development of the doctrine of contracts with protective effect towards third parties (Verträge mit Schutzwirkung für Dritten), which was developed by reference to §157 and completive interpretation, even though it is a clear example of a policy driven default rule rather than the tacit intention of the contracting parties.

In all of the systems studied, there is to a varying degree evidence of judicial willingness to disguise policy driven rules as deriving from the presumed or tacit intentions of the parties. This is more evident in Britain, where there remain judicial expressions of the idea that all implications, whether at fact or in law, are referable to party intentions. This is mere judicial fiction, designed to justify lawmaking by the courts, albeit out of a laudable desire to arrive at equitable results. It would be more honest, even in a jurisdiction like Germany where many default policy rules of contract law are codified, to accept that there may arise occasions when courts will wish to reflect the changing mores and nature of relationships by developing contract law in ways which cannot reasonably be tied to the unexpressed wishes of the parties. Such occasions require an honest expression of the policy factors which justify the legal development, something which is made more difficult if the language of implied terms is maintained.

11.  Consideration

(a)  The Common law336

Much of the difficulty with giving effect to promises in their own right stems from the doctrine of consideration (or, more accurately, of ‘mutual consideration’). The fundamental objection to the doctrine of consideration is that, though it persists in some jurisdictions as part of the historical development of contract law, there seems no good theoretical reason why, in order to demonstrate a serious intention to enter a binding contractual obligation, consideration should be required to have been received for the commitment intended, or why, if it is present, intention is often presumed without further investigation.337 Many legal systems

336See further Eisenberg, ‘The Principles of Consideration’.

337The presence of consideration has been said necessarily to prove an intention to contract: Williston on Contracts (Rochester, NY: 4th edn, vol. 1, 1990), §3.5. To similar effect, as earlier editions of Anson’s Principles of Contract used to state, ‘Consideration … is the only test of the intention of the promisor to bind himself by contract’ (see 16th edn, p. 130). The present edition (28th) less restrictively states

manage perfectly well (indeed, better) without the doctrine of mutual consideration, and have other ways of testing ­seriousness of contractual intent. Indeed, the leading proponent of the doctrine, English law (and through it, other Commonwealth jurisdictions), has itself developed a separate rule that parties must demonstrate an intention to enter into legal ­relations.338 Once such a separate rule was developed, any reason for continuing to insist upon mutual consideration was obviated. Intention forms a principal plank of English law’s recent legislation on third party rights, the lack of consideration given by the third party having been ignored in the statutory conferral of rights on such third parties.339 The logical conclusion is that the doctrine of mutual consideration, in terms of which a reciprocal performance is required for a valid contract, should go,340 as Lord Wright convincingly argued as far back as 1936.341 In continuing to insist on consideration, the Common law persists in getting matters back to front: it insists upon mutual consideration, while ignoring a genuine enquiry into the serious intention to be bound, when it should be insisting precisely on such serious intention, while dropping a separate requirement of consideration.

How is seriousness of intent to contract demonstrated in systems which lack a doctrine of consideration?

(p. 88) that ‘consideration reflects a variety of policies’, though one such policy identified­ remains seriousness of intent.

338See, for instance, Rose & Frank Co. v. J. R. Compton & Bros. Ltd [1923] 2 KB 261. Assessing such intention is an objective exercise: see Blanchard J in Fletcher Challenge Energy Ltd v. Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433, para. 54: ‘Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively.’ Intention to contract is often (but not always) presumed to be absent in certain types of agreement, for instance domestic arrangements between spouses, or social arrangements between friends: see, for instance, Balfour v. Balfour [1919] 2 KB 571 (husband and wife); Jones v. Padavatton [1969] 1 WLR 328 (mother and daughter); cf. Raffaele v. Raffaele [1962] WAR 29 (where a contract was held to have been intended between a son and his parents). For further authority, see Furmston and Tolhurst, Contract Formation, paras. 10.19–32.

339See the Contracts (Rights of Third Parties) Act 1999.

340That is not necessarily to conclude that contract law no longer needs need a doctrine of causa (the issue is discussed elsewhere in this text).

341Wright, ‘Ought the Doctrine of Consideration to be Abolished from the Common Law?’. Abolition was also recommended in The Law Revision Committee’s Sixth Interim Report (1937), and by Chloros, ‘The Doctrine of Consideration and Reform of the Law of Contract’. Cf., however, Gold, ‘Consideration and the Morality of Promising’, who argues that abolition would have undesirable consequences for a moral understanding of promising.

