To what exact extent does the role of 'Consent' of contracting parties play in Contract Law and how does this relate to what established theories tell us?
Section 1. – Introduction …….
Section 2. – Party-Based Theories
2.1 – Will Theories ……
2.2 – Reliance Theories ……
2.3 – The problem with Party-based theories of Contract ……
Section 3. – Bargain Theory of Consideration
3.1 – Doctrine of Consideration ……
3.2 – Critique of the Bargain Theory ……
Section 4. – Consent Perspectives of Contract
4.1 – Entitlements of Consideration ……
4.2 – Consent as the moral component of a contractual transaction….
4.3 – Defining Consent ……
4.4. – Determining contractual obligations in a consent perspective…
Section 5. – Conclusion ……
The era of reason is the title claimed by the enlightened world. The philosophy this world produced is essentially rationalistic, but time and again, in following out its own principles, it turns against itself and takes the form of scepticism
Contracts are a nexus of so many competing concerns and theories in the modern world that perhaps there is no-one thing as a contract. They are fundamentally a subset of the law on obligations however they exert their influence on almost every aspect of our lives. The ubiquitous nature of contracts also causes difficulty in classifying them as one or other thing; the different social spheres they are used in sometimes require them to be sensitive to the particular conditions of that sphere. The attempts at formulating a pure jurisprudence of contracts have been fraught with difficulty as we shall see. In particular the formation of a contract across all social spheres is a problem which has caused particular and this will be the focus of this work.
We will begin by discussing the traditional 'party-based' theories of contract formation namely the will theories and the reliance theories. Then we will relate this towards the bargain theory of consideration. This half of the work is aimed at developing an understanding of all these traditional theories so that we can evaluate the extent to which these theories account for the role of consent in Contract Law.
2. Party-Based Theories
2.1. Will Theories
The use of the concept of will, to the exclusion of all other factors, as an explanatory theory for contracts was the result of post-enlightenment scholars challenging the notions of Aristotelian and Natural Law theories . Aristotelian logic based fundamental parts of contract theory on overarching universal concepts such as the final end of man and the virtues of man in realizing good, thus flowing from these concerns a contracts binding nature was premised on the virtue of fidelity, a contract had a particular essence and implied terms flowed from that essence whether or not foreseen by the parties .
The Enlightenment writers in the form of Hobbes, Locke and Descartes deconstructed these theories in the seventeenth century and it is well documented that this had a major impact on the general direction of jurisprudence; the collective name for the movement that overthrew Natural Law thinking was that of Positivism. The idea of will theory is a subset of positivistic thinking and thus flows in a logical manner from many of the first principles that post-enlightenment writers laid down. It also would appear to suffer from the same flaws of positivistic thinking; it generally glossed over or simplified what was a complex issue. We will outline here the various doctrines that were grouped under the heading of will theories and then we will critique it in section 2.3.
The deconstruction of natural theory by these writers meant a demoralizing of legal thinking, the jurists expounding traditional will theories viewed the will / consent / agreement as the most important principle of contract formation, to the exclusion of all else. The rationale for the binding nature of the will of the parties, or the agreement thereof, was conspicuously absent. A contract was 'obligatory simply because it is the contract' . The will of the parties had always been acknowledged in writings upon the law but by expressing their will prior to post-enlightenment writing people were considered to be exercising Aristotelian virtues. In the eyes of the natural law scholars or 'intuitionists' , these scholars stated that 'there is something inherently despicable about not keeping a promise, and that a properly organised society should not tolerate this' . The main objection to this was evidently that it spoke of some inherent value of goodness or badness, which was rejected by the subjective approach of the will theorists. The search for some form of based morality or justification for making the will theory make external coherence is perhaps an impossible one but it never has been fully settled.
The justification given by Cohen is that the will theory views the will of the parties as something inherently worthy of respect , this view is perhaps controversial because of the use of the word inherent, this would in effect subsume into the natural law argumentation. The nineteenth century scholars who were the leading lights of the will theory such as Savigny, Pollock and Landell were arguably concentrating on will as the definition of a contract without any consideration of why the will of the parties ought to be the defining factor for the basis of contract.
The action of the seventeenth century writers was to strip the theory of contract down to one item namely the will of the parties. This meant that at the centre of their ideas about contract was the requirement for consensus in idem or a 'meeting of the minds' . This approach has a correlative effect on the expansion of ideas such as freedom of contract and privity of contract that began to be explained in famous cases such as Lochner v. New York and Winterbottom v Wright . However, the interest, and the difficulties of the will theory lie not in the concept itself but in its application. As Gordley makes clear the vacuum left by many of the Natural Law concepts was trying to be filled by one universal concept, that being the will of the parties, as we shall see in section 2.3 this lead to a situation where contracts were simple in theory but incredibly oppressive in practice.
The objective will theories lead to the requirement for an offer to be accepted, the natural lawyers had to a degree accepted this condition although there was a large school of thought that the sine qua non of any offer was the agreement to be bound therefore duties of fidelity and virtue meant a unilateral offer could be binding. However, when these extraneous concerns were swept aside by nineteenth century will theorists then the acceptance of an offer was fundamental to an act being a contract and thus an unaccepted offer couldn't form a contract . The incoherence that can flow from some of these tenets will be discussed below.
The issues over fraud and duress had to be reformulated; there was considerable difficulty in incorporating what was an obviously equitable concern into a logical and holistic jurisprudence on the nature of contracts. It was well understood that fraud or duress couldn't for logical reasons be considered to nullify the will of a party because relief for fraud or duress flows from the wrongful behaviour of a party and not from the state of mind of the person who consents to the contract. There never seemed to be any real logical basis for this exception if we premised everything on will theory.
