The Doctrine of Consideration

Author(s): Clarence D. Ashley

Source: Harvard Law Review , Mar., 1913, Vol. 26, No. 5 (Mar., 1913), pp. 429-436
Published by: The Harvard Law Review Association

Stable URL: https://www.jstor.org/stable/1326089

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 THE DOCTRINE OF CONSIDERATION. 429

THE DOCTRINE OF CONSIDERATION.

IN spite of all that has been written and said in explanation of

the doctrine of consideration, the law is still far from clear
upon the subject. The courts are not consistent in their applica-
tion of the rule, partly because they are unwilling to enforce it
strictly in all cases, and partly because they are often hazy in their
understanding and knowledge of the topic. All this leads to pres-
ent uncertainty and doubt. It is further true that consciously
or not the law of consideration is being modified gradually, until
the present technical requirement is likely to be entirely abolished.
Thus it is said in one case 1 where lack of consideration was
urged as a defense:

"Under the circumstances of this case is there an equitable estoppel

which ought to preclude the defendant from alleging that the note in
controversy is lacking in one of the essential elements of a valid con-
tract? We think there is. An estoppel in pais is defined to be 'a
right arising from acts, admissions, or conduct which have induced a
change of position in accordance with the real or apparent intention of
the party against whom they are alleged."'

This view would abolish the law of consideration and introduce

the rule enforced under modern Roman-law systems. If this
change is desirable it should be brought about by the legislature.
Such a decision is simply an unwarrantable usurpation of legislative
powers by the court. The usurpation may be conscious, or it may
arise from an attempt to apply the law without a clear compre-
hension of its principles.
It will not be out of place to examine a few of the doubtful propo-
sitions. For example, must consideration be presently exchanged
for an offered promise or may it be given subsequently?
Recently a thoughtful writer has given the following definition: 2

1 Ricketts v. Scothorn, 57 Neb. 5i (i898).

2 Dean Henry Winthrop Ballantine, Contracts, 7 Commercial Laws of the World, 8i.

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430 HARVARD LAW REVIEW.

" Consideration is primarily the test of bargain, and may be defined as

the thing which the promisee gives or promises to give in exchange for
the thing promised; not for the promise, as it is usually expressed."

To the objection that under this description only unilateral con-

tracts are possible the writer replies: I

"That is true if I grant the i6th century premise 'that in all agree-
ments there must be quid pro quo presently.' . . . I do not admit,
however, that the contract cannot arise until the consideration is actu-
ally furnished."

And he also adds that he would amend the language in my text4

on Contract to read,

"Consideration is something furnished or to be furnished to the prom-

isor at his request and in exchange for what he promises."
It seems to me that this is not the generally accepted concep-
tion of consideration. As the view comes from an authoritative
source it is deserving of careful examination. We are not here
concerned with the origin of the doctrine. The question of impor-
tance to-day is as to what is now consideration and when it must
be furnished. According to the idea given above, consideration
is not an element of contract, because it is said that it is incorrect
in bilateral contracts to speak of the exchange promise as the con-
sideration, but rather is it the thing promised, i. e., the perform-
ance of the promise rather than the promise itself. It is well
settled that the contract must arise, when bilateral, at the time
the counter promise is given. If this counter promise is not the
consideration, but its performance is, then the contract arises
before the consideration is furnished, and we have the possibility
of a contract without consideration. In other words, neither
party can withdraw; and this is so whether the demanded consid-
eration, i. e., the promised performance, is ever furnished or not.
According to this view the counter promise amounts to no more
than an acceptance, and there would seem to be no real difference
in result between an offer calling for a unilateral or bilateral con-
tract. In either event the contract seems to come into existence
upon acceptance, and not to be delayed until performance. But

I In private correspondence.
4 Ashley, Law of Contracts, p. 65.

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 THE DOCTRINE OF CONSIDERATION. 43I

if it be said that in a bilateral contract the counter promise is an

obligation, but not consideration, then what is the consideration
for this counter promise, and to what does it obligate? If it is the
performance of the first promise, then each arises and becomes
binding without any consideration, and there is merely the con-
templation of performance as the basis of the agreement. Just
what part the requested consideration may then play seems un-
certain. Apparently the only method by which its enforcement
could be secured would be by making it a condition precedent to
the performance of the obligation contained in the promise for
which it is required. Dean Ballantine further says: I

"If we rationalize the doctrine of consideration, we shall find that

the apparently arbitrary and technical rules of consideration furnish a
touchstone or test of two substantive qualities in the transaction, viz.:
(i) Is the engagement of the parties put on the basis of bargain, or is
the real basis gratuitous? (2) If a bargain is found, does the subject
matter given in exchange have sufficient possibility of value to be the
foundation of a legitimate claim, or is it obviously insufficient?"

