Doctrine Of Consideration And Economic Duress: Moving Away From Rigid Adherence To Consideration

The Doctrine of Consideration

Discuss how the development of economic duress has allowed the courts to move away from ‘a rigid adherence to the doctrine of consideration?

Generally, in contracts, there are three basic elements namely the agreement, the intention to create a legal obligation and the consideration. The doctrine of consideration is important because it endeavours to bind the parties to an agreement and checks the legal limits on them. The two principal rules associated with the doctrine of consideration are that it should move from the promise, but it may or may not reach the promisor and secondly, it may not be adequate, but it should be sufficient. 

The question that arises is that whether the doctrine of consideration is relevant in today’s world or not. Does the doctrine establish in the case of Williams v Roffey still exist or have there been other doctrines that have taken up its place? In today’s world, the existence of consideration has become very minimal, and the judges have resorted to going to extreme ends to juggle up considerations. Can we in today’s context say that the doctrine of consideration is becoming redundant gradually? This application is widely happening in the transactions having a commercial nature. In the case of Williams v Roffey, it was established that a consideration that is factual and against the legal benefits shall be a proper consideration. Thus, the definition as to what constitutes proper consideration became much wider in ambit. The precedent of Williams has been applied on various instances in the Singapore Law like that of Sea-Land Service Inc v Cheong Fook Chee Vincent. The application of the doctrine of consideration is day by day becoming obsolete although it has not become totally redundant.

The principle upon which the doctrine of consideration primarily rests is the concept of factual benefit with the requirement that it should be sufficient. This concept of factual benefit gives the same purpose as that of the doctrine of consideration thereby negating the sufficiency requirement. This gives rise to the question that does this not make the doctrine absolutely unneeded?

There are also various concerns regarding the application of the doctrine of consideration. In the case of Williams v Roffey, it was held by the judges that the promise that was made was sufficient and qualified within the terms of the consideration. But, in the case of Stilk v Myrick, it was ruled by the Courts that no consideration existed as the matter was with the presentation of an active contract. Both of these matters deal with the issue that a promise had been made to pay more than that owed under the contractual obligations. The decision given in these two cases is entirely opposite. The concern in this regard is the justification provided by Lord Justice Russell in Williams. It is very clear from the statement put forth that the judge was not pleased with the judgment pronounced in the case of Stilk. While there is such a big difference in the application of the same doctrine in different areas, then, what should be the base for the upcoming litigations to remove the inconsistency in the same law? These inconsistencies help in contemplating the effectiveness of the doctrine of consideration.

Application of the Doctrine

As far as the applicability of the doctrine of consideration is concerned, there are unquestionably certain issues that raise questions on its effectiveness. This doctrine is becoming redundant gradually, and there are several other doctrines that are day by day encompassing the essence of consideration and reshaping it. The other doctrines in this aspect are the doctrine of promissory estoppels, undue influence, the doctrine of duress, unconscionability, etc. 

Vitiating factors are often used by the Courts as a means in alteration of the doctrine of consideration. Economic duress is mostly served to make contracts that were framed by using improper conduct to be termed as voidable. The doctrine is used in those circumstances when unlawful pressure is exerted on the parties and because of that pressure, people enter into a contract. This doctrine tries to prevent the disputes that might fall under extortion that have a higher effect. That can lead to such circumstances that might give a look that the consideration in the contract was a valid one. These kinds of matters might result in very unfair judgments being pronounced by the Courts and in those circumstances; the doctrine of consideration is likely to become even more invalid. 

These situations arise when one of the parties in the contract, which generally happens to be in the dominant position, uses the advantage of his position to induce his words in the mouth of the other party. There might also be a situation when because of the dominant position enjoyed by one party; the other party may be prevented from entering into a contract although the same might be beneficial for them. Generally, in all these circumstances, it is very simple to find an alternative shape of consideration in the agreement that ultimately results in unfair judgments being pronounced by the Courts. 