The same sort of problems were mirrored in their treatment of mistake or error and its effect on the consent of each parties, this lead to a refocusing on the types of relief that ought to be given for error. In relation to this particular problem Holmes made a famous declaration to the effect that 'the life of the law has not been logic: it has been experience' , this is because the concept of mistake as understood through the lens of will. There was amazing variety in the proposed theories that attempted to deal with the problems of mistake, the main reason for the difficulty related to the fact that the theories struggled to explain fully when a party willed to contract furthermore they couldn't account for the existence of implied terms in contracts , in fact these seemingly 'intractable' problem were some of the main reasons for later nineteenth century writers such as Justice Oliver-Wendell Holmes and Siegmund Schlossmann developing another dominant theory known as the 'objective theory' which we will discuss in greater detail throughout this work.
One of the main ideas that flowed from the veneration of the parties wills was the idea that:
'…[t]hose who make promises and contracts do so because they want or desire the terms which they undertake, and that respect for their wills (their wishes) justifies, indeed demands, that they be forced to do what they undertook to do'
This lead to a number of fundamental assumptions about the content of contracts that we find appearing in modern contract doctrine. A good example was the doctrine of equality in exchange to give relief in situations where a person had to sell at under value. This was an alien concept in itself to will theorists because it imputed that things had a universal intrinsic worth, the view of writers such as Hobbes was that value could be 'measured by the appetite of the contractors' i.e. it was subjective to the individual parties.
The objective approach to contractual obligations is a confusing aside to the party-based theories and in its own way neither negates nor equates with either the reliance or will theories. It was originally contemplated as flowing from the will theory. Joseph Chitty, the notable contract scholar, in England and Roscoe Pound in America both recognised that consensus in idem was rarely what it may have seemed, whilst certainly parties may have willed a contract into existence that didn't mean they had considered every aspect. In the vast majority of cases the parties would have agreed on something's, assumed others and occasionally outright disagreed. The classic explanation for the objective approach was to synergise this with the will theory by saying the objective approach was 'a rule of evidence rather than a rule of substance, parties being estopped from denying that their words meant what they appeared to mean' . If we were to stretch credulity in order to believe that this is what courts do then it would undoubtedly present the argument that unfortunately it is not what the parties say. Chitty specifically outlines that the courts take an objective approach and Cheshire, Fifoot and Furmston specifically state 'agreement is not a mental state but an act, and…is a matter of inference from conduct. The parties are judged…by what they have said or written or done' .
I mentioned at the beginning that much of will theory owes a lot to positivistic thinking and liberal ideas about the way that law ought to function. However, as with a lot of positivism it is guilty of what post-modern writers call meta-narratives. These are grand theories that try to reduce infinitely complex concepts into understandable coherent theories, as we shall see this particular facet of the will theories has been one of its main criticisms.
2.2. Reliance Theories
At its most basic this is described as the view that 'it is proper for the state to enforce an obligation not to disappoint those whom you have induced to rely upon you' . This narrative for contract theories was famously expounded by Lon Fuller in an Article which has been the subject of numerous reviews; however there are other versions of these theories. However, Fuller's analysis tells us something about the position of this theory in relation to the previously defined will theory. Fuller was interested in re-moralising the basis of legal theory and this is manifest in his work on the reliance theory. The underlying rationale of his work was to argue that will theories were morally objectionable and that reliance theories provided a more legitimate moralisation of state enforcement of contractual relationships . However, as we shall see in section 2.3 the usefulness of the reliance theory as a meta-narrative is limited. Reliance theories 'At best… might fit the law equally well' .
Again as with the discussion the reliance theory is a meta-narrative, it reduces complexity into a coherent theory and the only real way of testing the validity of such narratives is to test it against well established legal rules and principles. Smith, in a considerably erudite piece of work, has pinpointed one of the significant distinctions between this theory and the will theories in section 2.1. Reliance theory is not focused on the duty to perform a contract, as it is the focus will theories. This is because otherwise it would be fundamentally the same; the distinction between upholding contractual liabilities because a party relied on a promise and upholding it because of the promise is tautologous. Thus Smith surmises that the distinction lies in the fact that 'a contracting party's duty…is not to perform a contract but rather to compensate the other party if she does not perform and causes harm thereby'.
The judicial act of rescission is imbued with this theory and there are plenty of judicial dicta to the effect that 'provided that the innocent party did in part at least rely on the false statements, he is entitled to have the contract rescinded' . Rescission is not however an action that the courts enter into lightly and is generally reserved for serious breaches of contract based on fraud, misrepresentation and undue influence. As we will recall from the previous section these doctrines were the ones that caused the will theory to be so maligned.
Thus the moral basis for the reliance theory isn't on the duty to perform as it is in will theories but on the duty to compensate from loss for arising from non-performance. However, in establishing the positive moral basis of punishing people who make statements that another party relies upon it becomes a very difficult line to tread between distinguishing between reliance theory and will theory on the one side; on the other you have to coherently marry this with the fact that courts predominantly focus on promise-induced reliance. The lack of moral basis for this concept has always been a predominant feature and its apparent synergy with the law of tort seemed to lend it an artificial strength. This point was made by Barnett:
'What exactly a "reliance theory" is has never been made clear…apart from their insistence that, just as tort law rectified the harm caused by physical misconduct, the purpose of contract law was to rectify detrimental reliance caused by verbal misconduct' .
