For consideration which, in his opinion, are not

For the formation of a contract thefollowing elements of a contract need to be established: Offer + Acceptance +Intention to be legally bound + Consideration.1 The promise can be enforcedin the court if it is either contained in a deed or supported by consideration.2 Thereare a few definitions of consideration. According to Patteson J.

in Thomas v Thomas the consideration means’something of value in the eye of the law’.3 Lord Dunedin in Dunlop v Selfridge described the considerationas ‘an act of forbearance of one party, or the promise thereof, is the pricefor which the promise of the other is bought, and the promise thus given forvalue is enforceable’.4 Themost famous definition of the consideration was given in the case of Currie v Misa: ‘a valuableconsideration, in the sense of the law, may consist either in some right,interest, profit, or benefit accruing to the one party, or some forbearance,detriment, loss, or responsibility given, suffered, or undertaken by theother.’ 5 It isfair to say that the doctrine of consideration is a complex one.

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Firstly,numerous definitions of the consideration mean that the doctrine ofconsideration is interpreted differently. Then, there are several rules in thedoctrine of consideration and there are various exceptions to these rules. Furthermore,some of the consideration rules can be argued to be unfair and possibly lead toinjustices. Therefore, some people e.g.

Lord Goff argued that there is no needfor the doctrine of consideration and it should be abolished, whereas others e.g.Lord Denning claims that the doctrine of consideration is too fundamentallyentrenched in the English contract law to be eliminated ‘by the side of wind’. Itcan be suggested that by referring to the term ‘side of wind’, Lord Denningmeant a number of criticisms of the doctrine of consideration which, in hisopinion, are not sufficient enough to eradicate the consideration element.Therefore, the first part of the following essay will consider main criticismsof the doctrine of consideration and more importantly, it will discuss theextent to which the recent modifications to the consideration doctrineincluding the doctrine of promissory estoppel and the notion of the practicalbenefit have diminished the need for the consideration element.

Then, in thesecond part of the essay, it will be demonstrated that the doctrine ofconsideration is still crucial to the formation of a contract and the recentmodifications to the doctrine of consideration are simply exceptions ratherthan sufficient substitutes to the doctrine of consideration. Therefore, thefollowing essay will argue that although there are numerous criticisms of thedoctrine of consideration and the recent developments have arguably diminishedthe necessity for the consideration element, the extent to which the courts requireconsideration in the formation of a contract is still substantial.Some people may challenge the Lord Denning’sstatement in Combe v Combe becausearguably, the need for the doctrine of consideration has diminished to asignificant extent in the modern contract law cases. For instance, Lord Goff characterisedthe doctrine of consideration as ‘unnecessary’.6 Then, Professor Burrows addsthat the abolishing of consideration principle will bring more clarity to thelaw on the formation of a contract.7 Additionally,it can be argued that the doctrine of consideration is not a necessity becausethere are precedents in some non-common law countries e.g.

France where the considerationelement is not required for the formation of a contract.8 Furthermore, ProfessorAtiyah believes that there is no comprehensible doctrine of consideration.9 Atiyahargues that in reality, the courts need the consideration element to find ‘agood reason for enforcement of promise’ and the idea of a bargain is not whatthe courts are concerned about.

10 Chappell and Co Ltd v Nestlédemonstrates this point because it shows that even a nominal consideration issufficient enough to support the agreement.11 Therefore, Atiyah argues thatthere are better enforceability tests than the one used in the considerationdoctrine e.g. ‘reliance test’.12 Forexample, the doctrine of the promissory estoppel applies the reliance test todetermine the enforceability of contracts.13 The promissory estoppelprinciple was defined by Lord Denning in the Central London Property Trust Ltd v High Trees House Ltd: ‘apromise intended to be binding, intended to be acted upon, and in fact actedon, is binding so far so its terms properly apply’.14 Importantly, the doctrine ofpromissory estoppel allows promises to be enforced in the absence of consideration.

15Therefore, it can be argued that the principle of the promissory estoppel hassignificantly diminished the need for the consideration element. Furthermore, it can be argued that thenotion of the practical benefit has considerably decreased the importance of thedoctrine of consideration in the formation of a contract. This new controversialapproach was applied in some cases where there were pre-existing contractualobligations. In Stilk and Myrick itwas desided that when a party promises to do something that they are underlegal obligation to do, these promises can never constitute to a valid considerationfor a new agreement.16 However,in Williams v Roffey the Court ofAppeal found a valid consideration in the performance or promise to perform ofwhat had to be performed by an existing contractual obligation because thecourt recognised a ‘practical benefit’ for the promisor.17 In Williams v Roffey Russell LJ argues that ‘the court nowadays shouldbe readier to find its existence so as to reflect the intention of the partiesto the contract’.18Therefore, the adoption in Williams vRoffey of a factual rather than a legal definition of consideration means ashift in the law relating to alteration of a contract.

