Random thoughts on the doctrine of consideration from my drive to work

signing contract.jpgTheorists of contract law have generally assumed that one of the more important questions that they ought to answer is “What promises should the law enforce?” After all, no society makes all promises legally enforceable. We wouldn’t want people to be able to sue over a broken promise to do lunch would we? The result is the doctrine of consideration, a conceptual muddle that delights law professors, confuses first year law students, and — as near as I can tell — makes little or no difference in actual practice. I wonder, however, if the whole thing isn’t a solution to a pseudo-problem.

Take the promise to do lunch. We wouldn’t want people to sue over such a trivial thing, so we need some doctrine by which the lunch promise isn’t legally enforceable. But why, I ask. As it happens, a sufficiently imaginative lawyer and a Cardozo-esque judge could probably find consideration on the promise to do lunch. And yet there is very little litigation on the subject. Why? The answer is pretty obvious: lawsuits are expensive and the damage suffered by the disappointed promisee in this hypo is trivial. It doesn’t pay to sue. The obvious answer, however, has a potentially important implication for contracts, namely that the cost of litigation rather than the doctrine of consideration is the real keeper of the gate between “legal” promises and trivial promises with which the law is unconcerned. If that is the case, however, then perhaps we needn’t ask the question “What promises should the law enforce?” at all. Just say that any promise that is sufficiently definite may be sued upon. The result will not be a flood of litigation. To see why, consider the tort of battery. I am constantly subjected to un-consented-to touching when I jostle folks on the side walk. (Or at least I was before I moved to a town with more geese than people.) Yet the court system is not awash in battery cases. And so, it seems to me, it could be for promises.

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11 Responses

  1. Bruce Boyden says:

    How do you get rid of the occasional irrational plaintiff with time and money to burn? For tort cases, the answer is for the defendant bumper-on-the-street never to identify him or herself. But that won’t work for broken lunch dates (or, say, a misplaced pair of pants). You’ll need some sort of legal reason to dismiss the suit.

  2. Nate Oman says:

    Why dismiss the suit. Why not simply admit liability and pay whatever the trivial damages are?

  3. John C says:

    The fresh air of a drive to work down Colonial Parkway must have gotten to your head. (said with love by an undergrad alumn). “[A]s near as I can tell [the doctrine of consideration] makes little or no difference in actual practice.”

    Surely you jest. I am currently litigating (well, not currently, b/c I’m reading this blog over lunch) a contract action centering on the question of whether there was consideration in an ostensibly charitible pledge to a university. More specifically, the case involves whether a Right of First Refusal was triggered when the pledge (consisting of rights allegedly appertenant to stock ownership) was made and a main issue there is whether the pledge agreement came with consideration – did the pledgor get anything of value in return from the pledgee? This turns entirely on the question of what is consideration, and no answer can be found based upon the “definiteness” of the promise or any alternate metric. If there was consideration, one side probably wins; if there wasn’t, the other side probably wins. Sounds like it makes a difference in practice to me.

    There are so many ways in which the doctrine of consideration plays into my practice, I could spend hours listing them. Maybe you should head to the Green Leafe and think this through again over a beer. I’d join you if I could.

  4. Bruce Boyden says:

    Why move to dismiss? There’s a couple of reasons; I suppose we could argue about whether it’s rational or not, but the defendant may not want to pay damages in such a norm-breaching lawsuit. Alternatively, and just as likely, I think, our irrational plaintiff might have an irrationally high damages demand, such as the dry cleaning case plaintiff (which I believe was a consumer law action, not a contract action, but he might just as well have been demanding Hadley v. Baxendale type consequential damages).

    John C, you must have an interesting practice, but I think it has to be the rare case where there’s a consideration issue. I had one when I was in practice, where one side’s duties to perform were conditioned on that party feeling like it (only a slight exaggeration), but other than that and gifts, how does it come up?

