Response paper on ‘The Doctrine of Consideration’

Clarence D. Ashley’s article ‘The Doctrine of Consideration’ (Harvard Law Review, Vol. 26,
No. 5 (Mar., 1913)) although more than a hundred years old is still as relevant. In this article,
the author tries to address the uncertainties and inconsistencies present in the doctrine. He
states that these uncertainties arise due to lack of proper understanding or unwillingness on
the part of the court. He further states that the doctrine is undergoing a gradual change. He
attributes these changes to doctrine of estoppel and other developments as such. He also
brushes upon the topic of intention to enter into a contract when he says that “Consideration
is not for the purpose of showing an intended business arrangement”. Further on, the author
continues to contemplate the nature and role of consideration in bilateral contracts where it
seems that the role of the demanded consideration merely is of acceptance of the contract
which renders the difference between bilateral and unilateral contracts small. He continues to
examine the manner and the instance in which the furnished consideration acts in a bilateral
contract. He also examines as to what constitutes a consideration in a bilateral contract in
which he states the problem by considering the consideration to be the mutual promises given
by the parties. The author finds that any proper definition for what is a consideration falls
short of actual understanding or is riddled with fallacy. He concludes by saying that apparent
confusion and possible injustice committed by the doctrine can be mitigated if the courts
followed the doctrine religiously or if the legislature steps in to abolish or modify the doctrine
in accurate terms.

There have been many works doubting the requirement of consideration in a contract and
some which even openly criticize this doctrine as being redundant and confusing. This is one
such work where the author goes on to criticize the workings of the doctrine. There are many
valid points the author raises regarding this doctrine, one, in particular, the role played by
consideration in contracts. Although it was a little ambiguous when this article was written,
the role from then on has clearly diminished as it can be inferred by the developments of the
promissory estoppel and intention to enter into contract. This is evident in recent
developments both in England and in India albeit for the variations present in the
administration of the said principles. Through the recognition of intention to enter into a
contract as the sole principle for consent and intention of the parties the English law has
undermined the credibility of this doctrine although not outright rejecting it but at the cost of
not accepting the principle of promissory estoppel. In India however, the principle of
promissory estoppel has developed much more than the principle of intention to enter a
contract making the role played by consideration as the binding agent in the contract dubious
for it means that a party can be bound by a contract un which he has no return consideration.

Another point made by the author that I concur with is the redundancy caused by these
developments that the author rightly points out. By the developments of the principles
mentioned above, there seem to be two sets of rules that govern the same or similar areas of
contract. While intention to enter into a contract attacks the role of consideration in
determining the intention of the parties, promissory estoppel openly questions the need for a
consideration.

The author also makes note of the problem that arises when the contract is gratuitous in
nature. In such transactions, there is no return consideration for the promisor and as such
makes the contract void. To overcome this problem the consideration given is merely a
formality to meet with the technical requirements of consideration. However, there are
effective counter-arguments to this point raised, being, enforcement of a gratuitous contact
could affect the trust or relationship between the parties, the basis on which the gift or the
gratuitous contract was drawn up. All these problems have been dealt with, to some degree,
in Section 25 of the Indian Contract Act. This comes in the form of exceptions to contracts
without consideration rather than present a wholesome solution.

Another interesting point the author raises is the role of the legislature in correcting these
ambiguities. It is acceptable that the legislature may bring upon a statute or in some other
way legislate to bring some clarity to the now ambiguous doctrine. There has been such an
attempt where the law commission, through its 108th report, tried to add section 25A to the
Indian Contract Act. It suggested the inclusion of promissory estoppel. Although it is yet to
be followed through it is commendable that such a suggestion exits.

Although the author questions the doctrine and its application by the courts he fails to provide
an answer to the dilemma he himself has raised through this work. Another major discussion
that the author focuses on is the question of what constitutes a consideration in bilateral
contracts. Once again the author asks ample questions and states various suggestions by other
authors and jurists, but his final say on this is a little hazy. Also, I cannot come to think well
when the author says that the legislature could intervene and abolish the doctrine in itself, for
the doctrine , however, diminished in its importance, still can play a role, either an
evidentiary or in some specific cases. These I suppose can be considered as criticisms to a
work that I largely agree with.

To conclude, this work by Clearance.D.Ashley is still a very relevant work on a topic that is
very important yet confounds jurists and laypeople alike. Even though he does not reject the
doctrine wholly, the author questions its principles and nature. He asks for a clear definition
for the doctrine and as for what constitutes a consideration itself. He thinks the answer may
come from a learned judge who is bold enough and well versed with the concept or suggests
the legislature to intervene and abolish the doctrine wholly.

S. Hasthisha Desikan

BC0190017