19 Furthermore, after Williams v Roffey in the New Zealandcase of Antons Trawling Co v Smith thecourt accepted that a mutually agreed contractual variation can be binding evenif there is no consideration or practical benefit found.20 Although not binding on theUK courts, this decision demonstrates that the need for the doctrine ofconsideration in the common law systems is diminishing. Therefore, it can beseen that Williams v Roffey representsa shift away from the bargain view of contract towards enforceability on theintention of the parties. Furthemore, the principle of practicalbenefit was also applied in certain cases concerning the part payments of debt.

The leading authority comes from Foakes vBeer: ‘a creditor’s promise to accept part payment of a debt in fullsettlement was not binding as it was not supported by consideration’21. However, MWB Business Exchange Centres Ltd v RockAdvertising Ltd challenges the authority of Foakes v Beer.22 In MWB the Court of Appeal decided that anoral agreement to defer payments was legally binding, as they found the practicalbenefit for the landlord: not having empty premises.23 Therefore, the fact that a few cases applied thepractical benefit principle demonstrates that the need to show alegal benefit under the doctrine of consideration has moved to a practicalbenefit.

This evidence consequently challenges the Lord Denning’s statementthat the consideration principle is still a fundamental part in the formationof a contract. However, the following essay agrees withLord Denning’s statement. LawCommission 1937 says that the doctrine of consideration is ‘so deeplyembedded in our law that any measure which proposed to do away with it altogetherwould almost certainly arouse suspicion and hostility.’24 In the old case of Foakes v Beer the Lord Chancellor, theEarl of Selborne argued that the fact that the doctrine of consideration ‘hasnever been judicially overruled’ since the sixteenth century means theconsideration principle remains the fundamental part to the formation of acontract.25 AndrewKull agrees with that and says that the requirement for the consideration remains’one of the most basic propositions of contract doctrine’.26 Then, Hamson argues thatthe idea of bargain which is one of the vital parts of the considerationdoctrine has become ‘an integral part of almost every branch of our law ofsimple contract’.

27 TheAtiyah argument that there is no coherent doctrine of consideration was stronglycriticised by Treitel.28 Treitelargues that the English Law has always recognised the existence of ‘a complexand multifarious body of rules known as doctrine of consideration’.29 It can be argued that the reason why thecourts still consider consideration as a vital element of the formation of acontract is because the doctrine of consideration carries out a few importantfunctions. The doctrine of consideration emphasizes the importance of formality.

30Therefore, promises of gifts or promises without consideration are not enforceddue to its informal nature.31 Thereare 3 important functions of formality, identified by Fuller.32 Thefirst function is the ‘evidentiary’ one, which presents evidence for theexistence of a contract. 33 Thesecond function is the ‘cautionary’ one, which ensures that the parties tooktime to consider all the terms.34 The thirdfunction is the ‘channelling’ one, which provides test for enforceability which demonstratesto the courts whether the contract can be enforced or not.35 Then, the doctrineof consideration prevents the gratuitous promises from being legally enforced.36 RichardPosner argues that in most cases ‘the costs for enforcement (administrativecosts plus costs of legal error) would exceed the benefits’.

37 Thisis because the enforcement of gratuitous promises would eliminate trust betweenparties who make and accept gratuitous promises.38 Then, the enforcement ofgratuitous promises can be unfair to the promisor who, for instance, can changehis mind.39Furthermore, it can be argued that thedoctrine of the promissory estoppel is just an exception applied in thesituations where it is difficult to establish the consideration. In Smith Kline Beecham plc vs Apoteh Europe LtdJacob LJ argued that the promissory estoppel cannot be used to create legalrelationship.40 Additionally,the purpose of the promissory estoppel in English law is not to replace the doctrineof consideration.41 In Brikom Investments Ltd v Carr Roskill LJstressed the fact that using the doctrine of the promissory estoppel in orderto eliminate the need fro the doctrine of consideration would be ‘wrong’.

42Furthermore, there are a few limitations to the principle of the promissoryestoppel.43 Forexample, one of the limitations is that ‘the doctrine can only be used as ashield, not a sword’.44This means that the doctrine cannot form basis for the cause of action and canonly be used as a defence.

45 Furthermore, Blaire argues that anextension of the doctrine of promissory estoppel has been fought by the higherEnglish Courts.46 Thiscan be explained by the fact that the doctrine was made ‘single-handedly’ byLord Denning and Lord Denning is often promotes his personal moral values intothe law.47 Furthermore,it can be argued that controversial judgment in Williams does not replace consideration with intention. It upholdsthe doctrine of consideration as being an equally fundamental part of contractlaw.48 In Re Selectmove and Re C the Court of Appeal refused to extend the principleestablished in Williams.

