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Consideration Theory Notes

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Contract Law

Consideration Theory

FHS 2012

Classical Definition

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Orthodox ? consideration is about reciprocity or bargains (fundamental distinction w/promise to make a gift)
- former is enforceable whereas latter isn't unless made in a deed

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Ibbetson: evolution - from fairly strict quid pro quo to a negative requirement. Originally based on exchange theory. In 19th C, Will Theory arrives from the continent (test of liability is 'meeting of minds') - O + A model imposed, but never supplants it ? led to problems

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Currie vMisa [1875] - "some right, interest profit of benefit accruing from one party or some forbearance, detriment or loss or responsibility given, suffered or undertaken by the other."
= Treitel: usually, benefit & detriment are merely the same thing looked at from different POVs.
= Smith: language of benefit & detriment is out of date. All that's necessary is for D to ask, expressly or impliedly, for something in return for his promise (act/promise). Though lip service has been paid to both notions, neither has substantive meaning b/c court won't enquire into adequacy. Rationale

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Evidence of intention to be bound (doubtful - e.g. nominal consideration)

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Justice of exchange

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Facilitative institution to support valuable activity of contract Criticism

1. Scope is too narrow, fails to give effect to promises that should have legal effect(ProfessorDawson)

2. Overly technical, artificial, internally incoherent, and sometimes inconsistent with parties' intention

3. Divorced from commercial reality - no enquiry into adequacy
? Easy for lawyers to satisfy b/c usually - e.g. Independent sold for PS1.
? Where there's doubt, lawyers will use a deed.

4. Extremely difficult to reconcile w/modern theoretical models of contract law(Smith)
? E.g. if contract is based upon the promise principle or will of the parties, why insist upon the presence of consideration in order to render the promise enforceable?

5. Too broad (enforces some non bargains as bargains)

6. Its work could be done more effectively by specific doctrines, i.e. duress, intent to create legal relations which can target w/greater precision the reason for law's refusal to give effect to the promise made Challenge to orthodox view + defence

1. Atiyah's challenge: just a label courts use for 'good reason to enforce'. Courts never set out to create the doctrine, but were instead concerned w/ more practical problem of enforceability - whenever found it enforceable, said there was cons. Not based on reciprocity ? benefit/detriment is normally a good reason to enforce, but not alwayssufficientone;equally, there may be other good reasons for enforcing, so not always necessary reason. Conclusion =no doctrine of consideration
= good point, but pushed too far: serious assault at overall coherence of contract law

2. Treitel's defence: agreed w/defects (not a single doctrine, there are other reasons to enforce) but consideration =
expression of reciprocity [benefit/detriment] + some findings of contracts irrespective of parties' intent: e.g. 'invented consideration' inNestle v Chappell. A restatement which cured these defects would be welcome but Atiyah'sonedoesn't b/c doesn't say when courts will find a 'good reason' to enforce, so not a principled approach&
won't lead to an improvement of current situation! Not so much a restatement as negation of current elements of the doctrine.
= Atiyah: Treitel has himself invented the concept of an invented consideration because he finds it the only way in which he is able to reconcile many decisions with what he takes be 'true' or 'real' doctrine.

Practical Benefit o Stilk v Myrick[1809] - 2 ship deserters, crew promised extra pay if got the ship back safely. But task already in their contracts ? no consideration = promise of extra wages unenforceable.... unless it's a promise to perform existing contractual duty where promisor receivesa 'practical benefit' o Williams v Roffey[1990] - D sub-contracted to C carpenter to lay carpetin 27 flats they were building for aclient for PS20K, C under-quoted, ran into financial difficulties; D would have to pay clients for delay, so promised C additional PS10,3K for on time completion, then failed to pay over half, C sued successfully b/c D gained a practical benefit.
? 4 practical benefits a) continued performance; i.e. didn't break the contract (Purchas LJ) b) no trouble/expense to find other carpenter c) avoided penalty from the client

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