Here is suggested the idea that consideration is merely for the

purpose of showing that a bargain is contemplated. This leads
to the natural conclusion that inquiry may be made as to the
reasonableness of the proposed exchange. An idea of this sort
was suggested in some of the cases dealing with the doctrine grow-
ing out of the decision in Pinnel's case.6 It has been generally
recognized that the question of reasonableness was not involved
in that decision. While one dollar would not sustain a present
proposed exchange for $iooo, a beaver hat would.7 In Schnell v.
Nell 8 the court had the same thing in mind when it said:

"In this case, had the one cent mentioned been some particular one
cent, a family piece, or ancient, remarkable coin, possessing an inde-
terminate value, extrinsic from its simple money value, a different view
might be taken."

Consideration is not for the purpose of showing an intended

business arrangement. In fact the transaction is sometimes meant

5 Contracts, 7 Commercial Laws of the World, 8i.

6 5 Co. Rep. I I 7 (i602).
7 Foakes v. Beer, 9 App. Cas. 605 (i884).
8 I7 Ind. 29.

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432 HARVARD LAW REVIEW.

to be gratuitous, and the requested consideration desired purely

to meet the technicality.
The elements of simple contract are mutual assent and considera-
tion. If either is lacking, there is no contract, whatever other
obligation may arise. There are exceptions to this general rule,
such, for instance, as compromise cases, but the rule itself has been
universally recognized.
It might be well if what Dean Ballantine has described were the
law, and, if it were merely necessary that a contract should con-
template a business relationship. This would be a question of
fact, of which consideration would furnish some proof. It is sub-
mitted that such is not our law. It is believed that a contract
does not arise until consideration is furnished, and without this
essential there is no legal obligation. If an act is requested, there
is no promise until the act is performed. But when we say that a
bilateral contract is contemplated we indicate by such language
that a counter promise, i. e., an obligation, is required by the partie
as consideration. Such is the intention of the offer in the supposed
case. But if the two promises when exchanged are binding, as
they assuredly are, there must be a contract then and there. Sup-
pose now the first promise is to pay money on a date and the second
is to do an act at a subsequent time. If when the money is due it
is properly tendered and refused and the tender is kept good, there
would seem to be no doubt that the other party is bound to per-
form when the subsequent date arrives and will break his contract
if he refuses. Yet as the money has not been paid there has been
no performance of the first promise, and hence according to the
proposed hypothesis the second promise is without consideration.
Or suppose it is a case where the performance consists of the pay-
ment of money on one side, and the delivery of a deed or other
chattel on the other, both to be performed at the same time. In
that event there are mutual and concurrent conditions, and a
tender by either party puts the other in default. But a tender is
not performance, and if performance is consideration, then the
second party is bound to perform without consideration.
In bilateral contracts the counter promise and not its performance
would seem to be the consideration demanded, and hence it must
be presently exchanged and the consideration cannot be future.

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 THE DOCTRINE OF CONSIDERA TION. 433

Sometimes there seems to be doubt in regard to "past considera-

tion." It is well settled that consideration cannot be "past,"
because in that case the so-called "past consideration" has already
been furnished, and is not given in exchange for the intended
promise.
But in a unilateral contract the act must have been performed
before the promise can arise, and hence at first blush it would
appear to be "past." The difference is that when an act is done
pursuant to an offer it is performed in exchange for the proposed
promise, while in instances of "past consideration" this is not so.
In the latter case the thing desired has been given prior to the
offer, and hence the offerer is no longer able to comply. He cannot
give that which is no longer his.
Again, questions have always been raised concerning the nature
of bilateral contracts. They were once described as follows: 9

"When the consideration on each side is a promise the contract is

bilateral; a binding promise, the consideration of which is anything
else than a promise, is a unilateral contract."

The question is, then, what is the consideration in bilateral con-

tracts? Is it the counter promise or performance of such promise?
As described above by Mr. Wald, it is generally believed to be the
mutual promises each for the other. But it is suggested that there
is a difficulty here. That the two promises must support each
other, and neither can be a promise until the other becomes one.
The first step is merely an offer, and must ripen into a promise to
serve as consideration for the counter promise. But such counter
promise must itself serve as a consideration for the original promise
which springs from the other. Sir Frederick Pollock suggests 10
that many objections might have been urged in the first instance,
and substantially relies upon the settled law as obviating any
difficulties which he intimates would lie were the proposition one
of first impression.11 I must confess that the suggested difficulties
have never impressed me. We start out with the technical re-

9 Wald's Pollock, 2 Am. ed., p. I2, note m.

10 Pollock, Contract, 8 ed., p. i9i.
11 Whether, in any given case, there is a promise in law must be determined by the
nature of the contemplated performance. For a discussion of this question see
8 HA1{v. L. REV. 30, I4 id. 496, i6 id. 3I9.

