Contract, Consideration and Consistency

This article seeks to continue the debate on the proper role of consideration in the formation of executory contracts at common law. It first attempts to identity the place of consideration within the theoretical framework of contract by outlining the arguments that have been made regarding the possible functions of consideration and how they correspond with the broad theories of contract. Two possible functions of consideration are identified. The first is that consideration is an indicator of an exchange. The second is that consideration is evidence that a promise or promises were made with due deliberation and with an intention that the promise or promises would be legally binding. The article then compares these two possible functions with the application of the doctrine of consideration and concludes that the evidential function is the only possible function that is consistent with the application. It then concludes by arguing that if consideration has an evidential function, alternative forms of evidence should be accepted in substitution for consideration and that therefore consideration should not be an essential element of the formation of contract. It also argues that if consideration was seen in this way, most of the problems commonly associated with the doctrine would be resolved.UnpublishedP.S. Atiyah Essays on Contract (Clarendon Press, 1994) H.G. Beale (Ed), Chitty on Contracts, (29th edition, Sweet & Maxwell, 2004) Jack Beatson “Reforming the Law of Contracts for the Benefit of Third Parties, A second bite at the Cherry” (1992) 45 CLP 1 Peter Benson “The Unity of Contract Law” in Peter Benson Ed. The Theory of Contract Law ; New Essays (Cambridge University Press, 2001) John Burrows, Jeremy Finn and Stephen Todd, The Law of Contract in New Zealand ( 3rd edition, Lexis Nexis, 2007) J.W.Carter. Elizabeth Peden and G.J. Tolhurst, Contract Law in Australia (5th edition, Lexis Nexus Butterworths, 2007) J.W. Carter, Anrew Phang Jill Poole “Reaction to Williams v Roffey” (1995) 8 JCL 248 Mindy Chen-Wishart “Consideration: Practical Benefit and the Emperor’s New Clothes” in Jack Beatson and Daniel Friedman eds Good Faith and Fault in Contract Law (Clarendon Press, Oxford, 1995) Brian Coote Consideration and Benefit: In Fact and In Law. (1990) 3 JCL 23 Brian Coote ‘Consideration and the Variation of Contracts” [2003] NZLRev 361 at 364 English Law Revision Committee (Cmd 5449), Sixth Interim Report, The Statute of Frauds and the Doctrine of Consideration, as published in (1937) 15 CAN. B Rev. 585 Charles Fried Contract as Promise: A Theory of Contractual Obligation (Harvard University Press, 1981) Lon L. Fuller Consideration and Form(1941) 41 Colum.L.Rev 799 David Ibbetson A Historical Introduction to the Law of Obligations (Oxford University Press, 2001) B Reiter, Courts, Consideration & Common Sense (1977) 27 U TLJ 439 Stephen A. Smith Contract Theory (Oxford University Press, 2004) S.J. Stoljar A history of Contract at Common Law (Australian National University Press, Canberra, 1975) Kevin M. Teevan A history of the Anglo-American Law of Contract (Greenwood Press. 1990) Department of Accountancy and Business Law, Working paper series no. 3 July 2009 G. Treitel “Consideration” in H.G. Beale General Editor Chitty on Contracts (29th edition, Sweet & Maxwell, 2004) at 221 Authorities Antons Trawling Company Ltd v Smith [2003] 2 NZLR 23 Attorney-General for England and Wales v R [2002] 2 NZLR 91 Central London Property Trust Ltd vHigh Trees House Ltd [1947] 1 KB 130 Machirus Properties Ltd v Power Sports World (1987) Ltd (1999) 4 NZConvC 193,066: Musumeci v Winadell Pty Ltd (1994)34 NSWLR The New Zealand Shipping Co. Ltd. v A.M. Satterthwaite & Co. Ltd [1974] 1 All ER 1015 (PC) Pillans and Rose v Van Mierop and Hopkins 3 Burr. 1663 (1765) Pinnel’s Case (1602) 5 Rep 117a Pollway Ltd. and Anor v Abdullah [1974] 1 W.L.R. 493 (CA) Rann v Hughes 101 ENG REP 1014n. (H.L.1778) Shadwell v Shadwell (1860) 9 CB (N.S.) 159 Stilk v Myrick (1809) 2 Camp 317 Thomas v Thomas (1842) 2 QB 851 Williams v Roffey Bros & Nicholls (Contractors) Limited [1991] 1 QB 1 (C