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The Mystery of English Common Law: What is the Real Meaning of Consideration?
In the English common law system, the word "consideration" is not just a legal term, but also a fundamental element in everyday transactions and contracts. Consideration is essential for simple contracts but is not required in certain contracts (such as official document contracts). Over time, this concept has also permeated other common law jurisdictions. According to the historic ruling Currie v Misa, consideration can be defined as "right, interest, benefit or forbearance, prejudice, loss". This means that consideration is a promise of value, something that the promisor provides in exchange for the value given by the promisee.
Consideration can be thought of as the concept of value offered and accepted by people or organizations when entering into a contract.
In a specific case, if A enters into a contract with B to purchase B's car for $5,000, A's consideration is the promise to pay $5,000 and B's consideration is the promise to deliver the car. As another example, if A agrees to paint B's house for $500, the two parties in this contract are considered A's services and B's compensation respectively. Even in otherwise seemingly unusual agreements, such as A agreeing not to paint his house white in exchange for B's promise to pay $500 per year, this is valid consideration because A gave up his original right.
At common law, for a contract to be formed, both parties must provide consideration. Otherwise, even if there is a promise, it cannot be considered a valid contract. In some legal systems, however, the need for this concept is considered negligible, and many advanced business relationships are still able to make use of contractual considerations. However, without consideration, the contract cannot be established.
Even if the court finds that there is no contract, it may still pursue recovery based on the principle of value return or commitment stop.
Legal rules to consider
Consideration of existence under English law often raises a number of common issues. Here are some key takeaways:
- Partial payments do not count as valid consideration.
- Consideration must be provided by the promisee but need not flow back to the promiser.
- The considerations must be sufficient, but need not be equal.
- Considerations must not be imaginary or past.
This means that while some legal systems recognise 'past consideration', English law does not. For example, if A performs a service at the request of B and B promises compensation afterwards, this consideration is no longer valid. This principle directly reflects the importance given to practical considerations under English common law.
In Indian contract law, the standard for establishing valid consideration is more relaxed and the promisor or any other person can make a promise motivated by the desire of the other party. In short, the parties to a contract must give each other some kind of feedback. This approach highlights the differences in the concept of consideration between different jurisdictions.
Historical and Comparative Approaches Considered
Historically, legal systems based on Roman law, such as Germany and Scotland, do not emphasize the need for consideration. This has led some scholars to suggest that consideration should be abandoned altogether and to request that its functions be replaced. However, the survival of this legal doctrine is considered to be so deeply rooted in the common law that it is difficult to withdraw.
"The doctrines considered are so deeply rooted that they cannot be easily overturned by indirect means."
This view has sparked a discussion both in academia and in practice. For some legal systems, the exchange of promises or assent of will is the legitimate basis for the formation of a contract. This contrast makes English common law appear cumbersome and slow in some practical operations. Is the existence of consideration just legal red tape?
Today, while the principle of consideration still has a place in the common law, the complexity of supply chains and advances in commercial practice have made its role increasingly difficult. When resolving contractual disputes, courts do not usually explore the financial fairness of a transaction, focusing instead on the question of whether there was a legitimate consideration. This has raised a strong question in the commercial legal community: Does the existence of considerations create additional obstacles for commercial activities?
During the debate, some may even point out that “unnecessary considerations”, although nominally compliant, can be a stumbling block to business activities. With the development of international commerce, many laws, including the United Nations Commercial Law and the International Sales of Goods Convention, do not require consideration, which further ignites the spark of legal scholars' thinking on the necessity of consideration. At this point, the question arises again: In today's legal environment, has consideration become obsolete?