(b)  The mixed legal systems

None of the three mixed legal systems studied has a requirement of mutual consideration; instead, all require that parties to a contract (or to a unilateral promise, where this is permitted) must demonstrate an intention to be bound to the obligation. In none of the systems does the lack of a doctrine of consideration cause any problems. Indeed, in South African law the requirement of consideration was consciously jettisoned from the law in order to improve it.342 Scots law both lacks a doctrine of mutual consideration for contracts, and also enforces unilateral promises, emphasising in both the need to determine whether there has been expressed an intention by a party to bind itself to an obligation. The courts have continuously emphasised the importance of determining what objectively was intended by the party in question:343 did it intend unilaterally and immediately to bind itself, or did it intend to make an offer to the other party? This simple focus on objective intention, however, glosses over potential problems, especially where the distinction between conditional unilateral promises and offers are concerned. Because either might take the form ‘I promise to do x if …’, the difficulties in distinguishing the two on the facts of a case will be evident. It was suggested earlier that the context of a party’s­ statement ought to be important (for instance, a commercial content will naturally give rise to the assumption that an offer rather than a promise was the likely intention), as well as whether the condition attached to the promise will bring any direct benefit to the maker of the statement (if it does, this again suggests that an offer is more likely to have been intended). It is, however, difficult to find any extensive judicial treatment of these theoretical problems.

In practice, when in Scotland difficulties in determining whether contractual intention was present or not have arisen, it is striking that it is often in cases where there is no question of the intended consideration being uncertain. A number of reported cases relate to facts where a clear price had been agreed between the parties, but the facts were held to demonstrate that no intention to be bound contractually had yet been

342The rejection of the doctrine of consideration in South African law was finally confirmed in Conradie v. Rossouw 1919 AD 279.

343See, for instance, Lord Hodge in Baillie Estates Ltd. v. Du Pont (UK) Ltd [2009] CSOH 95, at para. 25: ‘the court has to address not only whether the parties have agreed all of the legally essential elements of a bargain, or the means of achieving that agreement, in their negotiations but also whether they have manifested an intention to be immediately bound.’

demonstrated by one or both of them. In one such case, this was because the parties’ prior dealings indicated that a subscribed written agreement had been intended, such an agreement being absent.344 In another, it was alleged that discussions between negotiating parties at a meeting constituted an oral contract between the parties. However, the behaviour of the party so alleging, in continuing to engage in protracted negotiations and insisting on a written contract being concluded between the parties, objectively suggested to the court that that party did not consider a contract to have been concluded by virtue of the discussions at the meeting.345

South African law similarly requires parties to a contract to demonstrate an intention to be bound, a requirement which (as in German law) is not conceived of as the equivalent to the causa of the contract.346 As Mason J stated in Rood v. Wallach, the essential elements of a contract are:

the promise to do or forbear some act made by one and accepted by the other party and the intention that the legal relations of the parties shall be governed by the promise in matters to which it relates, or, as it is sometimes put, there must be consent and an intention to create legal relations.347

Such an intention to contract (animus contrahendi) is judged objectively, as Innes J explained in Pieters & Co. v. Salomon: ‘When a man makes an offer in plain and unambiguous language, which is understood in the ordinary sense by the person to whom it is addressed, and accepted by him bona fide in that sense, then there is a concluded contract.’348 Undertakings made in jest or anger do not demonstrate such an intent,349 nor are family or social arrangements likely to. Statements which appear to narrate no more than facts (such as ‘All goods supplied are manufactured according to the company’s standard manufacturing procedures and techniques’)350 may nonetheless disclose the requisite animus contrahendi, given the context of the statement.

344Karoulias v. The Drambuie Liqueur Co. Ltd [2005] CSOH 112, 2005 SLT 813.

345Aisling Developments Ltd v. Persimmon Homes Ltd [2008] CSOH 140.

346See Jansen JA in Saambou-Nasionale Bouvereninging v. Fridman 1979 (3) SA 978, 991G; also Van Winsen J in Hottentots Holland Motors (Pty) Ltd v. R 1956 (1) PH K22.

3471904 TS 187, 219. Mason J is clearly using the idea of a ‘promise to do or forbear’ as a synonym for an offer.

350The quoted statement was held to disclose an intention to be bound to an obligation in

Consol Ltd v. Twee Jongen Gezellen (Pty) Ltd 2005 (6) SA 1 (SCA).