The doctrine of duress tries to protect the unscrupulous behaviour that often gets highlighted in the contracts when they are formed. The application of this doctrine is witnessed on a large scale where the unethical behaviour is displayed by the use of money, power, and favourable position. What the courts look forward to nowadays is not concerned with the application of the precedents of either Williams or Stilk. Rather, the application of the principle of the law that there should be the possible display of sufficient consideration is looked at by them. While the alternatives, on the one hand, have their own benefits, they also have certain limitations that are associated in addition to that. They firstly do not hold as good a foundation in the legal system as is held by the doctrine of consideration. Because consideration is one of essential doctrines governing the law of contracts, totally abolishing the same is somewhat difficult. Hence, in such a situation, the best alternative that is available is that it should be entirely left in the hands of the judges to decide a matter based on the circumstances of a case. It cannot be denied that there are certain flaws in the existing system but for that issue, totally abolishing the same can never be a solution. There can be certain revisions and amendments made in the existing system.

The Doctrine of Duress

Consideration is one of the essential elements of any contract and in legal language; it means the price for the contract that is paid by one party to the other party as an acknowledgement of the performance of the contract. What is essential in its characteristics is that it is supposed to move from the promise and should be sufficient. Originally, it was meant for those promises that were made in the domestic level and for transactions that were controlled by the landowners around the mid 18th century. Since there was the very little development of commerce, trade agreements were also not well developed. What has been of concern is that time has changed, and so has the legal framework, but the doctrine keeps working on its traditional way. 

There is also a great amount of confusion that has been put forth before the common masses between the legal benefit and the detriment post the judgment of Williams v Roffey. The question has also been put on the validity of the concept of consideration. It was held in this matter by the Court that Roffey Bros were supposed to pay Williams because they had derived a benefit that qualified to be sufficient consideration. The general rule regarding consideration is that none of the promises to perform a contract can ever qualify to be sufficient consideration. However, an exception was laid in this rule. It was stated that none of the parties should thrive to reap any additional benefits when the obligations have been fulfilled by the other party. The rule under the common law, on the contrary, looks at the detriment for those obligations that come under public duty. Hence, because the factual benefit is displayed in everyday behaviour very easily, hence, to apply the rule established in Williams the scope of the doctrine of consideration has to be altered. 

Now, because the verdict in this matter was related to assessing the sufficiency of consideration, the judgment has left a smudge in the analysis of injury. If a benefit is said to be the adequate consideration, then, there must be no differentiated opinion over the judgments on different occasions. Thus, it should be a situation where the benefits earned should be sufficient in cases of price reduction as well. In the case of Re Selectmove Ltd, it was held that the promise to pay less did not qualify to be a valid agreement under the rule of Williams. The general rule as laid down in the Pinnel’s case which states that no part payment will be a sufficient consideration still prevails.

Reference should be drawn of the case of Foakes v Beer. In this matter, it was held by the court that there was no supplementary profit that went from Foakes to Beer. If we could have got proof that certain additional benefit was moving from Foakes to Beer that would have amounted to a sufficient consideration. But, no plausible outcome was stated by the court that could prove towards a sufficient consideration. Hence, it can be very well said that the common law position is very unclear.

Further, considering the case of Pao On, we can say that there may be consideration without duress while we evaluate the performance of duty towards a third party while there id legal benefit. Here again the principle laid down in Williams happens to be redundant.

The courts in various occasions have taken varied views regarding the applicability of the consideration criteria. While generally, the importance is given to the intention to enter into a legal relationship, consideration has very often been overlooked. The examples of these instances are Chwee Kin Keong v Digilandmall.com Pty Ltd and Edwards v Skyways. The courts in these have laid that the priority should be given to the honour clauses rather than the requirement of consideration. The priority is always given to those circumstances where the contracts are drafted under a seal of the law. If the seal is present, seldom is importance given to the consideration criteria. The doctrine of consideration may seem to be a bit out of track because the intention behind the contract is given much more importance.

