Agreement doesn’t make a contract fulfill. Both parties signing the contract must provide something to get something in return that states both the parties should be in a position of exchanging values. This is called “doctrine of consideration” and it is one of the three main building blocks of a contract.
This doctrine rejects the idea of “more for the same” and each party should engage in exchange, if any party doesn’t or only one party offers consideration, the agreement is not legally a binding contract.
Lush J. in Currie v Misa (1875) referred to consideration as consisting of a detriment to the promisee or a benefit to the promisor:
“… some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” (Misa, 1875)
Therefore, a contract to create a gift—a donative promise—and a gratuitous promise to create up another for previous solutions are not enforceable. Moreover, it is controversial that a guarantee without concern does not represent a agreement at all, as typical law most judges usually existing consideration as a purposeful need of contract development. It brings us to wonder whether there is a purposeful justified reason for the doctrine, which can describe why consideration should be needed, in and of itself and not merely as a proxies for something else that the law cares about. (a.smith)
Justification of doctrine of consideration
The courts have never set out to create a doctrine of consideration. A particular promise in a agreement whether should be enforced or not by the law is decided by the doctrine of consideration.
Consideration is essential for the validity of a contract. The doctrine of consideration is always controversial. Some specialist believe that it is necessary to contractual liability that makes link between the requirement of consideration and enforcement of the contract. Over the last several years specialists have criticized this doctrine as controversial, unnecessary,
sometime described as a historical accident without rational foundation.
Fried actually criticised the doctrine of consideration in a smart and standard way, which has been later shared by different law specialist. (fried, 1981)
First of all, fried described that this doctrine leads to a conflictive result that agreement is enforceable by law when one party is deprived of any benefit and need to prevent it. In his language, to prevent the unjust can’t be the basis of a contract. Then the idea dictates that compensating the harms occurred from the breach of the contract is the objective of the doctrine.
Secondly, fried said that the basis of the explanation of the doctrine is not specified and clear and also its characteristics are conflictive. The doctrine of consideration says that it is the idea of exchange, on the contrary it shows no problem in the inequality of the exchange values. The duty of the law is to judge whether the exchange has happened or not. He declared that the two objectives of the doctrine is contradictory and cannot be assessed together, because it seeks to emphasis on the bargains and to preserve the right of freedom of contract all together. His reasons proves that it is totally impossible to achieve two goals at the same time otherwise it will lead to a inconsistent result (hammer vs sideway, 1891) .
On the one hand, feature b states that law doesn’t bother about goodness of exchange, declares independent principles that the rationally both parties will arrange the exchange and it will be respected.
Where the feature a is limiting the enforceable class of arrangements to bargains, holds that individual self determination is not enough for the enforcement of the legal obligations. This policy actually overrides individual judgment.
In the next phase, Charles fried showed that many enforceable contracts don’t hold the feature of consideration. For example, promise to keep an offer open, to release debt, pay for a past favour.
Charles fried criticised this doctrine in his theory as it results in injustice in two ways. Sometimes one party denies to obey the promises and the enforceability and the recourse against a failure to perform such promises, in this situation the doctrine of consideration does injustice to promisee.
Consideration is only needed where for enforceability where the agreement is not a agreement. The procedures for creating a action now quantity to no more, essentially, than a finalized agreement, many agreements will be a deeds, because they are finalized. Relatively few will be topic to needing consideration at all.
Till now the best known justification for the doctrine of consideration, fuller states that the consideration doctrine has a important formal features. The justification of the doctrine can be done on similar grounds as those justify seal and other requirements.
Justification from the fuller’s perspective
Fuller also suggested another justification for this doctrine socially and economically. He justified the doctrine by two step analysis. He found out that economic changes are the main type of voluntary transactions that law can be enforced in these criteria.
Then he also answered the best effective tool to find out these enforcement worthy transactions.
The way is the consideration which assesses both the formal and substantive objectives of enforcing. He concluded with the statement that the doctrine of consideration can be justified to the extent that specifically sort out the voluntary transactions and that satisfy the formality.
Fuller claimed that partially executed contract shows strong case for legal enforcement, the reason behind it is that shows injustice for one party and reliance on other. So the substantial criterion of social and economic importance is satisfied by it. It turns to the declaration that for partially executed contract, the acceptance and the delivery of the values stated in promise involve a kind of natural formality. And so the fully executed contract is not much deserving for the enforcement of legal obligations than half-executed contracts. The findings explains the law’s refusals to enforce gratuitous promise. Gratuitous contracts and contractual liability, contracts made upon natural love and affection, voluntary compensation doesn’t seems to be pressing for the use of the principles of individual autonomy, if we consider the cost of legal intervention.
Exchange of goods as consideration in a contract conduces the production of wealth, where a gift is a sterile transmission. So lastly we can say from the context of formality, there exists a cautionary safeguards, we may see a contract is made in a field where the party’s intention is not canalized, which means it is predetermined that gift is usually considered unenforceable. (fuller, 1941)
Atiyah’ justification of the doctrine
Professor Atiyah has argued:
“The fact is that the legal courts have never set out to make a doctrine of consideration. They have been worried with the much more realistic issue of determining in the course of lawsuits whether a particular guarantee in a particular situation should be made….When the legal courts discovered a research implementing a guarantee they made it; they did not implement it. It seems extremely potential that when the legal courts first used the phrase “consideration” they intended no than there was a “reason” for the administration of a guarantee. If the concern was “good”, this intended that the judge discovered research implementing the promise.” (Atiyah, 1976)
He argued that consideration function is regarded as an umbrella or catch all concepts. Courts always tries to use the rule to consider a wide variety of factors for and against agreements. Courts considers some factors when they tries to invoke the doctrine of consideration such as good faith duress, the protection of reliance. Atiyah tried to describe the consideration doctrine as a “reason for enforcement of a promise” which actually represents a negation of the existence of any valid rule of law. Atiyah argues that the courts in last centuries described consideration very broadly and it was regarded as “good consideration” simply states “good reason” for the enforcement of the contract. This purpose might be, for example, that the promisor had a prior ethical responsibility to do what he guaranteed to do or that the promisee had trusted the contract. On the other hand, to say that an contract was missing excellent consideration intended that there was reasonable not to implement the contract. In the delayed Nineteenth and beginning Twentieth centuries, this wide knowing of consideration underwent modification under the impact of formalist advocates. courts started to explain concern using the specialized terminology of shared benefits or problems acquainted to lawyers today.