49 Blairargues that the CoA is correct ‘both in terms of contract principle andjudicial precedent’.50 Thereplacement of a settled, if sometimes harsh, doctrine, with one that isriddled with inconsistency is less than desirable.51 Therefore, this evidencesupports the Lord Denning’s statement that the doctrine of consideration isfundamentally entrenched in the formation of a contract and the courts stillrequire it. To conclude, the following essay hasexplained why the consideration is still fundamental to the formation of acontract.

Moreover, the criticisms of the doctrine of consideration as well as thepossible alternatives to the doctrine of consideration were assessed. It isfair to say that although the doctrine of consideration is difficult toeliminate entirely, the doctrine is in need of reforms. For instance, the LawRevision Committee 1937 scrutinised the doctrine of consideration and proposedchanges to it.

52 Forexample, there is a suggestion to replace the consideration with a test ofintention and the consideration will be retained as a requirement at the formationof the original contract.53 Inaddition, although the bargain of consideration should be retained, it will bebetter to recognise other good reasons for non-contractual enforcement.54 Furthermore,an effective reform would be to supplement consideration with a promissoryestoppel doctrine.55 1 Peter Gilles, Consise Contract Law(Federation Press 1988) 7.2 Dena Valente, Enforcing Promises: Considerationand Intention in the Law of Contract > accessed 7th January 2018, 7.

3 Thomas v Thomas (1842) 2 QB 859, 114 ER 330 (QBD).4 Dunlop v Selfridge (1915) AC 847 (HL). 5 Currie v Misa (1875) LR 10 Ex. 153, LR 1 App Cas 554 (HL).  6 Whitev Jones 1995UKHL 5, 1995 2 AC 207 (HL), 263.7 M. Chen-Wishart, ‘In defence of consideration’ 2013 Vol. 209 (13)Oxford University Commonwealth Law Journal 209, 210.

8 Barry Nicholas, French Law ofContract (Butterworths, 1982) 118.9 Ewan Mckendrick, Contract Law:Australian Edition (Palgrave Macmillan, 2015) 90.10 P.S. Atiyah, Consideration inContracts: a Fundamental Restatement (first published 1965, AustralianNational University Press, 1971) 7. 11Chappell & Co Ltd v Nestle Co Ltd 1960AC 87 (HL).12 Richard Stone, The Modern Lawof Contract (Routledge, 2015) 132.

13 (n 12)133.14 Central London Property TrustLtd v High Trees House Ltd 1947 KB 130 1947KB 130, 1956 1 All ER 256, 62 TLR 557 (KBD). 15 (n 12) 119. 16 Stilk v Myrick 1809 EWHC KB J58, 170 ER 1168 (KB).17 Williams v Roffey Bros& Nicholls (Contractors) Ltd 1989 EWCA Civ 5, 1991 1 QB1 (CoA).18 (n 2) 21.

19Roger Halson, ‘Case Comment: Sailors, sub-contractors and consideration’ 1990Law Quaterly Review, 2. 20 Antons Trawling Co. Ltd vSmith (2003) 2NZLR. 21 Foakes v Beer 1884 UKHL 1 (HL). 22 MatthewBurton, ‘Practical benefit rides again: MWB business exchange in comparativeperspective’ 2017 Vol. 46 (1) Common Law World Review 69, 73.23 Richard Farnhill, Contractvariation just got easier – mitigating the risk of inadvertent change < http://www.–-mitigating-the-risk-of-inadvertent-change.aspx > accessed 10th January 2018.

24 TheEditorial Committee, The Law Revison Committee’s Sixthe Interim Report (Vol. 1No 2 1937) <

1111/j.1468-2230.1937.tb00011.x/pdf> accessed 3d January 2018, 101. 25 (n 21).26 Andrew Kull, ‘ReconsideringGratuitous Promises’ 1992 21 J. Legal Studies, 39.

27 Hamson, ‘Reconsidering Gratuitous Promises’ 1938 54 L. Q. REV., 235. 28 McKendrick(n 9) 90.

29 Ibid. 30 Dawson,’Fuller, Consideration and Form’ (41 Colum. L. Rev, 1941) <.>accessed 5th January 2018.

31 ibid.32 ibid. 33 ibid. 34 ibid.

35 ibid.36 Kull(n 25) 52.37 ibid. 38 Chen-Wishart(n 7) 221.39 Chen-Wishart (n 7) 223. 40 Jill Poole, Textbook on Contract Law (OUP, 2016) 157.41 ibid.

42 ibid. 43 Stone(n 12) 121. 44 Combe v Combe 1951 2 KB 215 (CoA). 45 Stone(n 12) 124. 46Ann Blair, ‘Minding your own business – Williams v Roffey re-visited:consideration re-considered’ 1996 Journal of Business Law, 5. 47 ibid.

48 Blair (n 40) 4.49Blair (n 40) 6.50 ibid51 ibid52(n 24),  102.53 Ibid.54 Hamson(n 27) 247.55Blair (n 40) 7.