  5. Nate Oman says:

    Bruce: Let me restate my response slightly. If our concern is the irrational and overly litigious plaintiff, the doctrine of consideration does a pretty poor job of defending us from such a creature. After all, even if I can ultimately prevail on consideration grounds, I still have to pay my lawyer. The question, I suppose, is whether or not consideration is the sort of thing that makes a good 12(b)(6) motion, so as to avoid the cost of discovery, etc.

  6. John C says:

    John C, you must have an interesting practice, but I think it has to be the rare case where there’s a consideration issue.

    Really? The presence or absence of consideration is not at all an uncommon issue, and does not apply only to gifts. Corporate charters, partnership agreements, LLC Agreements, etc. routinely have transfer restrictions on ownership interests, and whether ownership intersts or rights appertenant thereto have been transferred routinely turns on issues of consideration. Tax law is replete with issues of whether consideration was present, whether it was adequate, and in what form. Real estate law too.

  7. One of the ironies about consideration is that the law on the one hand says that promises without something of value exchanged for them will not be deemed enforceable as contracts . . . but on the other hand, the law is very reluctant to look into the adequacy of the consideration (so a peppercorn is enough). The result is that consideration becomes a hollow formality, not any kind of meaningful arbiter of which promises should be enforceable or not. So I agree with you, Nate, that consideration makes little sense.

    However, one of the virtues of the doctrine of consideration, though, is that it is often very clear — there’s little second-guessing of contracts except in cases of unconscionability, etc. But with a requirement of definiteness, it opens up more contracts to potential challenge (i.e. are they definite enough?) and uncertainty.

  8. thomas otter says:

    Digressing somewhat here, but nevertheless…

    I vaguely remember the Romans were worried about this too.

    De minime non curat lex they called it.

    It was brought into an internet context by an fascinating talk by

    Burkhard Schafer at the GIKII conference in 2006 http://www.law.ed.ac.uk/staff/burkhardschafer_69.aspx

    Here is the abstract.

    “De minime non curat lex – an obstacle for internet governance? ”

    One of the most interesting features of the internet is its ability to co-ordinate a large number of in themselves small and insignificant actions into something with potentially massive impact. Projects such as SETI@home and other projects of distributed computing probably best exemplify this unique feature of internet facilitated activities. Closer to home, the ability to mobilise globally large numbers of citizens into political action, for instance through online petitions, has been identified as a qualitatively different feature of e-governance.

    However, the qualitative leaps that can occur through the co-ordination of very large numbers of individual events also poses new conceptual problems for legal regulation. The paper analyses three scenarios where actions that are in themselves insignificant and arguably legal mutate through their global co-ordination into something potentially harmful and, if not illegal already, in need of regulation.

    We will analyse briefly, the following three phenomena:

    a) denial of service attacks

    b) autonomous agents as “baits” in sting operations

    c) the gawker/Stalker website

    and discuss the question whether the “de minime” principle stands n the way of an efficient regulation of these (ab)uses of technology, discuss existing approaches to overcome its shortcomings (through procedures such as class actions, e.g.) and finally ask if they necessitate an even more far reaching “ontological” reconceptualisation of what is meant by an ”illegal event” – in particular, if it is conceptually sound to conceive of a type of crime whose constituent parts are all legal activities.

    I don’t have a copy of the paper, alas..

  9. Eric Goldman says:

    Stiffing someone for lunch is a cardinal sin in my book. But I have extra-judicial recourse–I can ratchet down my estimation of the stiffer or even drop the relationship altogether. Eric.

  10. Nate Oman says:

    But Dan it seems to me that there is already a requirement of definiteness in contracts. My point was only that abolishing consideration wouldn’t necessarily abolish other limits on the enforcement of contracts, limits that are generally seen as solutions to particular practical problems rather than answers to the global question of “What promises should the law enforce?”

  11. Bruce Boyden says:

    Eric, that’s because *you’re* rational.