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Should We Fire the Gatekeeper? an Examination of the Doctrine of Consideration

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Should We Fire the Gatekeeper? an Examination of the Doctrine of Consideration University of Miami Law Review Volume 48 Number 1 Article 3 9-1-1993 Should We Fire the Gatekeeper? An Examination of the Doctrine of Consideration Mark B. Wessman Follow this and additional works at: https://repository.law.miami.edu/umlr Part of the Business Organizations Law Commons Recommended Citation Mark B. Wessman, Should We Fire the Gatekeeper? An Examination of the Doctrine of Consideration, 48 U. Miami L. Rev. 45 (1993) Available at: https://repository.law.miami.edu/umlr/vol48/iss1/3 This Article is brought to you for free and open access by the Journals at University of Miami School of Law Institutional Repository. It has been accepted for inclusion in University of Miami Law Review by an authorized editor of University of Miami School of Law Institutional Repository. For more information, please contact [email protected]. Should We Fire the Gatekeeper? An Examination of the Doctrine of Consideration MARK B. WESSMAN* I. INTRODUCTION .......................................................... 45 II. CONSIDERATION AS AN ALTERNATIVE TO, OR SUBSTITUTE FOR, APPLICATION OF DOCTRINES OF ASSENT ................................................... 52 A. Complete Failure of Agreement ....................................... 53 B. Failure to Reach the Final Stages of Assent ............................ 55 C. Indefiniteness ...................................................... 58 D. The Objective Theory of Assent ....................................... 61 E. The Primacy of Assent .............................................. 65 II . CONSIDERATION AS A POLICING DEVICE ..................................... 69 A. Consideration as an Alternate Method of Policing Misconduct in Bargaining ............. ........................................ 69 1. FRAUD AND FRAUD ON CREDITORS .................................. 69 2. DURESS ........................................................ 74 3. UNDUE INFLUENCE ............................................... 78 4. THE DANGER: DECISIONS IN DISGUISE AND UNDERENFORCEMENT ............ 80 B. Consideration Doctrine as a Covert Way of Policingfor Fairness.......... 86 C. Consideration Doctrine and Disguised Policy Judgments ................. 93 IV. ADDITIONAL HARM CAUSED BY THE DOCTRINE OF CONSIDERATION .................. 97 A. Use of the Doctrine of Consideration to Avoid Decision of Evidentiary Questions ......................................................... 98 B. Distraction and Confusion in Promissory Estoppel Cases ................. 100 C. Complexity, Uneven Application, and Underenforcement .................. 101 1. PAST CONSIDERATION/MORAL CONSIDERATION .............................. 103 2. ILLUSORY PROMISES AND NON-STANDARD REQUIREMENTS CONTRACTS ..... 105 3. ILLUSORY PROMISES AND SATISFACTION CLAUSES ........................... II D. An Advance Response to Fanciful Hypotheticals......................... 114 V . CONCLUSION ............................................................ 116 I. INTRODUCTION The doctrine of consideration is decidedly out of fashion these days. Undoubtedly, the fact that a promise is supported by traditional consideration usually provides a sufficient reason to enforce it.' To the * Associate Professor, Tulane Law School. I thank Paul Barron, Lissa L. Broome, Jeanne Carriere, James D. Gordon III, Shael Herman, Julie H. Jackson, Marjorie Kornhauser, Suman Naresh, Vernon Palmer, Robert K. Rasmussen, Steve Thel, and Ann Woolhandler for reading prior drafts of this Article. I also thank Heather R. Boshak, Alan M. Fisch, and Eric Zentner for helpful research assistance. 1. JOHN P. DAWSON, GIFrS AND PROMISES 220-21 (1980). Dawson argued that an appropriately limited doctrine of consideration expressed an idea that has been accepted for centuries in Anglo-American law: that a sufficient reason for enforcing a promise is that it is part of an agreed exchange which would enable each party to secure from the other an act or result that he UNIVERSITY OF MIAMI LAW REVIEW [Vol. 48:45 extent that the doctrine of consideration is identified with the proposi- tion that bargains should generally be enforced, the doctrine is very much alive. The classical contract theorists, however, included a second proposition within the "doctrine of consideration." They asserted that consideration was a necessary condition for the enforcement of a prom- ise; they thus assigned to the doctrine of consideration a gatekeeping function.2 The doctrine of consideration sorted promises into two classes, bargain promises and gratuitous promises. The former were admitted to the realm of contract, and the latter were consigned to outer darkness. It is this gatekeeping function of the