Doctrine of Consideration

As defined by Sir Frederick Pollock, consideration is an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable. Consideration is crucial in all contracts, and only with its presence will an agreement be deemed legally enforceable.

However, as shown in “A Coda on the Doctrine of Consideration”, the doctrine is rendered to be outmoded and redundant, and there are plenty of other alternatives that are able to carry out the tasks that are intended by the consideration. The abstract brought up the judgments of the cases Chwee Kin Keong v Digilandmall.com Pte Ltd and Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric, where the doctrine of consideration has been claimed to be inexistent and unnecessary.

1. To a large extent, I am of the opinion that the doctrine of consideration is now “outmoded or even redundant”.

One major factor about the doctrine of consideration is that consideration given for a promise must be sufficient but need not be adequate. The value of consideration that the promisee gives need not be equal to the value of promise that has been made to him by the promisor. The court will not compare the values of the promises exchanged between the two parties. However, with this rule in mind, a problem arises as there will be a conflict in the extent of consideration. In the case of Chappell & Co Ltd v Nestle Co Ltd, The House of Lords held that three mere chocolate bar wrappers were part of the consideration even though they were insignificant to Nestle. However, in the case of Stilk v Myrick, the court held that there was insufficient consideration for the crew to claim extra wages because they performed their tasks that they were contractually bound to initially, despite the fact that they had to slog even harder when two fellow sailors deserted. As shown in the two above cases, the doctrine of consideration had caused a discrepancy to what is considered sufficient and insufficient consideration. Three chocolate bar wrappers were deemed to be much more sufficient than the extra hours and effort the sailors had to put in during their voyage, which is definitely more economical in any reasonable sense. Therefore, the doctrine of consideration seems to be outmoded and redundant.

Furthermore, I believe that the most critical part in establishing a contract is the parties’ mutual intention to create a legal relationship. Apart from social and domestic agreements, other agreements such as the common commercial contracts are established with the basic thinking that it will be legally binding, and it is up to both parties to come up with a reasonable agreement that will benefit both sides. I am certain, especially in the current era, parties will only enter into contracts when they have ample knowledge and understand fully what they will be bound to. Hence, I am assured that, under normal circumstances, any reasonable man will not sign a contract that will only benefit the other party. In this case, the doctrine of consideration can be considered as outmoded and redundant.

However, to a limited extent, I believe that the doctrine of consideration is not outmoded or redundant. Consideration can be loosely defined as a price for which a promise is bought. It is the benefit that the promisee confers on the promisor in return for the promises or detriment suffered by the promisee as he receives the promise. This is an idea of reciprocity, whereby both parties will be able to gain something in return as they both suffer losses by making the mutual promise. With the doctrine of consideration, it ensures that both parties will benefit from the contract, and that there will be a lower possibility that one party is being taken advantage of. There will then be fairness ensured in the contract. Hence, the doctrine of consideration takes care of the well-being of both parties, and is not outmoded, and definitely not redundant.

2. I agree with the observations on theWilliams v Roffeycase contained in the extract.

One of the observations made with respect to the case is that there will be a high probability of locating consideration in every case as factual benefits and detriments will be easy to detect. The case of Williams v Roffey has introduced a new concept whereby there are factual benefits involved when the existing duty is performed, and this constitutes to sufficient consideration. I agree with this observation. If the concept is applied, and the case is used as a precedent, factual benefits will then take precedence over legal benefits. This will result in performance of existing duty to promisor becoming a sufficient consideration as long as factual benefits are reaped. This includes the performance of existing public duty. An example will be the case of Glassbrook Bros Ltd v Glamorgan City Council (1925), whereby the court held that there was sufficient consideration, and the police were expected to be rewarded. Hence, the doctrine of consideration is diluted in the case of Williams v Roffey as it erodes the general rule that there is insufficient consideration when the promisee performs the existing contractual duty owed to the promisor.

