Introduction
The doctrine of consideration is a fundamental principle of English contract law, often described as the ‘badge of enforceability’ for promises. The traditional definition provided in Currie v Misa (1875) states that consideration may consist of some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. In essence, it is the 'price of the promise' (Pollock, 1950), distinguishing an enforceable bargain from a gratuitous promise. For centuries, this doctrine has formed the basis for determining which agreements the courts will enforce. However, its relevance in the modern commercial world has been increasingly questioned. The development of judicial exceptions, such as the concept of ‘practical benefit’ in Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991), and the growth of the equitable doctrine of promissory estoppel, have created inconsistencies and led to calls for consideration’s reform or abolition. This essay will evaluate whether the doctrine of consideration remains a necessary component of English contract law. It will argue that while the doctrine is flawed and its role has been significantly eroded, it still serves a residual function, and its complete abolition would be premature without a more developed alternative.
The Traditional Function and Problems of Consideration
The primary function of consideration is to act as a filter, ensuring that the courts are not flooded with claims based on informal or social promises. By requiring a bargain, the law can assume that the parties intended their agreement to have legal effect. The rules surrounding the doctrine, such as that consideration must be sufficient but need not be adequate (Chappell & Co Ltd v Nestle Co Ltd (1960)), are intended to give parties freedom of contract, allowing them to make their own bargains, even if they seem unbalanced. Similarly, the rule that past consideration is no consideration (Re McArdle (1951)) reinforces the idea that a contract is an exchange of promises or acts, not a reward for something already done.
However, these traditional rules have often been criticised for creating rigid and sometimes unjust outcomes. A significant example is the rule regarding part-payment of a debt, established in Pinnel’s Case (1602) and confirmed by the House of Lords in Foakes v Beer (1884). This rule states that a promise to accept a smaller sum in full satisfaction of a larger debt is unenforceable because the debtor provides no consideration for the creditor’s promise to forgive the remainder of the debt. Lord Blackburn in Foakes v Beer expressed his own dissatisfaction with this conclusion, noting that businessmen frequently see it as beneficial to accept a portion of a debt promptly rather than risk getting nothing at all by insisting on full payment. This shows that the doctrine can contradict commercial reality and prevent the enforcement of a promise that a party has willingly made and which the other has relied upon. The inflexibility of this rule has led the courts to develop ways to circumvent it, highlighting its underlying problems.
The Erosion of Consideration: Practical Benefit and Promissory Estoppel
The strictness of the consideration doctrine has been significantly weakened by judicial developments, most notably in the area of pre-existing contractual duties. The traditional rule, as seen in Stilk v Myrick (1809), was that simply performing an existing contractual duty owed to the promisor could not be good consideration for a new promise of extra payment. However, in Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991), the Court of Appeal held that a promise to make bonus payments was enforceable because the promisor obtained a ‘practical benefit’. These benefits included avoiding a penalty for late completion of the main contract and avoiding the trouble and expense of finding a new subcontractor.
While the court in Williams v Roffey claimed it was refining rather than overruling Stilk v Myrick, the decision has created significant uncertainty. It is difficult to see how the practical benefits in Williams v Roffey differ from the benefit the captain in Stilk v Myrick received from having his ship sailed back to London. This decision appears to create a conflict between two key areas of consideration. The ‘practical benefit’ approach in promise-to-pay-more cases (Williams v Roffey) has not been applied to promise-to-accept-less cases, where the rule in Foakes v Beer still holds sway, as confirmed by the Court of Appeal in Re Selectmove Ltd (1995). The Supreme Court had an opportunity to resolve this inconsistency in MWB Business Exchange Centres Ltd v Rock Advertising Ltd (2018), but decided the case on other grounds, leaving the law in a confused state. This shows that the doctrine of consideration is no longer a coherent or consistent set of principles.
Alongside this, the doctrine of promissory estoppel has developed to mitigate the harshness of consideration. As formulated by Denning J in Central London Property Trust v High Trees House Ltd (1947), this equitable doctrine can stop a promisor from going back on a promise to waive their strict legal rights when it would be inequitable for them to do so. This is often used to get around the rule in Foakes v Beer. However, promissory estoppel has its own limitations; it is generally held to be a ‘shield and not a sword’ (Combe v Combe (1951)), meaning it can only be used as a defence and not to create a new cause of action where one did not already exist. This limitation means it cannot replace consideration entirely, as consideration is required to found a new contract. The fact that an entirely separate equitable doctrine is needed to make the common law rule of consideration function more fairly is a strong argument that the original doctrine is no longer fit for purpose.
Arguments for Retention and the Path Forward
Despite its many flaws, there are arguments for retaining the doctrine of consideration. It is argued that it serves a valuable function in marking out the boundaries of contract law and signalling an intention to create legal relations. Without consideration, any promise, no matter how casually made, could potentially be enforceable, provided the parties intended it to be legally binding. This could lead to a significant increase in litigation. Proponents argue that consideration acts as a useful formal requirement, forcing parties to think about the promises they are making and the consequences of them (Atiyah, 1986). It provides a clear test for enforceability that, despite its issues, is well-established.
However, other common law jurisdictions, such as New Zealand, have shown that a legal system can function without a strict doctrine of consideration, relying more heavily on the intention of the parties. Academics like Professor Andrew Burrows have suggested that the existing requirements of offer, acceptance, and an intention to create legal relations are sufficient to establish the existence of a contract (Burrows, 2011). The intention to create legal relations, in particular, could perform the filtering function that consideration currently provides. In commercial contexts, this intention is presumed, while in social and domestic contexts, it is not. This seems to be a more direct and logical way of determining enforceability than the often artificial search for a benefit or detriment.
Conclusion
In conclusion, the doctrine of consideration is a principle of English contract law that is showing its age. Its original purpose of distinguishing bargains from gifts has been obscured by a series of confusing and sometimes contradictory judicial decisions. The rule in Foakes v Beer is out of step with commercial practice, and the development of ‘practical benefit’ in Williams v Roffey has left the law uncertain and inconsistent. The need for the separate doctrine of promissory estoppel to patch up the holes in consideration further demonstrates its deficiencies.
However, to say it is entirely unnecessary may be an overstatement. It still acts as a basic test of enforceability that is familiar to lawyers and judges. The main alternative, relying solely on the intention to create legal relations, may not be developed enough in English law to take over the full role of consideration without causing its own uncertainties. Therefore, while the doctrine is no longer the clear and coherent principle it once was, and is in clear need of reform by Parliament or the Supreme Court, it is not yet redundant. It remains a necessary, if flawed, part of modern English contract law until a clearer alternative is established.
References
Atiyah, P. (1986) Essays on Contract. Oxford University Press.
Burrows, A. (2011) 'A New 'Restatement' for English Contract Law'. Denning Law Journal, 23(1), pp.1-23.
Pollock, F. (1950) Principles of Contract. 13th edn. Stevens.
Cases
Central London Property Trust v High Trees House Ltd [1947] KB 130
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
Combe v Combe [1951] 2 KB 215
Currie v Misa (1875) LR 10 Ex 153
Foakes v Beer (1884) 9 App Cas 605
MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24
Pinnel’s Case (1602) 5 Co Rep 117a
Re McArdle [1951] Ch 669
Re Selectmove Ltd [1995] 1 WLR 474
Stilk v Myrick (1809) 2 Camp 317
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1