The attractiveness of subsuming the whole of law of obligations under a super meta-narrative is obvious, it makes internal sense. However, as we pointed out above the external morality of the thesis is far from clear, either it is subsumed under the will theories by reliance on the key concept of promise or it becomes removed form the reality of practice. This problem has never been fully dealt with and furthermore the doctrine has to account for certain rules in contract law that don't sit well with the duty to compensate for loss arising from non-performance.
On a more practical angle one of the most difficult doctrines in practice to fit into the reliance theory narrative is the use of specific performance as a remedy for breach of contract. However, the general position on specific performance, that it is a doctrine to be reserved for rare occasions and not as a normal remedy for breach of contract, does sit well with the theory of reliance. The problem is that it gives no coherent reason for the exceptional cases where specific performance is required.
If we recall, the offer and acceptance model came about primarily from the nineteenth century writer's insistence that the will of the parties was paramount. Thus it is not surprising that this doctrine is one of the more difficult to fit logically within the reliance theory narrative. The offer and acceptance model is not necessary for proving reliance thus it is prima facie the case that a situation of offer and acceptance may or may not induce reliance. If it weren't necessary to induce reliance then the law is making an arbitrary distinction between those interactions that conform to the offer and acceptance model and those that don't. The main problem is that on the corpus of contract law cases available to scholars it is impossible to construe the decisions to mean that 'courts impose liability generally for reliance-inducing statements regardless of whether those statements are promissory or not' . The hegemony presented by will theorists, rightly or wrongly, holds force with the judiciary and it is unsurprising that reliance theory doesn't sit well with this model.
The theorists who attempt to support the reliance theory have tried to argue that whilst an offer followed by an acceptance isn't per se the only reliance-inducing statements that as a matter of practicality it is the best evidence of subjective reliance by one of the parties. This seems to be an illusory distinction and also there is scant evidence of any other standard being applied by the courts to determine reliance other than by promise. It also begs the question of whether we ought to have a theory that is divorced from reality; furthermore the lack of judicial obiter dicta to support the reliance theory interpretation makes this unappealing.
However, as a descriptive theory this may be poor this doesn't alter that it has idealist potential. It could be a normative theory that argues this is what the law of contract ought to be about, this is effectively what the nineteenth century scholars did to the natural law assumptions. However, for whatever reason the positivistic thinking that spurred will theories wasn't replicated by reliance theories and they have never received widespread academic and judicial support. There have been such idealistic diatribes as I have suggested here but Barnett thinks that all have failed to outline anything that fundamentally moves us away from a promissory-oriented system. The classic submission of reliance theorists is the advocating of a 'reasonable, justified, or foreseeable reliance' test. Barnett argues that there is yet to be a significantly sophisticated account of reliance so as to lend this theory credence. Inevitably for scholars who were taught the will theory paradigms it is incredibly difficult to abandon the will of the parties as an organising event around which contractual liabilities are centred. The nebulous reliance test suggested above is most likely to dissolve into exactly the same thing as will theory, which in order for a reliance to be fair, reasonable and foreseeable there must have been offer and acceptance.
Barnett also touches on an interesting tangent, which illuminates why the reliance theorists have failed to establish a satisfactory test or incorporate standard legal concepts into their narrative. In attempting to bridge the gap between contractual and tortuous liability the reliance theory does grievous harm to liberal principles of freedom of contract. The liberal nature of contract law is so deeply embedded in the rules and paradigms of contract law, mainly because of its development with positivism which in a lot of senses has an affinity for liberalism. The reliance theory whilst still being party-centric like the will theory attempts to move us from a fundamental system of personal law to a system of interpersonal liability. The Romans considered contracts to be properly designated Lex and up until the mid-1950's the will theories recognised that part of the enlightenment was tied up with ideas of liberalism. Humans could determine what to do by consulting themselves rather than priests or god, the autonomy of man is fundamental to post-enlightenment thought and law has recognised from time immemorial 'that the law views private individuals as possessing a power to effect, within certain limits, changes in their legal relations' .
We will discuss the flaws of the will theory in greater depth in the next section but it is worthwhile noting that the basis of the reliance theory is its attempt to move away from the will theory and its attendant flaws. The tailoring of a theory to the faults of an old one ignores the very deep philosophical premises that occasioned the will theory.
2.3. The problem with party-based theories of Contract
The will theories and reliance theories are party-centric or subjective in their nature. They concentrate on meta-physical attributes such as reliance and consent which in real life can be incredibly difficult to comprehend to any real extent. Cohen made this point in relation to the will theory:
'Minds or wills are not in themselves existing things that we can look at and recognise. We are restricted in our earthly experience to the observations and changes or actions of more or less animated bodies in time and space'
This is one of the fundamental natures of the party-based theories and in turn leads to a number of problems with the theories which may seem obvious to many students of the law because they have been brought up in the era of objective theories of contract. The will theory and the reliance theory are traditionally understood to favour one side of the contractual nexus over the other; the will theory concentrates on the promisor and the reliance theory concentrates on the promise .
There are a number of problems with both the reliance and the will theories which have caused them to be considered as unworkable by numerous writers. The main criticisms will be replicated here so that later on we can have a better appreciation of how theories concerning the consent of the parties adequately deal with the problems as presented by these theories.
