I remember being at the national press club at about the time that Paul Keating had announced a further sell-down of the Commonwealth Bank. The trajectory was virtually the same as Telstra. From memory C1 was an initial float of 30% of the equity (ostensibly to ‘pay for’ the taking of equity in the Victorian State Bank). Keating was now announcing C2 the sale of another 19 odd percent on this occasion to dodgy the budget into looking a bit better by rearranging assets.
Keating was asked at the press club “”if you’re in for a penny, why aren’t you in for a pound ? Why not 100%?” Keating said that he wasn’t selling more of it because Australians needed a bank that was rolled gold safe that Australians needed the option of a Commonwealth Government guaranteed and majority owned bank. It stopped the press in their tracks at the time, but I remember making a mental note. I thought “hmmm odd argument. I haven’t heard that before. But given that it also locks Keating into not selling the rest of the Commonwealth Bank I guess he means it.”
Of course Keating went on to complete the privatisation with nary a murmur. No doubt Kerry O’Brien or someone quoted the words back to him, but I didn’t see it and it certainly wasn’t a big deal. it. If someone did quote his words back to him, that was for a a few embarrassing seconds. And then the moving finger, having writ, moved on. I never heard about it again.
I remember the chagrin on the ALP side when Dr Hewson’s ‘Fightback’ plan came with an appendix many pages long of nothing but Keating quotes saying not just that the GST was a good tax, but that the country was a two bit hic economy without it.
I guess I’d like to see the press push this kind of basic credibility thing much harder. Each time Keating argued something, (or perhaps just a couple of times every interview for a few months) his interviewer should say something like “well thanks for that argument Mr Keating but how do we know there’s any conviction in it. You might be just making it up like you were for the Commonwealth Bank and the GST.” But that would involve the media being actively non-partisan and probing, rather than passive just reporting everything on a ‘he said: she said’ basis.
Likewise right now John Howard’s ‘formula’ for responding to questions about the leadership is that he’ll stay for as long as his party wants him. Now it’s possible he gets a tap (or a thud) on the shoulder to end his reign, but it’s much more likely that he’ll go when he feels like it ie that he won’t stay for as long as his party wants him. I haven’t heard a single reporter even question his formula. And of course once he does go, the media will immediately segue into end-of-an-era nostalgia.
I couldnt agree more: whatever side of politics you are looking at, even the supposedly keep the bastards honest sides, every statement made seems to be made either in blithe disregard of it truth, or with a host of unwritten qualifications, conditions precedent and subsequent, codicils and wangles.
Having said that, one of the problems is that the media exhibit a degree of ferocity and absurd literalism that makes it hard, I suspect, for a politician to say anything. The classic example is asking a minister to deny that they will do something eg challenge or put on a gst or a return to conscription. If they don’t say “never ever” then the next morning the screamer is that Howard or Beazley has refused to rule out (say) capital punishment.
So they dutifully say “never ever” and then even that becomes devalued.
There was for a time an argument (a completely demented argument) that political promises should be subject to some sort of trade practices act prohibition of misrepresentation.
That wont work, for about a million reasons, but it would be good to see if there was a bit of independent and objective media scrutiny of lies, and a bit of independent and objective media refusal to demand total black and white statements from politicians.
One of the problems is to do this objectively and accurately, and to avoid generating the sort of image as a perpetual cynic that many commentators suffer.
I had, in a way, some hopes for Crikey and, perhaps more muted, for Margot Kingston. Margot Kingston has sadly left the screen; perhaps Crikey will deliver.
Or perhaps Club Troppo should. I am a newcomer to this site, but it seems to have a bit of balance, and a bit of a hard edge. But how many hits does it get? Should every visitor get their own armadillo?
Well Richard,
Let me just say to someone who couldn’t agree with me more, that I couldn’t agree with you more.
I agree with you about ‘never ever’ and you’ll notice it didn’t feature above. I always took that to be shorthand for ‘no – now leave me alone’. I agree with John Howard that holding an election before you change from ‘never ever’ to ‘maybe this once’ is no crime.
I love seeing this beat-up being carried on ad nauseatingly. It says much more about our trivialising press than about either John Howard or Peter Costello. We used to think the London tabloids were pretty disgusting. Our mob have certainly come a long way.
Good article. I will admit to tuning out politician’s and pundit’s words as I am of the opinion they will say anything at anytime.
Since no one seems to be bothered mentioning the costello/howard spat, and since I can’t work the thing that enables me to put on my own message, can I say in this context that this is another permutation of the same syndrome?
