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Should the Doctrine of Consideration Be Abolished?

Essay by   •  March 12, 2012  •  Research Paper  •  5,547 Words (23 Pages)  •  2,680 Views

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Should the doctrine of consideration be abolished?

Under common law, there can be no binding contract without consideration, which was defined in an 1875 the English court decision Currie v Misa as "some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other" , this was most recently stated in Terrafund Financial Inc. v 569244 BC Ltd

The Doctrine of Consideration has been a topic of discussion for many years due to its intractable nature and its inconsistencies. It is also argued that much of the problems created are due to development in Promissory Estoppel . The courts have created these inconsistencies due to their failure to enforce it strictly to all case, and also partly due to the hazy and a lack of a universal understanding of the law . This has lead to the present uncertainty and lack of confidence in the Doctrine of Consideration. The history of the formation of the doctrine is viewed by people differently some believe that consideration was first referred to by judges meaning it as a reason for enforcing a promise . However many view that "reasons" could have a wide range of understanding. Therefore it was not until the creation of the first contract text books in the 19th century that the Doctrine of Consideration with a rigid set of rules can be said to have been established.

Additionally a contract is viewed differently in other countries, in the French Civil Code it is viewed that "cause" is the most significant component in a contract . In Germany the law looks at "intention" of the parties to compose a contract . An interesting theory on how different countries may have formed such profound differences in law of contracts is due to the fall of the Roman Empire. As the Roman forces withdrew from England so did its influence and a series of Barbarian invasions took place thus when Roman law reached the highest stage of its development of civil law England was not influenced by it . The proceedings of the courts in other countries are mentioned as if the Doctrine of Consideration was abolished it would have to adopt a more effective legal system.

This approach used in Terrafund Financial Inc. v 569244 BC Ltd defining consideration develops deficiencies when seen in contracts purely based on an exchange of promises. Thus if A promises to buy a boat from B for $1,000 should one of the parties decide not carry out the contract and B on his part promises to sell the car to A for $1,000, there is clearly a binding contract which may be enforced . Until the date of performance arrives there is clearly no detriment or benefit undertaken by either party, the consideration within the contract presenting itself via the exchange of promises made by the parties . The definition of consideration is therefore meaningless. This definition has created criticisms and for some people to question the Doctrine of Consideration. This has led to it preferable to think in terms of consideration amounting to a plaintiff purchasing a defendants promise by defending some act in return for it. It can also be seen as when the plaintiff may purchase the defendants promise by furnishing a counter promise. This approach was summed up most recently by Sir Fredrick Pollock where he defined consideration as "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 the value is enforceable" This definition was approved by Lord Dunedin in Dunlop Pneumatic Tyre Co. Ltd v Selfridge and Co. Ltd . This is thought to be more representative of the Doctrine of Consideration in modern context rather that the concept of benefit and detriment used during the nineteenth century.

The definition of consideration is given is not straight forward but is rather a body of rules or sub principles. It is with these exceptions in the sub principles where confusion for the Doctrine of Consideration is created. The sub principles are consideration may be executed or executor but not past, consideration must move from the promise but not the promisor, consideration must be sufficient though but not necessarily adequate .

Consideration may be executed or excutory but not past, in executor consideration the form of consideration arises by a way of promise by the defendant in return for a promise by the plaintiff . In other words this is an agreement that will take place in the future. Executed consideration occurs when one of the parties has done all is what is required to do under the terms of the contract he has "executed" their side of the bargain.

In English law past consideration is seen as no consideration, past consideration can be defined as

something that has been given or an act that has already been performed and therefore cannot be induced by the other party's thing, act, or promise in exchange and is not truly a consideration.

A case that applies to the basic principle of past consideration is that of Roscarla v Thoma , the most recent example of a case of the same approach is Re McArdle . A reason to abolish the Doctrine of Consideration is due to is to the exceptions in it thus making the rule confusing and difficult to implement, exceptions to past consideration rule include the principle in Lampleigh v Braithwait ( L v B) and Statutory expectations. In the case of ( L v B ) B was convicted of an unlawful killing. He asked L to get a pardon from the king. This was successful, and B offered L £100. However, when L tried to claim, B refused. His defence claimed L had offered no consideration, so the agreement was not binding. The court ruled that in cases of this sort, where a past benefit was at the request of the beneficiary and where reward was expected, the past consideration could be 'assumed' into the agreement. This case shows states that although it is a strong principle of English law that a past benefit cannot be invoked as Consideration to support a future Contract, this principle may not be operative when the past benefit accrued at the beneficiary's request, and with an understanding given that the benefit would be reward in the future . However it should be noted that the principle only applies if the plaintiff's services had been rendered at the defendant request and that it was implicit that both parties must have understood that the plaintiff's services would have been paid for. Also the promise to pay is only usually in situations in a commercial relationship between parties. The principle in L v B had been affirmed in the restated by Lord Scarman in Pao On v Lau Yiu Long [1975]. It is exceptions to cases

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