One of the major problems for the party-based theories is to provide a moral basis for the distinctions that law makes between contractual and non-contractual obligations. The will theory relies on the moral basis 'that contractual duties are binding because they are freely assumed by those who are required to discharge them' . When we analyse this approach it becomes visible that the moral problems of the will theory were considerable, liberal thinking posited a requirement that 'it is illegitimate for the state to interfere with an individual's liberty unless that individual has harmed another individual' . Thus enforcing a contract on the basis that someone promised something, simply because it is de facto a promise, is against this principle, contractual liability doesn't rely on a harm but on freely given consent. This moral objection to the will principle is what is called the 'harm principle objection'. Fundamentally this is because liability operates independently of any harm caused by the person; I am bound to honour a contract whether or not I choose to do so. This is not an attempt at saying that law should not regulate contracts but it exemplifies that a justification solely based on the will of the parties .
The extent of the problems of the will theory were not limited to only external moral problems but also internal coherence problems. The justification given above for the will theory causes a problem because the discovery of subjective intent could be impossible or if not it may defeat the legitimate expectations of a person who has relied upon a contract. We can see that many of the scholars in the nineteenth century struggled to cope with this, the objective 'inherent' standards of the natural lawyers were attempted to be replaced by subjective will of the parties. These difficulties were, as I suggested in section 2.1, replicated on issues such as fraud, duress, mistake and error which didn't logically comply with the will of the party as the sole determinant.
A classic example is the issues over whether a contract was gratuitous or onerous are not adequately dealt with by the will theory. The natural theorists had distinguished between them based upon the idea that you could define a transaction by its single purpose or end, in particular one was a liberal transfer of property and the other was an exchange of one thing for another. The end of a contract was known as the 'final cause' which was the end of the contract which the parties had in view when they entered the contract, even though they may have had other ends as well . The difficulty for will theorists is to account for how a transaction could be defined by an end which might never be achieved solely by the concept of will. The problem was for the will theorist it was difficult to explain how on the basis of will they could distinguish between the end of the contract and other motives or ends of the particular party, thus if a party entered a contract intending to give it to a third party the contract is still onerous. In many ways the will theory was paid lip service to because and whilst the courts and the academics stated that the justification for the law of contract lay in the will of the parties they were invariably using objective methods to prove that will
The will theory was excellent in its time and in many ways still has its impact on current approaches to contractual doctrine. It suffered greatly for the benefit it gave but the will theory cannot be consigned away as being completely foolish. Professor Ibbetson made the point that 'the great merit of the will theory was that it had a measure of intellectual coherence that the traditional Common law wholly lacked, though this coherence had been to some extent bought at the expense of common sense'
The reliance theory has always been part of contract theory, true enough it declined significantly when the nineteenth century scholars were extolling the values of the will theory but it still had its place. Atiyah makes the point that 'the vaguely delictual idea, that an act of reasonable reliance on a promise can create a liability for subsequent loss, never disappeared' . This hardly surprising when we consider that the will theory and the reliance theory are interlinked in many senses because where the one stops the other takes off. The lack of moral basis of the will theory was partly induced because promises and offers didn't require reliance as a condition, all that mattered was that the parties had in fact willed there to be a contract. However, if there were no reliance then there is no harm and thus is incompatible with the classical liberal harm principle. So reliance becomes the obvious next step because it circumvents the moral objections against the will theory. However, the major problem, as we identified with will theory in section 2.2, was that it didn't provide in itself a guide to when reliance was to be protected by law and when it was deemed insufficient to attract legal consequences.
The inability to account for the substantive requirements of the law and how they equated with the reliance theory are the most cited problems , one of the interesting things about the reliance theory is that there is universal academic consensus seems to be that the reliance theory suffers from this fatal flaw however there is a differing opinions over whether there is a potential way of threading the needle, to speak allegorically, between will theory and reliance theory being subsumed into each other .
An obvious solution would appear to rest in the conglomeration of the two dominant party-based theories into a larger meta-narrative which took account of both narratives. It makes logical sense given the interlinked nature identified above. However, as I pointed out in section 2.1 the major reason why the will theory, and the reliance theory puts up no defence to this argument, was never followed in practice is that it requires subjective reasoning. The objective approach of the courts is too enshrined and perhaps too efficacious to be removed or ignored by any theory of contract. The 'moral vacuum' in which the theories operate causes tensions with this approach. Barnett premises his rejection on an equally strong ground, namely that because each theory favours one side of the contracting relationship it inherently misses the interrelationship dimension. He argues that dominant jurisprudence shows that 'the interrelational quality of social life is facilitated by identifying the entitlements or property rights of individuals in society' . The failure of the will theories to take account of any of the intersecting rights of the parties is yet another reason to set aside party-based justifications of contract law .
3. Bargain Theory of Consideration
3.1. Doctrine of Consideration
Just as the objective approach to contract is found in relation to the doctrine of Agreement so is the Bargain Theory of Consideration found in the doctrine of Consideration. This is not the place for a detailed analysis of all the nuances of the laws approach to consideration but its importance in the law of contract has to be fully understood . It is commonly explained as being the distinguishing feature between a promise and a contract, we all make promises on a daily basis and unfortunately it would be impracticable and undesirable for the law to attach legal consequences to absolutely every promise and thus 'the purpose of the doctrine of consideration is to put some legal limits on the enforceability of agreements even where they are intended to be legally binding' .