Another observation that I agree with is the broader concept of public policy. It is an important consideration of extortion by public authorities. Consideration is deemed insufficient in the case of existing public duty, and this helps to prevent public extortion to some extent as the policemen will not be able to sue the other party for not paying up as a contract will be deemed non-existent. However, if the concept of Williams v Roffey is applied, then there is consideration and the contract will exist. Hence, the policemen will gain practical benefits, which may undermine the system of public authorities as policemen will then be able to earn extra money by performing their usual tasks.

3. There are various alternatives suggested in the extract to be feasible options to the doctrine of consideration, mainly the doctrine of economic duress and the doctrine of promissory estoppel.

The doctrine of economic duress states that a contract can be voided if it is proven that a party entered into the contract as he had no choice. An element of the economic duress is the wrongful or improper threat, an example being an unlawful action. The contract can be rendered useless if the innocent party is able to provide substantial evidence that he was pressured into signing the contract, and that it was the crucial reason that the contract took place. The pressure must arise from unlawful terms and the innocent party must have suffered certain economic losses. An example of the doctrine can be seen in the case of Universe Tankships Inc. of Monrovia v International Transport Workers Federation (1983), whereby the plaintiffs were able to retrieve their money when it was proven that they gave in to the defendant’s unreasonable demand to provide for their welfare if they wanted the ship to be released. Hence, the doctrine will be a suitable option to replace the doctrine of consideration as both parties have entered into a contract, with one party obviously claiming much more benefits than the other party. Due consideration has not taken place, but the doctrine of economic duress is sufficient to void the contract. Thus, the doctrine of consideration is useless. However, it is arguable as both parties have the intention to create a legal relation, which is an element that binds the parties to the contract. Hence, it may not seem that easy to render the contract useless as both parties have the knowledge and are aware that the contract they have signed is legally binding.

Another alternative is the doctrine of promissory estoppel, which is a principle of law whereby a party of the contract is prevented from withdrawing a promise made to the other party if the latter had relied and acted on the promise to their damage. When promissory estoppel is established, a promisee may have a shield against the promisor’s claim despite the fact that the promisee did not give any consideration. Hence, this doctrine provides an exception to the general rule that all contracts require consideration. For example in the well known case Central London Property Trust v High Trees House Ltd, the plaintiffs succeeded in their claim, although Lord Denning made an obiter dictum that they would be estopped if they had gone back on their promise even when the promise lacked consideration. Therefore, it shows that consideration is redundant since the doctrine of promissory estoppel can be applied even in cases whereby consideration is absent. However, an important point to note is that this doctrine can only be used “as a shield and not as a sword”, which means that it can only be raised as a defence against the plaintiff’s claim and should not be used to commence a legal prosecution. Thus, it is not a perfect substitute for the doctrine of consideration.

4. However, despite the existence of suitable alternatives to overwrite the doctrine of consideration, there will be practical difficulties faced if it is diluted or abolished altogether.

Firstly, as justified above, the alternatives suggested are not without limitations of their own, and they are not perfect substitutes for the doctrine of consideration. Thus, if they were to replace the doctrine, problems will definitely arise. The doctrine of economic duress is subjected to controversy, and the doctrine of promissory estoppel is still being debated, whether it can be used as a “sword” or it is merely a “shield”. There is also further consideration whether it is only suspensory in operation. Hence, it will be incredibly difficult to replace the doctrine of consideration using such suggestions which have loopholes in certain areas.

Secondly, the doctrine of consideration has since long been established in common law, and is a recognized chapter in all law textbooks. Despite its shortcomings, it simply cannot be replaced outright.

Therefore, the doctrine of consideration should undergo certain reforms, but it should not be completely abolished. Since there is a lack of suitable and perfect replacements, the usage of the doctrine of consideration as well as all the doctrines mentioned above should be the most reasonable and practical solution for now as they will be able to provide the courts a range of legal options so as to judge a case fully and fairly.