Consideration and Form

• Author: John D. McCamus
• Pages: 233-302

233

CHAPTER 7

CONSIDERATION

AND FORM

A. INTRODUCTION

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

a pervasive feature of our commercial and social lives. A question of

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

distingui shing 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 promis es should be considered binding as a mat-

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 criteria of enforceability or rules for the recognition of

enforceable promises have developed.

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

form part of a bargain. The doctrine 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 functioning of a modern credit economy. It is

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

of bargains. What is less clear, however, is whether the doctrine of con-

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

THE LAW OF CONTR ACTS234

identif‌ies the proper line of demarcation between those promises that

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 chapter, after providing an

account of various aspects of the application of the doctrine, we will

return to consider the prospects for its reform.

The second rule of recognition for enforceable promises rests on

the formal trappings w ithin which the undert aking is given. Thus, cen-

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

English legal system recognized as enforceable those promises that

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

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

ciple that a promise given under seal is enforceable simply because

of the formal manner in which the undertaking has been given has

persisted. For much of the early history of the doctrine, 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 impres sion

of a seal or signet ring or other identif‌ier of the party executing the

instrument could be made. The general enforceability of instruments

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

fourteenth c entury.1 In an essentially preliterate society, it is easily seen

that the aff‌ixing 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 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 instru-

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

continues in many common law jurisdictions to the present day. 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 promisor. Although the solemnity of the

act of sealing has thus obviously declined over the centuries, the exe-

cution of instruments under seal nonetheless remains a useful alter-

native to consideration as it provides a device by which non-bargain

promises can be rendered enforceable. At the same time, the decline

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

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

nif‌icance of the typical contemporary seal, the doctrine has attracted

much criticism in the modern era. After examining the contemporary

1 See AWB Simpson, A Histor y of the Common Law of Contract (Oxford: Claren don

Press, 1975) at 9–52 [Simpson].

Considerat ion and Form 235

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

sider contemporary justif‌ications for doctr ines justifying enforceabilit y

on the basis of requirements of form ality 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 both complicated and the subject of much

academic investigation 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 Mansf‌ield, toyed with

the idea that contracts recorded in writing could be enforceable even

in the absence of consideration. In the well-known case of Pillans and

Rose v Van Mierop & Hopkins,3 Lord Mansf‌ield offered the controversial

view that the rationale of the consideration doctrine was merely evi-

dentiary in nature and that other evidence of contractual intent, such

as the recording of the agreement in writing, should suff‌ice, even in

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

absence of consideration should not defeat agreements between mer-

chants, both forma l and informal. A few years later, however, the House

of Lords, in its 1778 decision in Rann v Hughes,4 rejected as erroneous

Mansf‌ield’s suggestion that the fact of a wr iting eliminated the need for

consideration. Nonetheless, the fact that the doctrine of consideration

renders unenforceable some seriously intended promises, especially

those given by merchants, because of the absence of consideration,

continues to inspire contemporary criticism of the doctrine and may,

indeed, lead to its reform.

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

ise has been followed by substantial detrimental reliance thereon by

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

where the reliance was foreseeable or, indeed, intended by the promi-

sor.5 Again, however, the fact that foreseeable detrimental reliance on

a promise will not have the effect of rendering the promise enforceable

persists as a point of criticism of the modern doctrine of consideration.

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

Common Law (Canberra: Austral ian National University P ress, 1975) [Stoljar].

3 (1765), 3 Burr 1663, 97 ER 1035 (KB). See K Teeven, “Mansf‌ield’s Reform of

Consideration i n Light of the Origins of the D octrine” (1991) 21 Memphis State

UL Rev 669 [Teeven]. See also Simpson, ibid at 617–19.

4 (1778), 4 Brown PC 27, 2 ER 18 (HL).

5 For discussion of ea rly intimations of a relia nce doctrine, see Teeven,above

note 3 at 670–72.