However, it wouldn't be feasible to leave the issue at that, the concept of consideration is not an objectively identifiable phenomena but as with any object within law is the subject of jurisprudence. The most commonly extolled jurisprudence of consideration was first articulated by Oliver-Wendell Holmes and Langdell . Whilst Holmes was a major proponent of the objective approach to contract and decidedly negative when it came to the will theory he was by no means using natural law argumentation. He also didn't believe that corporeal matter had an intrinsic view and was very much influenced by the views of Thomas Hobbes:
'[T]he value of all things contracted for, and therefore the just value, is that which they be contented to give'
Thus Holmes, Pollock and Langdell all proposed a theory of consideration very much premised on a liberal caveat emptor approach. Pollock, whose writings are said to have influenced Holmes to a large extent , gave the classical explanation of what has become known by the name of the 'Bargain theory of consideration'' when he stated:
'Consideration means not so much that one party is profited as that the other abandons some legal right in the present…as an inducement for the promise of the first. It does not matter whether the party…has any benefit thereby'
The fundamental idea that flows from this consideration is that 'the courts do not concern themselves with the question whether 'adequate' value has been given' . It is sufficient under the Bargain theory of Consideration that a legal 'detriment' is incurred as an inducement for the making of a promise AND that promise is given in order to induce the detriment. The Bargain theory can be very complicated to understand but it is fundamentally premised on the idea of mutuality between the parties. The detriment and the benefit usually reflect that mutuality in that they are the same thing viewed from different angles. Thus in a typical contract for sale the payment is a detriment to the buyer and a benefit to the seller, whereas the delivery of the item is a detriment to the seller and a benefit to the buyer . However it must not be forgotten, as it seems to be by many members of the judiciary , that the simple existence of the benefit/detriment dichotomy is sufficient to create consideration. In classical Bargain theory of Consideration the detriment or benefit must be 'sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise' . This distinction is easy to overlook if one gets caught up in what is considered a benefit or a detriment, however it ought to be noticed that like the Party-Based theories the emphasis is on the subjective 'inducement' of one party by the promise of the other.
The Bargain theory of Consideration is a highly positivistic piece of jurisprudence because it divorces itself from ultimate values and merely guarantees that the contracts have the benefit/detriment dichotomy on both sides of the equation, it is de minimis protection and is primarily designed to avoid the injustice that might arise from a doctrine of consideration where 'a promisee could make a gratuitous promise binding by subsequently acting in reliance on it' . The Bargain Theory avoided this exact problem because any subsequent action could only be considered to be consideration if it was envisioned by the original bargain. Atiyah makes this point by stating 'A person only had the right to rely upon another party if he had bought the right to rely' . There had to be an acceptable limit and that was represented by the paradigm extolled by the Bargain theory of consideration.
The Bargain theory has a lot of implications when we consider the extent to which each party consents to the contractual negotiations, we will discuss this in more depth in section 4 however it is as well to be aware that the will of the parties is not the determining consideration. The voluntary consent of parties is one of the key ingredients of consensus in idem, in many ways consent or will are a subjective matter. It has to be realised that, unsurprisingly given Holmes was the author of theory, that the bargain theory is a way of the law providing an objective limit on subjective concerns. The law determines when consent will be effective; there are contingent difficulties with this as we shall see in the next section.
3.2. Critique of the Bargain Theory
There are a number of issues concerning the Bargain theory that have caused considerable doctrinal queries. Primarily the fact that it was inconsistent with a lot of case law was a major factor, Atiyah states that 'the sense of justice was simply too strong to be bowed down by these rather abstract and theoretical forms of reasoning' . However, in Gordley's opinion the reason it became so entrenched was 'less because it resolved the theoretical problem of distinguishing gifts from exchange than because nobody could think of a better alternative' . This may well be true because it has been attacked by a number of scholars.
The French academic Ames pointed out that if the adequacy of the value of the consideration was unimportant then there was no logical reason why a promise of performance of a pre-existing duty ought not to be considered a detriment , Ames attacked the whole requirement of a benefit or detriment as illusory because as long as one party is induced to promise by the other parties promise then the original promisor's desires of eliciting a mutual promise have been achieved. The reply of those defending bargain theory was that the aim was to elicit the actual actions promised rather than the words promised however this suffers from circularity in relating it back to the general theory. The guarantee of actual actions was predicated on the legally binding nature of the offer and acceptance, it would only be binding if there were consideration and consideration would only be achieved if it were binding . In the end then the bargain theory of consideration was a foil for arbitrary decision-making because again by itself it could not predicate any substantive standards. In this sense it is very much like the party-based theories we discussed in section 2 which also were criticised for not providing any substantive standards for defining what were legally enforceable contracts and what weren't.
However, Barnett did not consider this to be the main reason for rejecting the bargain theory but he argued along the lines that its focus on the process of contracting caused 'insurmountable obstacles in the way of minimizing… difficulties of enforcement' . The theory as we argued above boils down to arbitrary judgements, however sustaining the doctrine merely serves to hide these arbitrary decisions. It also means that when there are difficult cases which challenge the substantive principles then the equitable decision is made with a post hoc rationalisation being impossible because of the standard theory. In relation to the bargain theory Fried has pointed out numerous examples of statutes in various jurisdictions that have extended legal enforcement to contracts that have no technical consideration. The US Uniform Commercial Code (UCC) attaches legal consequences to a promise to keep an offer open (paragraph 2-205) and to modify an obligation (paragraph 2-209). The Californian Civil Code s.1606 attaches consequences to a promise to pay for past favours. Fried also provides the example of the promise to release a debt . These statutory examples show that per se the doctrine is inadequate; however the danger for a liberal society is that the distinction between equitable relief and unjustified interference is very fine. The doctrine thus construed is in danger of being either over- or under-inclusive.
