Consideration and Form

• Author: John D. McCamus
• Pages: 215-282

215

CHAP TER 7

CONSIDER ATION

AND FORM

A. I NTRODUC TION

The giving and, indeed, exchanging of promises or undertakings is

a pervasive feature of our commercia l and social lives. A quest ion of

central importance for the law of contract s is to articulate a ba sis for

distinguishing between those promises that should properly attract the

attention of the legal system as enforceable promises and those that

should not. Although an argument could be fashioned on the basis of

moral precepts that all promi ses should be considered binding as a

matter of honour, few observers would suggest that all promises should

be legally enforceable regard less of how ra sh and improv ident they

might have been and regard less of the setting, be it commercial or non-

commercial, in which the promise wa s made. In the English common

law tradition, two criteria of enforceability or rules for the recogn ition

of enforceable promises have developed.

The basic principle is that promises will be enforced only if they

form part of a bargain. The doctr ine of consideration holds that to be

enforceable, a promise must be purchased in the sense of being given

in return for something of value provided by the promisee or, as is said,

for “good consideration.” The enforcement of bargains obviously plays

an important role in the funct ioning of a modern credit economy. It is

easily seen, therefore, that a strong rat ionale exists for the enforcement

of bargain s. What is less clear, however, is whether the doct rine of con-

sideration or, as it is somet imes called, t he bargain theor y, succes sfully

THE LAW OF CONTR ACTS216

identif‌ies the proper line of demarcation between those promises that

should be considered enforceable by the legal system and those th at

should not. Indeed, the doctrine of con sideration has attracted much

criticism over the years. In t he present chapter, after providing an ac-

count of various aspects of the applicat ion of the doctrine, we will re-

turn to consider the prospect s for its reform.

The second rule of recognition for enforceable promises rest s on

the formal trappings w ithin which the underta king is given. Thus, cen-

turies prior to the development of the doctrine of consideration, the

English legal system recogni zed as enforceable those promises that

were made in the form of sealed instruments. Although the manner or

method of sealing inst ruments has evolved over time, the basic prin-

ciple that a promise given under seal is en forceable simply because

of the formal manner in which t he undertaking ha s been given has

persisted. For much of the early history of the doct rine, the execu-

tion of an instrument under seal involved the melting of some wax or

other adhesive substance on the in strument upon which an impression

of a seal or signet ring or other identif‌ier of the part y executing the

instrument could be m ade. The general enforceability of instr uments

executed in this fash ion appears to stretch back as far, at least, as the

fourteenth century.1 In a n ess enti ally prelit erate socie ty, it i s easi ly se en

that the aff‌ix ing of the seals constituted, in effect, a form of signature.

Under contemporary practice, of course, it is commonplace for people

to execute agreements by placing their ha ndwritten signature on the

document. There is thus no practical necessity for the use of seals as

an equivalent of signature. Nonetheless, the practice of sealing instru-

ments and of enforcing them simply by reason of their formal nature

continues in many common law jurisdictions to the present d ay. The

contemporary version of the sealed instrument typically involves the

aff‌ixing of a sma ll round piece of red-coloured adhesive paper or “wafer”

next to the signature of the promi sor. Although the solemnity of the act

of sealing has t hus obviously declined over the centuries, the execution

of instruments under seal nonetheless remains a useful alternative to

consideration as it prov ides a device by wh ich non-bargain promi ses

can be rendered enforceable. At the same time, the decline in the so-

lemnity of the form and the fact th at, outside the legal profession, there

is unlikely to be widespread understanding of the legal signif‌icance of

the typical contemporar y seal, the doctr ine has attracted much criti-

cism in the modern era. After examining t he contemporary doctrine

1 See A.W.B. Simpson, A History of the Common Law of Contract (Oxford: Claren-

don Press, 1975) at 9–52 [Simpson].

Consideration and Form 217

relating to sealed in struments, then, we will return to con sider contem-

porary justi f‌ications for doctri nes justi fying enforceabilit y on the basis

of requirements of formality and possible measures for the reform of

current formality doctrine.

The history of the development of the doctrine of consideration

and its ultimate emergence in its modern form in the late-eighteenth

and nineteenth centuries is b oth complicated and the subject of much

academic inve stigation and controversy.2 This complex story cannot be

told here. We may note, however, that along the way various altern ative

formulations of the basic rule of recognition were rejected. Thus, for a

time, English courts and, in particular, Lord Man sf‌ield, toyed with the

idea that contracts recorded in w riting could be enforceable even in the

absence of consideration. In the well-known c ase of Pillans and Rose v.

Van Mierop & Hopkins,3 Lord Mansf‌ield offered the controversial view

that the rationale of the consideration doctrine was merely evidentiary

in nature and that other ev idence of contractual intent, such as the re-

cording of the agreement in writ ing, should suff‌ice, even in the absence

of consideration. More generally, it was his view that the absence of

consideration should not defeat agreements bet ween merchant s, both

formal and informal. A few years later, however, the House of Lords, in

its 1778 decision i n Rann v. Hughes,4 rejected as er roneous Mansf‌ield’s

suggestion that the fact of a writing eliminated the need for considera-

tion. Nonetheless, the fact that the doctrine of consideration renders

unenforceable some seriously intended promises, especially those

given by merchants, becau se of the absence of consideration, continues

to inspire contemporary cr iticism of the doctrine and may, indeed, lead

to its reform.

Further, English law has rejected the idea t hat the fact that a prom-

ise has been followed by substantia l detrimental reliance t hereon by the

promisee should render the promise enforceable, at least in case s where

the reliance was foreseeable or, indeed, intended by the promisor.5 Again,

however, the fact that foreseeable detrimental relia nce on a promise will

not have the effect of rendering the promise enforceable persist s as a point

of critici sm of the moder n doctrine of consideration. By way of contrast,

2 See, for example, Simps on, above note 1; S.J. Stoljar, A History of Contract at

Common La w (Canber ra: Australian Nation al University Press, 1975) [Stoljar].

3 (1765), 3 Burr. 1663, 97 E.R. 1035 (K.B.). See K. Teeven, “Mansf‌ield’s Reform of

Consideration in L ight of the Origins of the D octrine” (1991) 21 Memphis State

U.L. Rev. 669 [Teeven]. See also Simp son, ibid. at 617–19.

4 (1778), 4 Brown P.C. 27, 2 E .R. 18 (H.L.).

5 For discussion of e arly intimations of a reli ance doctrine, see Teeven, above

note 3 at 670–72.