous and unenforceable for lack of consideration.  It should be noted that consideration is a necessary element in all simple contracts.  Formal deeds, on the other hand, which are formal contracts under seal, do not require consideration in order for the contract to be binding.  The statute of Frauds 1677, the Law of Property (miscellaneous Provisions) Act 1989, etc required some classes of contracts to be evidenced in writing.  

As contracts are promises which have legal sanctity, they are binding on the parties that have entered into the contract and compel them to act or not to act in a particular way and consideration is said to be a price agreed upon to be paid for the promisor’s promise.  A valuable consideration is defined in the case of Currie v Misa[1875] as some right, interest, profit or benefit accruing to on party or some forbearance, detriment, loss of responsibility, give, suffered or undertaken by the other party.  Sir Frederick Pollock defines it in a similar way as well, in the case of Dunlop v Selfridge[1915] as being an act or forbearance of one part, or the promise thereof, is the price for which the price of the other is bought and the promise thus given is for value is enforceable.  Thus basically, consideration will either be a benefit to the person making the promise or a detriment suffered by the promise, or both.  

There are generally two types of enforceable consideration, which are executory and executed consideration.  Executory consideration is a consideration provided in the future, whilst executed consideration is that of the present.  This is to show that consideration should be prospective, inter alia, of the present or future and not of the past as a promise given for a deed already done in the past will not be regarded as good consideration as it lacks the element of trade and/or reciprocity.  The act of forbearance, especially when giving up the right to pursuing a bona fide cause of action given in exchange for the promise provided by the promisor is good consideration. Often the consideration is provided by the promise should be at the request of promisor.  Thus, in this sense, a party who receives unrequested benefits is not legally compelled to return the favor as evidently, the other party has acted voluntarily.  

Therefore, promises made for something in the past is no consideration.  Such a contract is not enforceable such as in the cases of Eastwood v Kenyon and Roscorla v Thomas, where promises were made after the initial contract had been formed and performed similarly, a promise to increase wages retrospectively was held to be supported by a consideration in the past and again, this lacks reciprocity and so, such a contract will be unenforceable such as in the case of Anderson v Glass as the consideration is not provided in response to and in support of the promisor’s promise. In the case of Roscarla v Thomas, it was held that the fact of the sale did not imply that that there was a warranty and the expressed promise was made after the sale, and so, was not supported by fresh consideration.  Similarly, in the case of Re: McArdle, past consideration could not be sufficient enable a party to enforce a promise given after the initial consideration in the past.  

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 At times, the application of the doctrine of consideration is neither precise nor consistent.  So, the requirement of consideration often confuses such as the case of Lampleigh v Brathwait.  Strictly speaking, this would be a prima facie case where the consideration was in the past and that the promisor’s promise which came in later was not supported by a fresh consideration and yet it was argued that the previous request and the subsequent promise was deemed to be one transaction, and thus being a valid consideration after all.

Another similar case which follows this line of thought ...

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An overly long and at times unfocused essay. However, the detail is largely accurate and shows a depth of understanding of consideration and associated problems. A better approach would be to consider this issue in the context of the benefit/detriment analysis and how this does not fit in with the idea of "invented consideration". The student may also raise: the fact that an exchange of promises may constitute consideration, the range of exceptions to basic principles (eg. the fact that consideration need not be adequate but must be more than "illusionary" / does not apply to gifts of onerous property) and the complexity of Collier v Wright "decreasing" pact and estoppel rules. 4 stars.