In the next section we will go onto discuss the attempts, lead by Barnett to use the concept of consent to revitalise the law. However, at this point what has to be understood is that there are a number of distinctions to be comprehended between all the theories and their various aims so that we can assess the contribution consent can give to these established theories. Barnett, in his article on the various theories of contract appears to present the Bargain theory of Consideration as a meta-narrative when in reality this doesn't seem to be what was intended by the original writers. The objective theories of contract were supposed to tell us what a contract was and comprehend when there was Agreement, the Bargain theory was supposed to tell us when those agreements were legally enforceable. The will theories and reliance theories seem to do both i.e. when one relies on a promise that is a contract and also reliance makes it legally enforceable. In many ways that was what made the Bargain theory more tenable than the reliance theories because it wasn't attempting to subsume every type of agreement under its remit but was an approach to practical problems.
4. Consent perspective of Contract
4.1. Entitlements of Consideration
Thus far we have been considering well established substantive theories however now we move onto consider the role of consent in relation to these theories. The major problem with traditional theories of contract is that by and large they suffer from the problems of meta-narratives: they ignore reality at the expense of intellectual coherence. It is not presented here that consent can somehow overcome all these problems, to do so would be to make the same error, however this work is interested in analysing the interlinking that can be done between a consent perspective of contract and traditional theorising on contract. Barnett has done most of the work on this issue and his thesis has not thus far been the subject of a large amount of academic critiquing and this means a lot of the discussion in this section will centre on his work.
Consent as traditionally understood in the law of contract is concerned with factors that might vitiate the consent of the particular parties in the case such as mental incapacity due to illness, drunkenness, youth and married women; there are also the issues of fraud and undue influence. However, Barnett has drawn on the classical work of Robert Nozick Anarchy, State and Utopia and his jurisprudential concept of Entitlement theory. Entitlement theory as understood by Nozick was 'designed
to provide an account of what justice requires concerning property' . The theory of entitlement provides for justice on transfer:
'A person B is morally entitled to an object, O, that was previously the legitimate property of some other person, A, if and only if A freely gave O to B as a gift or in voluntary exchange for some other object, P, which was the legitimate property of B'
Similar proposals have been made throughout history for this approach, for example in the eighteenth century a general theory of title to property was highly important, and in the ascendancy , thus contract was considered one method by which title could be passed. The idea is hardly revolutionary but contextualising contract as the smaller part of a larger theory of entitlements which regulates the justice of property situations is an important reconception. Barnett argues that 'Whether a purported right is genuine or can be legitimately transferred is not an issue of contract theory only, but is one that may also require reference to the underlying theory of entitlements' . The subsuming of contract into a general theory of property requires consideration of the fundamental nature of property rights which is to the effect that:
'Property rights do not refer to relations between men and things but, rather, to the sanctioned behavioural relations among men that arise from the existence of things and pertain to their use'
Thus Barnett highlights that this allocative and distributive function of property law is transmuted to the general theory of contract by subsuming it into the general theory. Barnett argues that this can give us a general justification of contract law, which is to 'identify the rights of individuals engaged in transferring entitlements, and thereby indicate when physical or legal force may legitimately be used to preserve those rights and to rectify any unjust interference with the transfer process' .
4.2. Consent as the moral component of a contractual transaction
Thus Barnett has deducted from this that for a vast number of reasons that the role of consent is a fundamental moral component of contractual transactions. In this work we will briefly lay this out so that we can fully understand why consent can be used as a moral tool. There has not been much analytical critiquing of Barnett's propositions so as we shall see there may be some difficulty in being critical but it is of primary importance to see how consent can be so important to contractual relationships.
From the previous section we understand that contracts is a form of property transfer and thus subject to the general prohibitions of a theory of entitlements as outlined above. The entitlement theory entails a form of justification for the use of legal sanctions, which on a traditional liberal view ought to be kept to a minimum. Thus the interference of law on contracts can be seen as the regulation of valid and non-valid transfers as understood in light of the quotation above about Nozick's just principle of transfer of rights. However, this takes us only so far and leaves us asking the same question that was begged by traditional theories which is what is the correct moral premise between valid and non-valid transfers. Barnett thus argues that consent is the moral component that justifies the legal distinction between those transfers which are valid and those which are not valid.
This is justified because rules regarding the alienation and protection of property from interference are premised on allowing humans to have free and uninfluenced interactions. If this is accepted as a promise it becomes obvious that disregarding consent would be a serious imposition on the freedom of human interaction and thus it becomes of greater importance. Thus 'the moral requirement of consent mandates that others take the interests of the rights holder into account when seeking to obtain the rights she possesses' . Barnett is attempting here to make consent the paramount concern for various reasons. Mainly, as we shall see, one of the main concerns is to resolve a lot of the problems we identified with traditional jurisprudence above. However there are number of concerns that we need to raise with this approach at the outset before we go onto consider fully the ramifications of this approach.