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434 HARVARD LAW REVIEW.

quirement of consideration, something which must be given in

exchange for a promise in order that it shall exist in law. Suppose
the consideration asked in the offer is an act. Then there can be no
promise until the act is completed, even though there may be
mutual assent. But suppose the act is a bond under seal. Then
when the bond is delivered the offer ripens at once into a promise,
but not an instant earlier. At that precise point the requested
consideration is furnished. In that case, however, the bond is
complete by itself, and comes into existence without considera-
tion. Let us see whether this makes any difference. When a
promise is demanded, we have in reality an act requested. This
act consists in giving something to which the law will annex the
obligation of promise. Unlike the bond, the promise, to exist, must
have its consideration, which is to be the counter promise. The
instant one utters words of such a character as to constitute a
promise if the element of consideration is found, the person so
speaking has done his part towards giving the act asked, and it
simply remains for the law to annex its obligatory character to it.
At that point both parties put themselves where the law can act
upon them. There appears to be no logical difficulty in saying
that the law operates simultaneously upon each and thereby
transforms each action into a promise, each mutually dependent
upon the other. In all cases there must be some instant at which
the law takes effect. This is so in the case of any obligation. A
bond becomes such at the instant of delivery. Prior to that it is
a mere paper writing. So each promise becomes an obligation
when the action of each party makes it possible for the law to act
upon each.
There may be very marked differences in result, if considera-
tion is looked upon as an incident in the contract after it has
arisen, rather than as an essential to its existence. Once con-
cede that the contract becomes an obligation without considera-
tion, then there would seem to be no good reason why consideration
may not be waived by the promisor, but as its presence is essential
to the origin of the contract it is not within the power of the parties
to do without it. The law refuses to annex the obligation of con-
tract to acts of the parties which lack this essential element. For
this reason estoppel is inapplicable. This is not because there
may not be a contract, some elements of which are done away

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 THE DOCTRINE OF CONSIDERATION. 435

with by acts which result in estoppel or something analogous

thereto. For example, mutual assent is generally an essential
element, in fact is the characteristic of contract, and yet contracts
frequently arise in which there is no actual assent.
This is not true of consideration. The law as it has developed
makes this particular requirement a necessity, which the parties
cannot avoid. A gratuitous promise is not a contract. No one
can waive the requirement of consideration because the law which
affixes the obligation refuses to do so under such circumstances.
Very true, this is peculiarly technical, and is by no means essential
in its nature. But the rule is there, and no doctrine is more con-
sistently enunciated than the one which says that consideration
is requisite for a contract.

With such importance attached to a technical requirement of

the law, it is not unreasonable for the lay public to ask for a scien-
tifically accurate definition of the term "consideration." It is
believed, however, that no satisfactory definition can be given.
Deplorable as this may be, it seems nevertheless true. It is due
to a lack of accurate legal terminology, which causes confusion
when any form of words is used which attempts to explain. A
definition to be of value should indicate within its own confines
just what it describes. Otherwise it is certainly inaccurate, and
may lead to erroneous conclusions. A distinguished authority
on the law of contract 12 suggests this definition: "Any surrender
of a legal right may be a consideration for a promise." This state-
ment will strike anyone thoroughly familiar with the subject as
accurate. But such person does not need any definition, and is not
helped thereby. To anyone seeking knowledge, the above sug-
gestion leaves him where he started. He may well inquire what
is a "legal right." Can we define such right in a way that w'll
prove a divining-rod, and certainly indicate in advance whether
in any given case there exists such a legal right to be surrendered?
In other words, this proposed definition simply substitutes one
question for another and answers neither. Any attempt to define
a legal idea is indeed a "perylous chose."
We still maintain as requisite a technicality existing simply
12 Prof. T. D. Terry, I2 Col. L. Rev. 574.

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436 HARVARD LAW REVIEW.

because of its historical development,

tant topic as contract. We envelop an obligation of everyday use
with a legal rule, which is unnecessary, and which frequently
works rank injustice. In view of this and other outgrown doctri
it is not strange that the common-sense intelligence of the people
leads them to regard law and lawyers with suspicion.
A technical rule, however harsh, is less objectionable if clearly
understood and consistently applied. Men may shape their con-
duct to meet the requirement. But the doctrine of consideration
is not so enforced. Neither courts nor thinking writers are willing
to follow fearlessly wherever the rule may lead. Thus there seems
to be no escape from possible injustice in certain cases where a
unilateral contract is contemplated. Such an eminent authority
as Sir Frederick Pollock refuses to follow the premises to their
legitimate conclusion."3 It is inconceivable that the author does
not understand the argument. Yet he attacks it by assuming
other questions as involved, sets up an imaginary position as to
acceptance, and then proceeds to knock down this rag baby of
his own creation. If any one disapproves the result, why not
recognize the force of the logic, and refuse co accept the rule
on the simple ground that it works injustice?
After all these years of discussion and adjudication, well-trained
lawyers are still in doubt as to fundamental questions concerning
consideration. There is not even a full agreement as to what it is.
I believe that an able judge might, by an authoritative statement,
overrule the entire doctrine, and declare that the common-law
rule of consideration is not now enforced. This would require
courage as well as an accurate knowledge of the subject. Such a
bold course would be far preferable to any attempt to reach the
same result by subterfuge, with talk about estoppel and the like.
This indirect method only leads to confusion, doing more harm in
the long run than it accomplishes possible good in the given case.
But if the courts will not bring about this result, the time has
come when the legislature should act. This could be accomplished
by a brief statute stating in accurate terms that the doctrine of
consideration is abolished.
Clarence D. Ashley.
NEw YORK UNIVERSITY.

"I Pollock, Contract, 8 ed., p. 26, note (c); 28 Law Quarterly Review, p. Ioo.

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