A. Introduction

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 275-277

Page 275

The doctrine of consideration holds that, apart from promises given under seal, promises will not be enforceable unless they are given as part of a bargain or exchange. As we have seen in Chapter 7, the doctrine of consideration usefully identifies a category of promises that ought indeed to be enforced. However, the opposite side of the consideration coin, the doctrine that gratuitous promises are generally unenforceable, is a rule that is capable of creating considerable inconvenience. Thus, for example, promises to vary existing contractual obligations will be unenforceable unless paid for by the promisee. Parties to agreements will often give gratuitous undertakings of this kind, however, and expect them to be enforceable and to be relied upon. In Gilbert Steel Ltd. v. University Construction Ltd.,¹for example, a supplier of steel was unable to enforce the purchaser’s promise to adjust the contract price upwards as the supplier’s performance of the pre-existing duty to supply the steel was not good consideration. Similarly, in the leading decision in Foakes v.Beer,²a creditor’s promise to discharge a debt in return for partial payment of the obligation was held to be unenforceable. The debtor’s

Page 276

payment of a sum less than that required by the pre-existing contractual duty was held not to be good consideration. Decisions of this kind frustrate the reasonable expectations of the parties. Accordingly, a number of Canadian provinces reacted to the holding in Foakes v. Beer by enacting legislation that specifically and narrowly overruled it.³

Gratuitous promises to enter into contracts in the future may also give rise to hardship. In the context of building contracts, for example, a general contractor will normally rely on the quoted prices of sub-contractors in calculating its bid. If the bid is successful and a subcon-tractor then refuses to enter into a subcontract at the quoted price, the contractor may suffer a loss. If the general contractor cannot obtain an equivalent price from another supplier, it will have relied to its detriment on the subcontractor’s gratuitous promise. The failure of the doctrine of consideration to address adequately problems of this kind is a frequent source of criticism of the doctrine.

In this chapter we examine the doctrines of waiver and promissory estoppel and attempt to determine whether they provide a solution to these difficulties. Our conclusion will be that these doctrines...