Nozick's Entitlement theory is one of the most maligned theories in jurisprudence and has been attacked on many grounds but one of the most pertinent here is the one that has been raised by Samuel Scheffler. It is most commonly claimed that a theory of entitlement is antithetical to charity, as a moral schema it fails because it in effect claims that those in society with a high degree of need have absolutely no entitlement to the legitimately acquired property of an owner. This attacks Barnett's thesis at the very core. Nozick argued, and Barnett borrowed from him, the idea that people have rights primarily because they need them to live a meaningful life. However, Nozick's scheme doesn't provide 'that all the necessary material conditions for having a reasonable chance of living a meaningful life will be met' . This problem boils down to a choice in modern society as to what is required by a meaningful life. That is beyond the scope of this work however the importance is that consent may only be an issue if we value property rights as superseding the rights of those in society who need. We can see this in operation in many social spheres and there is a rich vein of work by legal realists that discusses the fact that the use of implied terms can be used for the discrete application of public policy. Thus the imposition of onerous implied or in some cases statutorily implied terms may be guided not by the entitlement theory but by other equitable concerns. This may at an abstract level be detrimental to viewing consent as determinative of which transfers are valid or not. There is not scope to develop these concerns in this work but with the lack of academic criticism of Barnett's approach it is wise to be borne in mind.
4.3. Defining consent
The first issue in defining consent was, for Barnett, to distinguish it from the standard will theory, because they are prima facie incredibly similar. He did this by arguing that the will theory was at odds from the objective approach to law, as we identified above, whereas a consent theory of contract law could withstand the objective reality in practice. In fact it would almost appear as though it were morally required. He bases this on the liberal notion that entitlement rights create clearly defined boundaries within which a person can pursue a meaningful life, he therefore argues that we have to have a mind that the law has a declaratory effect in that it is a guide for the diligent man who wants to be law abiding. Thus an attempt to base a theory of contract on the subjective intent of the parties couldn't perform that declaratory function, if it were solely based on the subjective consent of the parties then decision-making would be particularistic and arbitrary which would inevitably impinge on the rights of a free independent person to pursue a meaningful life.
The approach advocated by Barnett is interesting but we ought to take note of certain drawbacks to the approach, which becomes obvious on more in depth critical analysis. The argument is premised on the fact that in order to fulfil a meaningful life one needs to know in advance what the rules will be. However, it is unclear from Barnett's suggestions whether there are any inherent qualities of that objectivity that make it capable of that declaratory nature? Furthermore he goes onto say 'A consent analysis is genuinely interested in the actual intentions of the parties, but we never have direct access to another individual's subjective mental state' thus his account seems to be divergent. On the one hand he is saying that objectivity is desirable because of its declaratory effect and on the other it is necessary because we can't access another's intentions. This is primarily inconsistent but there is also a lack of clarity over what is the relationship between consent and objectivity. He seems to be saying that consent is at one point necessarily demonstrated by objective factors to perform a certain function and at another that it is a failing on our part. However, if he were to overlook this his theory is sound.
This is a powerful approach to defining consent and linking it with the objective approach means at this juncture we ought to give more consideration to the jurisprudence surrounding objectivity in contract law. In the late 1980's there was considerable debate over the exact nature of objectivity in the case law. It would appear that there are two potential approaches to objectivity. On the one hand the orthodox approach is to interpret words 'as they were reasonably understood by the party to whom they were spoken' but there is a rival approach which is to interpret the words 'as they would have appeared to a reasonable man eavesdropping on the negotiations' . There seems to be considerable judicial ambiguity over what objective stance point to take and the dichotomy presented above doesn't adequately capture all the nuances that we need to consider. It is clear that in the original test that subjective concern could sneak there way into the conversation . However, Barnett's approach seems to take this into account to a large degree, according to Solan, Barnett recognises that the objective approach is a default which may in certain cases be trumped by the subjective intent, thus where it is clear that both parties didn't intend to contract but an objective third party would have reasonably thought that they did then it has been held there is no contract. For example, see the case of Berke Moore Company v. Phoenix Bridge Company in the US and the Hannah Blumenthal Case in England where it was held that the objective rule was primarily intended to stop injurious reliance being overridden by the subjective intent of one of the parties but where both had the requisite subjective intent then there was no need for the protection.
However, here we see how the use of consent theory defines contractual obligations in a wholly different manner from the traditional theories we consider above that get round the problems of the objective theory and how the will theory and reliance theories relied on a certain understanding of intention. This understanding, especially in the will theory, was artificially skewed but the consent theory seems to marry all the concerns well and define consent in objective terms without detriment to the original meaning. However, there is a need for clarity over what the interrelationship between the subjective consent and the declaratory nature of law. As we have touched on here that interrelationship might well be found in the challenging approaches to objectivity which highlight there are various viewpoints that can be taken on objectivity and in particular Solan's work on subjectivity may hint that objectivity is an inappropriate default rule. However, it has not been the suggestion that this in any way destroys Barnett's conception.
4.4. Determining contractual obligations in a consent perspective
There is a vein of theoretical writing which argues that the consent of the parties ought to have a presumptive force, or that this might be a more helpful analysis. This deflects the difficulty of dealing with what happens to the consent on issue of mistake or failure to achieve consensus in idem. This is an important perspective on consent, it ties it in closer with issues such as default rules, and it allows the state to infer legal liability based on straightforward objectively identifiable phenomena unless certain situations pertain. The importance of the presumptive approach to consent is that it requires having regard to the way that consent is constructed in the objective manner and also to the nature of the defences to consent that the law provides.
The issues of consent here interplay with the other theories and we can see that Barnett's approach is clearly guided by an attempt to deal with a lot of the problems that we have discussed with relation to more traditional theories, he divides these into the difficulties the theories have with both formal and informal consent and provides how the consent theory can elude these difficulties to a very large degree.
