Consideration: Contract & Bargain

• Author: Val Ricks
• Pages: 1-75

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Chapter 1. Consideration:

Contract & Bargain

A. Introduction

The doctrine of consideration is somewhat of a mystery for many law students.

Many never get it. I introduce it first partly because your understanding of it will

become clearer with several weeks to think about it. But I also introduce it first

because it came first chronologically.

Originally, the common law of contract was very simple. The plaintiff had to show

only three things:

Golding’s Case (1586)

2 Leon. 72, 74 ER 367

... [Egerton, Solicitor-General:] In every action on the case [upon an

assumpsit], there are three things considerable: consideration, promise and

breach of promise. ....

Besides promise and breach, about which you should have some understanding,

only consideration had to be shown. Why? Briefly put, the doctrine of consideration

was used to determine which promises should be enforced. Only a promise with

consideration was enforceable.

Some historical background is necessary for you to understand why the word

consideration came to be so important in contract law. Courts first required that

consideration be alleged, in order to show an actionable promise, in England in

1539. English contract law retains the requirement to this day. When American

states became independent, state legislatures and courts adopted the contract law of

England, including the consideration requirement. That means that in order to

recover damages for breach of a promise in an American court, the plaintiff must

prove that the promise was given for a consideration. To understand why a

consideration was first required, one must know something of English law

regarding the enforcement of promises.

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1. Medieval Law of Promise Enforcement

In medieval England, promise enforcement law was grounded in agreement,

custom, and religion. Many courts could hear contract disputes: manor courts (e.g.,

a lord’s court), borough courts, county and hundred courts, ecclesiastical courts,

some civil law courts with very limited geographical jurisdiction (such as at

Oxford), the court of England’s chancellor, and the royal courts. Each of these

medieval courts revolved around a power center: the local lord, the city government,

the county government, the church, a university, or the king or queen. Also, each

of these courts had its own jurisdiction, so that disputes did not arise between them,

but each was empowered to enforce promises to some degree or another.

By the fourteenth century, three distinct royal courts had formed: the Common

Pleas, the King’s (or Queen’s) Bench, and the Exchequer. (Each court had a distinct

history and original purpose, but by 1539 those purposes had largely disappeared

and other differences existed. When differences in the courts’ jurisdictions and

practices are relevant, they are noted below.) The royal courts gained preeminence

among these other courts, for a number of reasons: backing by the monarch (who

eventually came to dominate all other institutions in England), national

geographical jurisdiction, and jurisdiction over broad subject matters. By 1539, the

royal courts were by far the most prominent in England. The contract law of both

England and the United States developed first in these royal courts.

Beginning law students often think that legislatures make law and that courts

enforce laws, as Ferguson v. Skrupa appears to require. But medieval England had

no legislature as we understand that term. Occasionally, the king would meet with

powerful lords and heads of other powerful institutions, and these people in power

would agree to change existing custom, writing out their decisions. But in the

medieval period this happened relatively rarely. Most law resulted from the less

powerful people seeking help from the more powerful people, each of which sat in

his (and it was nearly always a man) “court.” When too many people sought help

for the powerful person to grant relief in person, the powerful person appointed

ministers to hear pleas for help. The English king’s ministers to hear pleas were

called “justiciars” or “justices.” The justices could receive pleas for help even when

the king was not around, but the king was said to be “in court” where his justices

sat to receive pleas. Eventually, all the justices sat at Westminster, near London, the

largest city in England. The practices of these justices in response to pleas became

law.

In this system, a plaintiff (one who complains) might complain to the royal justices

about a breach of promise in a couple of different ways. The most obvious way was

to allege that the defendant promised or agreed to do something and had not done

it. If the plaintiff’s case rested solely on the breach of promise, the justices called

this a case of covenant. (Covenant is a translation of the Latin word conventiones,

which means literally agreement.) If the plaintiff ’s case appeared to be one of

covenant, then the justices applied the following rules (at least after about the year

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1350): (i) Trial of factual issues was by jury in the county where people would know

something related to the transaction. The jury could be counted on to know the

customs of the country. (ii) The plaintiff’s case failed unless the promise or

agreement was in a sealed writing. (Other courts might grant relief on an unwritten

promise, but not the king’s courts.) (iii) The jury would set damages for the breach.

(iv) The justices would not order the defendant to perform the promise.

There were other ways to allege breach of promise. Another way was to allege that

the defendant was indebted to the plaintiff. The justices called this a case of debt.

Debt was a property-related concept in medieval England: If a transaction occurred

which indebted the defendant to the plaintiff, the plaintiff could go to court to get

the defendant to pay the property owed. Various transactions would cause the

defendant to be in debt, and most involved some sort of breach of promise: i.e., an

informal sales contract in which the goods had been delivered, a loan, a service

agreement performed, a lease. But if these transactions involved breach of promise,

why were they not cases of covenant? Because they also involved one other element:

a quid pro quo, a “something for which” the defendant’s promise was made and the

plaintiff’s action was appropriate. In the case of a loan, the lender had already lent

the money, and, coupled with the agreement to pay, this quid pro quo justified the

lender’s suing for the property owed. The quid pro quo separated debt from

covenant.

When a plaintiff alleged a debt, the justices applied the following rules: (i) The

plaintiff could not proceed unless the amount of damages was certain. (ii) Trial of

factual issues was by jury or by “wager of law,” as the defendant may elect. A

defendant waged his law by (a) swearing an oath that he was not indebted to the

plaintiff and (b) producing eleven other “compurgators” or oath-helpers to swear

that the defendant’s oath was credible. If the defendant could swear and find eleven

others to swear with him, he could go free and never pay. It was possible to lie one’s

way out of a debt, though in practice this probably did not happen often . But only

fear of God and possible loss of reputation kept defendants from lying. The

common law courts did not punish perjury until 1563. Naturally, plaintiffs would

have preferred another method of recovery to debt had one been available.

You would think that given the uncertainty of debt actions, potential plaintiffs

would have been wise to put their transactions in writing and under seal. In fact,

many transactions were put in writing and under seal. Cautious people even went

one step further and, instead of having the person promising (the “promisor”)

merely promise something in the writing, they would have the promisor promise to

pay a penalty if the promisor did not do the desired act. For instance, if the cautious

plaintiff had sold the defendant a house for 40£, the cautious plaintiff would have

the defendant promise to pay 80£ if the defendant had not paid 40£ by a certain

date. The defendant’s writing, called a penal bond, was enforceable in a special debt

action called debt sur obligacion. No wager of law was available in a case of debt

sur obligacion, and the defendant had very few defenses. Factual issues went to the

jury, but the bond itself set the damages.