After having analyzed the various alternative approaches taken by the Courts, we shall now evaluate if these options are feasible methods or not. The duress doctrine provides that if any unfair pressure is put on any individual, he cannot be forced to enter into an agreement. If the doctrine of duress is applied in just conditions, then, the weaker party gets a protection under the law. However, in most of the instances, it is often difficult to determine in the specified instances if duress was present or not. Like in the case of Williams v Roffey, the ambiguity has not yet been resolved as to what is a normal commercial pressure and what is an economic duress.

In any event, if economic duress is established, it has the effect of overriding consideration, and the contract is held to be invalid. In majority of the situations, the courts look at the presence of duress before validating a contract. Though strict guidelines are absent, the validity of the doctrine is often questioned and this often results in various uncertainties and ambiguities. As in the case of Barton v Armstrong, these clauses, only have the effect of making a contract voidable and not void. Thus, in this respect, we can state that unlike consideration, the duress cannot make a contract void. Hence, from this it is very clear that duress can never be a total replacement for the doctrine of consideration.

To replace consideration, there are wider aspects over public policy as well. There are numerable public servants who are likely to misuse the concept for deriving benefits. In such matters, even though the presence of extortion will be low, yet, the additional benefits during the process is likely to have an effect over the performance of the duties. This conflict with the public policy on the face as it is detrimental for the society as well. Hence, to justify the position of the concept of duress, number of cases is required. Since, on the one hand, our society of today is largely dependent on the latest forms of trade and commerce, duress is likely to increase at a steady rate. On the other hand, the situation has not yet become so ripe that the entire concept can be over ridden by the concept of duress.

Thus, we can say that precisely, it is very difficult to abolish the consideration criteria in contracts and replace it totally with duress. The alternative of duress is not totally developed and concrete enough so that it can be used as a total replacement. Moreover, the basic role that is played by the concept of duress is very different from the concept of consideration as far as the basis of law is concerned. As the present situation goes, consideration goes at an equal pace with the requirement of duress. Duress in today’s era is nothing more but a simple exception that moves parallel to the well established the doctrine of consideration. It is not a valid requirement foe any legal agreement to be termed as a contract and as far as the situation in the present day is in question, it goes very much hand in hand with consideration. The original doctrine of consideration still applies in every single case of contracts. Hence, it can be validly said that this doctrine of duress does not possess a similar threshold of coming at an equal standard of consideration and even if it does, it will become extremely difficult to determine the validity of these contracts in those areas which generally come under the exceptions if the entire concept of consideration is totally removed and detained.

Conclusion

While we come to write the conclusion in this respect, it can be said that the same may be totally removed but nowhere can it be said to be totally redundant. Considering the changing shape of commercial transactions, we can say that the common law in the upcoming time will evolve out gradually to remove all the redundancies that are present so that the requirements can be met by the society and the situation fits in the puzzle of the pressures of the modern society contracts. There has to be an analysis of many more cases under the common law doctrine to establish a valid jurisprudence in this regard. Since the law develops slower than the pace in which society develops, it should be borne in mind by all of us that the law is likely to suffer from certain imperfections. In order to have a reduction in these imperfections, exceptions do come out but the doctrines that have been considered to be the skeleton of the legal pillar and those which give a shape to the law, should be kept running. This is because they have an impact over many of the operations in which the society is till date engaged. The same logic applies over consideration as well. Abolishing the entire concept is likely to create greater chaos and confusion in the legal domain.

References

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Barton v Armstrong [1973] UKPC 2 [1973] UKPC

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Edwards v Skyways [1964] 1 WLR 349 (1964) 1 WLR

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Inbrief.co.uk, ‘Duress And Undue Influence In Contract Law’ (2015) accessed 5 August 2015.

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Chwee Kin Keong and Others v Digilandmallcom Pte Ltd [2005] SGCA 2 [2005] SGCA.

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