The maxim 'Signed, Sealed and Delivered' was one that reflected the formal nature of contracting in the nineteenth century. However, as we saw above in relation to the bargain theory of consideration the formal consent of a part constituted in a document which is signed and delivered correctly is not sufficient to create legal obligations. Thus for some reason those contracts which most obviously exhibited the intention of the parties to contract could not be coherently understood to be a legally enforceable contract. Furthermore the reliance theory struggled to show how this could evince reliance. Consent in many ways circumvents these problems in the incredibly simplistic manner that formal consent is the external manifestation of the intention to be legally bound. However, this simplistic conclusion does damage to the others, in that one of the largest advantages for the bargain theory of consideration was that it could deal with informal consent i.e. when not given wholly in written form.
Informal Consent is more difficult because it isn't so easy to decide which criterion should be used to determine when consent has been given and when it has not. Thus as we discussed above much of the doctrine of consideration and things such as were used by natural law scholars such as the causa of the contract were used to deal with this perceived problem. The use of consent as a theoretical alternative to will / reliance / consideration requires that consent be able to deal with these problems. Thus Barnett uses an ingenious schema which is to build in both reliance and the bargain theory into the meta-narrative of consent. He argues that evidence as to reliance on a promise and evidence as to a bargain could be useful concepts in being presumptive evidence of an intention to be legally bound. If we remember that I discussed in the section on party-based theories that in many respects the will and reliance theory are interlinked and what is ingenious about Barnett's schema is that it adequately deals with this relationship in a coherent manner. There is no point in replicating the exact arguments that Barnett uses in making this point but an example will suffice to show how consent can be used in a manner as part of a higher schema because 'one need not have relied on a bargain to be protected in a consent theory' and by the same token 'the absence of consideration does not preclude the application of legal sanctions if other indicia of consent are present' . Thus reliance and consideration are inidicia of consent but not determinative of it and thus we are allowed to have a more informed view.
The Entitlement Theory also solves one further problem which has briefly been touched on throughout this work and that is how theories can deal with the non-enforceability of contracts due to misrepresentation, fraud, duress and undue influence. The House of Lords specifically considered the jurisprudential nature of these defences in the case of Lynch v. DPP of Northern Ireland and came to the conclusion:
'Duress does not 'overbear' the will, nor destroy it; it 'deflects' it. Duress…leaves him with a choice between evils'
This doesn't fit well with a will theory and thus the use of entitlement theory allows there to be a moral component of voluntary consent because as we saw Nozick's requirements mean that principles of justice put certain requirements on the transfer of rights. Thus these issues can neatly be fitted into a schema of consent.
We have discussed many issues in the foregoing sections regarding both the traditional theories and Barnett's progressive meta-narrative of consent. Primarily what we have shown is that the theories above were interlinked in many ways. My analysis of traditional theories varied from Barnett's in that eh considered them as aiming to be meta-narratives. Whilst the party-based theories undoubtedly were, it is far from obvious that the bargain theory of consideration was. It could be more adequately thought of as a response by the objective theory to the requirement of determining what transactions would in practice is enforceable. The impression at the end of sections 2 and 3 of this work was undoubtedly one of a fragmented approach to contract. Undoubtedly ideas such as offer and acceptance complemented the will theory but many of the courts dicta implied that the basis of liability could be on the reliance of the parties. The bargain theory of consideration also didn't sit well with all aspects of practice and in the end was a foil to cover arbitrary decision-making.
The beauty of the consent theory was not to set itself up in opposition to established theories such as bargain theory and party-based theories but to incorporate them into a larger meta-narrative. In that way it is highly logically attractive because it seems to answer all the problems that those theories have without ignoring the fundamental reasons that they were abandoned. However, it is hard not to see the consent theory as a return to a more advanced natural law argumentation that the will theory and reliance theory were attempts to move away from. Lon Fuller and Robert Nozick are proponents of a modern natural rights theory and thus it is hardly surprising that a more contextual approach, which relies on a moral background, is able to incorporate the various theories which at the beginning of the seventeenth century was considered to be contextual.
In reality the consent theory makes one important contribution to general contract theory which is to align it with a larger general theory of law. However, that does make it vulnerable to changes in the prevailing legal theory. It is arguable that perhaps basing contract law on natural law argumentation such as Nozick is going to leave itself open to a post-modern critique. It is ripe for such a critique given that it is a meta-narrative and talks about ultimate values. The contextualisation and particularism of various legal phenomena is one of the things which are notable about most post-modern theories. An embryonic suggestion from this writer would be that perhaps under a post-modern theory of contract there would be no such thing as contract but various social situations in which people interact with the expectation of being governed by law. Those individual situations may be inappropriate to talk about entitlement rights or the justice of certain transfers. The entitlement theory is largely premised on a paradigm of the contract of sale but when we consider the contract of employment then it may be that there are wholly different considerations where consent isn't appropriate because of the imbalance of bargaining power. As I mentioned this is tentative but there is undoubtedly the potential to use post-modern critiques to attack Barnett's argumentation.
Finally, we have to be aware of the uses of contract being a perpetuation of social differences and there was not enough room to give full consideration to the implications of this charge. I touched on the criticism of Schleffman of Nozick but this is one of many who have challenged his theory of entitlements, the validity of this as an ultimate schema for contract law has to be doubted. However, the marvel of Barnett's work is not to be glossed over; there are two types of academic in the world those who criticise and those who reform. Barnett is the latter and has undertake to build de novo a new conception of contract which makes considerable intellectual coherence and is an attractive blend of modern natural rights theory with solving the problems in positivistic thinking.
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