doctrine of consideration that is now so out of fashion among academics. It is also the subject of this Article, and I shall henceforth use the phrase "doctrine of considera- tion" to refer to the view that only promises supported by consideration should be enforced. The current attack on the doctrine of consideration has been build- ing for some time. A little less than twenty years ago, Gilmore advanced the thesis that contract, and "the balance wheel of the great machine,"3 the doctrine of consideration, were in the process of reab- sorption into tort. Gilmore attributed this process to the rise of promis- sory estoppel.' While subsequent scholarship on promissory estoppel has provided good reason to doubt Gilmore's view that contract as a whole is being eaten up by tort,5 it has nonetheless confirmed the impor- tance and frequency of reliance-based recovery as an alternative to recovery based on bargain.6 It is difficult to avoid the impression that any promises stopped at the gate of consideration are likely to gain sought. There are other exceptional reasons for enforcing promises, but this is overwhelmingly the normal one. Id. While the presence of consideration "usually" justifies enforcement of a promise, there are thoroughly uncontroversial exceptions to the general rule that bargains are enforced. For example, bargains subject to defenses of fraud, duress, incapacity, undue influence, mistake, illegality, or unconscionability may very well qualify as bargains, but various policy or moral reasons militate against their enforcement. In addition, there are some bargains that are too casual or trivial to justify enforcement. See infra notes 98-101 and accompanying text. Appropriately qualified, however, Dawson's generalization is difficult to dispute. 2. See GRANT GILMORE, THE DEATH OF CONTRACT 18-34 (1974) (describing the classical theory of consideration). 3. Id. at 18. 4. Id. at 87. 5. See generally Edward Yorio & Steve Thel, The PromissoryBasis of Section 90, 101 YALE L.J. 111 (1991) (arguing that courts tend to enforce, with expectancy damages where possible, promises deliberately made, using the presence of reliance as an indication of deliberation). 6. See generally Randy E. Barnett & Mary E. Becker, Beyond Reliance: Promissory Estoppel, Contract Formalities,and Misrepresentations, 15 HOFSTRA L. REV. 443 (1987); Mary E. Becker, Promissory Estoppel Damages, 16 HOFSTRA L. REV. 131 (1987); Daniel A. Farber & John H. Matheson, Beyond Promissory Estoppel: Contract Law and the "Invisible Handshake," 52 U. CH. L. REv. 903 (1985); Stanley D. Henderson, Promissory Estoppel and Traditional Contract Doctrine, 78 YALE L.J. 343 (1969); Yorio & Thel, supra note 5. 19931 CONSIDERATION entrance through the back door of promissory estoppel. While it is clear Gilmore had no plans to mourn the death of the "requirement" of consideration (or the classical theory of which it was a part), he was apparently content to illustrate the waning of the require- ment.8 Other scholars have attacked the doctrine of consideration more directly and enthusiastically. Professor Fried has assailed the so-called "requirement" of consideration as internally incoherent and inconsistent with the moral foundation of the enforcement of promises.9 Economic theorists have suggested that gains in utility could be produced by recog- nizing a class of enforceable gratuitous promises.' 0 Indeed, it has been suggested that much of the good work accomplished by the doctrine of consideration could be done by other doctrines'1 and that the use of the doctrine of consideration by judges is generally superfluous or 2 pretextual.1 One of the difficulties with the recent frontal assaults on the doc- trine of consideration, however, is that they tend to be relatively abstract. They pay insufficient attention to the various maneuvers judges actually perform with the aid of the doctrine of consideration. Given the volume and clear trend of the scholarly criticism, one would expect that, in the years since Gilmore's book was published, cases in which promises are held unenforceable for lack of consideration would have virtually disap- peared from the reports. It might not be surprising to find the ritual incantation that consideration is a "requirement" or "element" of a valid contract. Retention of the "requirement" of consideration as a mere rhe- torical salute to the past would be an example of the survival of a com- mon law rule as a verbal formula after its substantive bite was lost. If the critics of the doctrine of consideration are correct, however, deci- sions in which the doctrine of consideration functions as a gatekeeper should be extremely rare products of backwater courts in which the gos- pel according to Gilmore has not been heard or heeded. If the old gatekeeper has been fired, however, someone forgot to 7. See Farber & Matheson, supra note
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