Introduction
This essay critically examines the formation element of consideration in English contract law, focusing on the argument that it is a legal construct without practical purpose, as highlighted by the doctrine of pre-existing duty. Consideration, a fundamental requirement for the enforceability of contracts, ensures that each party provides something of value in exchange for the other’s promise (Currie v Misa, 1875). However, the rules surrounding pre-existing duty—where a promise to perform an existing obligation is often deemed insufficient consideration—raise questions about the relevance and utility of this element. This discussion will first outline the concept of consideration and the pre-existing duty rule. It will then evaluate the arguments for and against the retention of consideration as a formation requirement, before assessing whether its practical purpose is indeed negligible. Ultimately, the essay argues that while consideration serves some theoretical functions, the pre-existing duty rule illustrates significant flaws that support calls for its reform or abolition.
The Concept of Consideration and Pre-Existing Duty
Consideration, as defined in Currie v Misa (1875), involves a benefit to the promisor or a detriment to the promisee, distinguishing contracts from mere promises. It is a cornerstone of contract formation in English law, intended to ensure that agreements are based on mutual exchange and intention to create legal relations (Poole, 2016). However, the rule on pre-existing duty complicates this notion. According to this principle, a promise to perform a duty one is already obliged to fulfil—whether under a prior contract or by law—does not constitute valid consideration. For instance, in Collins v Godefroy (1831), a witness who was legally required to attend court was not entitled to additional payment for doing so, as they provided no new consideration.
This rule aims to prevent exploitation, ensuring that parties cannot demand extra benefits for fulfilling obligations they are already bound to perform. Nonetheless, it has been criticised for creating rigid outcomes that fail to reflect modern commercial realities, as will be explored further below (Beatson et al., 2016). Indeed, the pre-existing duty doctrine often appears to prioritise legal formalism over practical fairness, raising the question of whether consideration itself serves a meaningful purpose.
Arguments for Abolishing Consideration as a Formation Element
One primary argument for abolishing consideration centres on its lack of practical utility, particularly when viewed through the lens of the pre-existing duty rule. Critics contend that consideration is an outdated construct, rooted in historical notions of bargain rather than contemporary understandings of contractual intent (Atiyah, 1986). The pre-existing duty rule exemplifies this issue by invalidating agreements that may reflect genuine mutual consent. For example, in Stilk v Myrick (1809), sailors who agreed to continue their duties during a ship’s voyage after crew desertions were denied extra pay, as their pre-existing contractual obligations negated fresh consideration. While the decision aimed to prevent coercion, it disregarded the practical realities of the situation, where the employer arguably benefited from the crew’s continued service under difficult conditions.
Furthermore, the rule can lead to unjust outcomes in commercial settings. Although the case of Williams v Roffey Bros (1991) introduced a practical benefit exception—allowing consideration to be recognised if the promisor gains a tangible advantage, such as avoiding delays—the exception remains narrowly applied and inconsistently interpreted (Poole, 2016). This inconsistency suggests that consideration, and by extension the pre-existing duty rule, often hinders rather than facilitates contractual fairness. Therefore, abolishing consideration could shift the focus to intention and reliance, better aligning contract law with modern economic practices.
Arguments for Retaining Consideration
Despite these criticisms, there are arguments for retaining consideration as a formation element. Principally, it serves as an evidentiary tool, distinguishing enforceable contracts from gratuitous promises (Beatson et al., 2016). Without consideration, courts might struggle to determine which agreements warrant legal protection, potentially leading to a flood of litigation over informal promises. Consideration, in this sense, provides a clear criterion for enforceability, even if its application via rules like pre-existing duty can appear overly formalistic.
Additionally, consideration reinforces the notion of mutuality in contracts, ensuring that each party has a stake in the agreement. While the pre-existing duty rule may seem restrictive, it theoretically protects against exploitation by preventing parties from extracting additional benefits without offering something new in return (Chen-Wishart, 2018). For instance, without this rule, an employee could repeatedly demand pay increases for performing their existing job duties, undermining contractual stability. Thus, although flawed in practice, consideration arguably remains a necessary safeguard against abuse.
Critical Evaluation: Does Consideration Serve a Practical Purpose?
Evaluating these perspectives, it becomes evident that consideration’s practical purpose is limited, particularly when scrutinised through the pre-existing duty rule. While it theoretically upholds the bargain principle and provides a measure of contractual intent, its rigid application often disregards the nuances of real-world agreements. The decision in Williams v Roffey Bros (1991) demonstrates a judicial attempt to address this rigidity by recognising practical benefits as consideration, yet it also highlights the underlying problem: if consideration must be reinterpreted to achieve fairness, does it truly serve a consistent or useful function? Arguably, a focus on intention to create legal relations, as already applied in social and domestic agreements, could replace consideration without sacrificing legal clarity (Balfour v Balfour, 1919).
Moreover, comparative analysis with civil law jurisdictions, which often prioritise consent over consideration, suggests that English law’s adherence to this element may be unnecessarily restrictive (Atiyah, 1986). In such systems, the pre-existing duty issue is often resolved through good faith principles, offering a more flexible approach to enforcing agreements. This raises the question of whether English law should follow suit, abandoning consideration to better reflect mutual intent and economic realities.
Conclusion
In conclusion, the formation element of consideration, while historically significant, appears to lack substantial practical purpose, as poignantly illustrated by the pre-existing duty rule. Although it provides a theoretical framework for distinguishing enforceable contracts and preventing exploitation, its rigid application often results in outcomes that defy fairness and commercial sense. Cases like Stilk v Myrick (1809) and the limited scope of exceptions in Williams v Roffey Bros (1991) underscore these shortcomings, supporting arguments for its abolition. Conversely, consideration’s role in evidencing intent and ensuring mutuality cannot be entirely dismissed. Nevertheless, the balance of evidence suggests that reforming or abolishing consideration in favour of a focus on intention and good faith could better serve modern contract law. The implications of such a change would require careful judicial and legislative consideration to avoid unintended consequences, but the current state of the law arguably warrants this debate. Ultimately, the pre-existing duty rule exemplifies why consideration’s relevance in contract formation remains questionable, necessitating a critical re-evaluation of its place in English law.
References
- Atiyah, P.S. (1986) Consideration: A Restatement. In Essays on Contract. Oxford University Press.
- Beatson, J., Burrows, A. and Cartwright, J. (2016) Anson’s Law of Contract. 30th edn. Oxford University Press.
- Chen-Wishart, M. (2018) Contract Law. 6th edn. Oxford University Press.
- Poole, J. (2016) Textbook on Contract Law. 13th edn. Oxford University Press.
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