Consideration and Form

• Author: John D. Mccamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 211-274

CHAP TER 7

CONSIDER ATION

AND FORM

A. INTRODUCTION

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

a pervasive feature of our commerci al and social lives. A question of

central importance for the law of contracts is to articulate a basis 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 basi s of

moral precepts that al l promises should be considered binding as a m at-

ter of honour, few observers would suggest that all promises should be

legally enforceable regardless of how rash and improvident they might

have been and regardless of the setting, be it commercial or non-com-

mercial, in which the promise was made. In the English common law

tradition, two criter ia of enforceability or rules for the recognition of

enforceable promis es 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 purcha sed in the sense of being given

in return for something of va lue provided by t he promisee or, as is sa id,

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

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

easily seen, therefore, that a strong rationale exists for the enforcement

of ba rgains . What is less cle ar, howeve r, is whether t he doctr ine of con -

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THE LAW OF CONTR ACTS212

sideration or, as it is sometimes called, the bargain theory, successfully

identif‌i es the proper line of demarcation between t hose promises th at

should be considered enforceable by the legal system and those that

should not. Indeed, the doctrine of consideration has attracted much

criticism over the years. In the present ch apter, after providing an ac-

count of various aspects of the application of the doctrine, we w ill re-

turn to consider the prosp ects for its reform.

The second rule of recognition for enforceable promises re sts on

the formal trappings within which t he undertaking i s given. Thus,

centurie s prior to the development of the doctrine of consideration,

the English legal system recogn ized as enforceable those promi ses that

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

method of sealing in struments has evolved over time, the basic prin-

ciple that a promise given under sea l is enforceable simply because

of the formal manner in which t he undertaking h as been given has

persisted. For much of the early history of the doctrine, the execu-

tion of an instr ument under seal involved the melting of some wax or

other adhesive substance on the instrument upon which an i mpression

of a seal or signet ring or other identif‌i er of the party executing the

instrument could be m ade. The general enforceability of inst ruments

executed in this f ashion appears to stretch back as far, at least, as the

fourteenth century.1 In an essentially pre-literate society, it is easily

seen that the aff‌i xing of the seals constituted, in effect, a form of sig-

nature. Under contemporary practice, of course, it is commonplace for

people to execute agreements by placing their handwritten 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

instrument s and of enforcing them simply by reason of their formal

nature continues in ma ny common law jurisdictions to the present day.

The contemporary version of the sealed in strument ty pically involves

the aff‌i xing of a small round piece of red-coloured adhesive paper or

“wafer” next to the signature of the promisor. Although the solemnity

of the act of sealing has thus obviously declined over the centur ies, the

execution of instrument s under seal nonetheless remain s a useful al-

ternative to considerat ion as it provides a device by which non-bargain

promises can be rendered en forceable. At the same time, the decline

in the solemnity of the form a nd the fact that, outside the legal profes-

sion, there is unlikely to be w idespread understanding of the legal sig-

nif‌i cance of the typical contemporary seal, the doctrine has attracted

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

don Press, 1975) at 9–52.

Consideration a nd Form 213

much criticism in the modern era. After examini ng the contemporary

doctrine relating to sealed instruments, then, we will return to con-

sider contemporary justif‌i cations for doctrine s justifying enforceability

on the basis of requirements of formal ity and possible measures for the

reform of current formality doct rine.

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 both complicated and the subject of much

academic invest igation and controversy.2 This complex story can not be

told here. We may note, however, that along the way var ious alternative

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

time, English courts and, in particula r, Lord Mansf‌i eld, 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 Mansf‌i eld offered the controversial view

that the rationale of the consider ation doctrine was merely ev identiary

in nature and that other evidence of contractual intent, such as t he re-

cording of the agreement in wr iting, should suff‌i ce, even in the absence

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

consideration should not defeat agreements between merchants, both

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

its 1778 decision in Rann v. Hughes,4 rejected as erroneous Mansf‌i eld’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, es pecially those

given by merchants, bec ause 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 t he idea that the fact th at a prom-

ise has been followed by substant ial detrimental rel iance thereon by the

promisee should render the promise enforceable, at least in cases where

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

however, the fact that foreseeable detrimental reliance on a promise w ill

not have the effect of rendering the promis e enforceable persists as a point

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

Common La w (Canberra: Australian National University Press, 1975).

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

Consideration i n Light of the Origins of t he Doctrine” (1991) 21 Memphis State

U.L. Rev. 669. See also Simpson, 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.