But this perspective, as Atiyah points out, does not perfectly explain what legal courts were doing then—or now. Excluding a few legal courts deceived by contemporary over stated claims, what legal courts were, and still are, actually doing is what they have always been doing—asking if there are explanations to implement the contract. Of course, legal courts do not do this openly; instead, they pay lip-service to traditional concept. The truth, however, is that they operate the concept or the important factors so that they can discover or create consideration and vice-versa. (Atiyah, 1976)
Justification on the basis of Gordley’s criticism
Keeping compatibility with the fuller’s reasoning on the substantive basis of consideration, Godley believe that contract law can enforces specific deeds for the purpose of gaining a substantive end. (Gordley, 2001).
Gordley states that contract law can be enforced to the extent that the activities of the parties are prudent and the rules of the wealth disbursing in society are just. The normal principle in consideration is that the parties are obligated only to what they promised.
The conclusion is not to maximize the wealth or welfare or a theorist would see it that it is a normal concept of good life in the Aristotelian tradition. He claims, this custom provides a set of benefits such as commutative and distributive rights that everyone should regard for the greatest end of living the lifestyle appropriate to a person.
Gordley seems to recommend that these benefits supply the qualification guidelines that may or may not regard personal options. Gordley interprets his conclusion by criticising the will theory which speaks that the parties promises of wills are the base of the obligations. But this law sometimes hold participant to terms where the parties didn’t agreed expressly and sometimes the law disregard the terms they agreed upon. (Ibid)
In situation of exchange, commutative rights maintains the portion that connected to each, so it needs that resources traded be comparative in value so that neither person’s share is reduced. In situation of present or gift, the law only defends functions of gift that are suitable with the concept of liberality. In brief, the guidelines of agreement law should make sure, as far as feasible, in case of return, each party gets an equivalent; while in situation of a gratuitous agreement, that the contributor functions properly. Gordley seems to be disagreeing that the doctrine of consideration at typical law is there to provide the above described objective by singling out contracts of exchange, moreover, the doctrine of unconscionability guarantees that, in agreement of return, each person’s exchange comparative values.
Justification on the basis of Benson’s theory
Where other specialist involved themselves in questioning and rejecting them away, Benson tried to give justification of the doctrine of consideration by considering its core orthodox features. And his strategy is formalistic, not teleological. He did not examine into the “reasons” for developing right, but first delineates the normative functions of a simply juridical connection and begins from there to see whether consideration represents those features.
Benson claims that the promises reinforced by consideration are essentially different from gratuitous contracts. The former is not merely the latter plus consideration or a seal, in a feeling that a agreement is two-sided in characteristics and represents the idea of reciprocity in every element, while gratuitous guarantee is one-sided. The doctrine of consideration, by requiring a quid pro quo for the contract, provides the second part of an agreement.
Benson argues that consideration is necessitated to bridge a transfer of right from the promisor to the promisee. Benson maintains, at common law, a promise should be given along with a request for consideration as quid pro quo; in turns, consideration must be given in response to this request. Thus, promise and consideration must posit each other as essential to its own completion, missing either side would not be sufficient to form a mutually related contractual relation.
Benson statements, consideration does not only fit and protect the way of the two-sided regards that is needed by provide and acceptance, but also favourably provides referrals to some perception of the parties’ “wants”, which is the significant feature of agreement (while offer and acceptance, by purpose check, only recommend the architectural functions of agreement, that one part must be the purpose or the cause of the other side; therefore, offer and acceptance, only adversely, concept out particular passions and purposes that are lawfully unrelated, but does not contain good research of what is lawfully relevant.
The question is what the normative factors for the doctrine of issue is. This papers attempts to identify this base by seriously analyzing the considerable justificatory information of the doctrine. The doctrine of issue has been doubtful. Some supporters said that consideration is necessary to agreement liability either on teleological factors or in a sensation that the law postulates an essential link between requiring issue and the enforceability of the absolutely executory agreement according to the objectives idea. On this view, issue is specified and exclusive of agreement. However, over the last several decades scholars have consistently belittled the doctrine of issue as artificial, unnecessary, inner not reliable, or dysfunctional—in brief, as an conventional occurrence without sensible foundation—to the aspect that some have obtained the conclusion that agreement law’s rationality and moral acceptability would be enhanced by its abolition.
a.smith, S. contact theory. 2004: oxford university press.
Atiyah. (1976). the rise and fall of freedom of contract.
fried, c. (1981). Contract as Promise: A Theory of Contractual Obligation. harvard university press.
fuller, L. n. (1941). consideration and form.
Gordley, j. (2001). contract law in the aristotelian Tradition.
hammer vs sideway, 538 (N.Y 1891).
Misa, L. J. (1875).