Has the Concept of Consideration Become Obsolete - Essay Example

Has the Concept of Consideration Become Obsolete? At present consideration has been reduced to a mere technical condition of the law, which is unrelated to equitability or fairness in implementing a promise. This change in attitude towards the notion of consideration has transpired over a period of time. Effectively, consideration has been transformed from constituting a cause for enforcing a promise to a technical dogma that has minimal or no bearing on either the fairness of or advantage in carrying out an assurance, or acknowledging a commitment. Consequently, there exists the possibility of enforcing a promise that lacks consideration, whilst it is also possible that even in the presence of consideration a promise may not be enforceable1. The extant practice of the courts is to reject a transaction even if there is consideration for the promise; if it is illegal in nature. Furthermore, it has become accepted practice to refuse enforcement of a promise, for the reason that it had not been the objective of the promisor to create any legal association by that promise. As such, consideration is no longer perceived to be a concise term that indicates the presence or absence of justification for enforcing a promise2. Albeit, consensus demands unconditional acceptance of an offer, consideration is also required, if a valid contract is to come into existence. Consideration is related to various legal concepts and provisions. A mere inclusion of consideration in the contract is insufficient to make it valid. Consideration should be either in a monetary form or in a form that can be estimated monetarily. A promise that lacks consideration is not capable of being legally enforced3. In general, the provision of goods or services constitutes the consideration on account of one of the parties to the contract. The other party pays money for these goods or services. Agency law terms such financial consideration as commission. Such consideration is known as price in sale of goods; receipt of wages or salary by employees in employment contracts; freight in the carriage of goods; and premiums in insurance contracts4. In Collins v Godefroy, the Court found that the defendant was duty bound to execute a promise. Therefore, the court held that good consideration was absent5. As such, persons, who are under a legal obligation to perform some duty, need not be provided with consideration, in order to perform the same. This is due to the reason that they are legally bound to complete the duty. Thus, anyone who is under a legal obligation to do something cannot make a good consideration by merely completing it. Performing a duty beyond a person’s legal obligation can constitute good consideration. This principle was established in Glasbrook v Glamorgan County Council. In this case, the court held that good consideration could be provided by persons whose actions had been in excess of what was required by their public duty6. Execution of contractual duties does not provide consideration for any new promise. However, the law provides for two exceptions to this principle. First, if the promisee agrees to or executes more than what is demanded of him by the contractual duties, he can claim such additional performance as consideration for a new promise7. Second, promisee can enforce a fresh promise by the promisor, if he had previously refused to execute his contractual duty, on account of unanticipated circumstances8. The courts attitude towards consideration in different situations has been discussed in the sequel. In Hyundai Heavy Industries Co Ltd v Papapoulos a ship building contract had failed before delivery, the House of Lords ruled that it could not be construed that there had been a total failure of consideration9. On the other hand, if the contract had entailed a sale, then there would have been a failure of consideration10. Past consideration has been deemed to be legally invalid, and this principle was established in the case of Eastwood v Kenyon11. Nevertheless, in the Pau On v. Lau Yiu Long case, the court ruled that past consideration could be considered as a valid consideration. Thus, in some situations, past consideration constitutes good consideration12. Williams v Roffey was a landmark case in the area of consideration. In that case the Court of Appeal held that if a party to an existing contract offered extra payment to the other party, in order to ensure the proper execution of contractual obligations; then the agreement would be binding, if the offering party received some new practical advantage. The agreement is also held to be binding, if there is a consequent avoidance of disadvantage13.The decision in Williams v. Roffey does away with the fundamental requirement of consideration, if there is a modification of the contract. This ruling upheld the commercial interests of the parties to a contract. In Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd, the patent owners promised the plaintiffs that they would suspend payment of periodic compensation, during the wartime, from the manufacturers. The House of Lords held that the promise of the defendants was binding on them during wartime. However, the patent owners could subsequently return to what was due to them under the law, after issuing suitable notice to the other party. As such, the owners did not cease to be eligible to receive these payments14. In CTN Cash and Carry Ltd v Gallaher Ltd, one of the parties had promised additional payment to the other party. This additional payment resulted in practical benefit to the promisor. The court held that this practical benefit was the consideration received by the promisor for the additional payment made by him15. The Court of Appeal in the Selectmove Ltd case, held that an offer, in respect of a particular contractual agreement could not constitute consideration for some other agreement16. In Hartley v Ponsonby, the court held that the additional payment offered by the defendant was the consideration to the remaining sailors to sail the ship home; subsequent to a large number of desertions among the crew17. The courts concede the presence of consideration if one of the parties exceeds what is required of him, according to normal contractual duty. In Ward v. Byham, the mother of an illegitimate child went beyond her legal duty. The court opined that parents had to necessarily provide adequate care to their child. However, the court ruled that she had gone beyond her legal duty to ensure the happiness and welfare of her child. Consequently, the court ruled that the father of that child had to bear the necessary expenditure to nurture the child18. As such, the concept of consideration, which was hither to fore, an important element of a contract, has been transformed drastically, by the case law. Over a period of time the decisions of the courts reveals that the courts have ignored the principle of consideration, if some practical benefit accrues to the offeror. For instance, even intangible benefits have been deemed to constitute consideration, under certain circumstances, like performing actions beyond one’s duty. Furthermore, consideration has been reduced to a mere legal technicality that has no bearing on the carrying out of an assurance. Consequently, the enforcement of an agreement does not depend on the presence or absence of consideration. Moreover, a promise could prove to be unenforceable, even if there were to be consideration, if the agreement were to be illegal. List of references Agreement not legally binding, The Times, January 13, 1994 from LexisNexis Academic Atiyah, P.S. Essays on Contract, (1990, OUP) CTN Cash and Carry Ltd v. Gallaher Ltd (1994) 4 All ER 714 Collins v Godefroy (1831) 1 B & Ad 850 Eastwood v Kenyon (1840) 11 A&E 438 Furnnston, Michael Philip, Sale and Supply of Goods, (2000, Routledge) Glasbrook Brothers v Glamorgan County Council (1925) AC 270 Hartley v. Ponsonby (1857) 7 E B 872 Hanson v Royden (1867) LR 3 CP 47 Ellis, Henry, Modern Irish Commercial and Consumer Law, (2004 Jordans) Hyundai Heavy Industries Co Ltd v Papapoulos (1980) 2 All ER 29 Pau On v Lau Yiu Long (1980) AC 614 (PC) Re Selectmove Ltd (1994) BCC 349 Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1955) 1WLR 761 Ward v Byham (1956) 1 WLR 496 Williams v Roffey Bros. and Nicholls (Contractors) Ltd (1991) 1 QB 1 Read More