Crikey has someone saying that any lawyer would say there was a contract, many media have it that costello called howard a liar, no one seems to have really considered what was allegedly said.
In fact, the best the evidence gets is a summary by Mr McLachlan – not the actual words spoken – of the effect of some words. And the best that effect gets is that howard indicated an intention to stand aside and let costello have a go after one and one half terms.
Now this is not an agreement; it is hardly a coherent statement. First of all, a statement of intention is not an agreement to do something. Second of all, any such statement must be subject to a host of implied terms, including the term that H would fall on his sword only if it was in the interest of the liberal party to do so. The agreement can not have been that H would top himself and let C have a go if it meant the doom of the liberals, or if it was in the teeth of opposition from cabinet. So put at its highest, the promise (if it was a promise) was highly context laden, highly conditional, and vague.
But if I am wrong about that, the time for performance came after one and a half terms – not after four terms. By now, in my view, C has probably waived any right to insist. If a nice young person offers to have a dance with you in 1967 and you dont take them up on it until 1987, you have probably left it a bit late.
Frankly, if that is a contract, or a binding agreement, then my dog Gizmo is a brain surgeon.
As for this nonsense about C calling H a liar, that’s just what it is: nonsense. They are disputing, as people do every day, the meaning of some words spoken some time ago. It is an article about interpretation, not about facts. To say you disagree about something is not to call the other side a liar.
Before anyone asks, I dont much care who wins this dispute, I must say I like a bit of ultra violence in politics, but other than that I have no real interest in the outcome. But I wish reporters would exercise a bit of restraint. grumble grumble
Thx for that Richard. And didn’t McLachlan report that Howard had said that this was a statement of intention, explicitly said that there were no guarantees?
Even if it WAS couched as an undertaking and its terms were clear, Howard has claimed (and Costello hasn’t denied) that at a later dinner between Xmas and New Year 1994 Costello expressly indicated to Howard that he still reserved the right to run for the leadership. So what valuable consideration was there flowing from Costello in exchange for Howard’s “undertaking” to retire in 2 terms (or 1.5)? In the absence of consideration it isn’t a contract. Howard would appear to be correct that it wasn’t a “deal”, legally enforceable or otherwise. And a gratuitous undertaking by Howard for which no reciprocal promise was made is not one that Costello could reasonably have expected to be honoured anyway (assuming that the concept “honour” has any meaning in that context).
BTW Richard. Did I email you the detailed instructions on how to post at Troppo? If not, just say and I’ll send them. If so but you’re still struggling to work it out, again just say so and I’ll send you my phone contacts and then I can talk you through the process.
Ken,
The doctrine of consideration may be good law still, but it’s always seemed otiose to me. All that’s necessary is what is required in non-common law countries. That is the other two things required in common law contract.
If you have
1) offer and acceptance and
2) intention to create legal relations
What pray tell, does the doctrine of consideration add?
Richard, nice comments and nice contractual analysis. Time certainly wasn’t of, or made of, the essence of this pact.
But Richard and Ken, isn’t “promissory estoppel” a better ground to found an “action” here rather than contract, i.e., an undertaking given by Johnny on which Costello relied etc a la Walton Stores. Not that I think it would be successful, I’m only arguing analogously, as the qualifications Richard and Ken pointed to are valid. And doesn’t such an estoppel more accurately characterize the intentions of the parties?
Nicholas, strictly you don’t need an offer and acceptance as an element for a valid contract. This is one method of evidencing an intention to be bound. Not all contracts have such. For example, so called unilateral or synallagmatic contracts don’t, eg, the contract in Carlill v. Carbolic Smoke Ball C.
Now consideration is also an element of a valid contract because without it a contract is a nudum pactum and unenforceable. My memory of the history of contractual actions is hazy but I suspect it may have something to do with the fact that the basic remedy for breach of contract is damages. Hence, no considereation, no right or forbearance given, no damages.
As a final general point, I know it is great fun to dcipher the code of politico-speak,like “no” means “not now” or “maybe but later”, but it does devalue the language. Politicians, for me, are in a position of trust vis a vis citizens, fiduciaries of power if you will, and we should expect more. Naive I know. But analogously, would we be happy with such cavils and caveats from say our friends, who are in a sense in a position of trust in respect of our emotions and affections.
But, of course, as you say Richard, the media reporting politics as a contact sport doesn’t help this regrettable state of affairs.
Gaby I think it’s a matter of definition. I’d say with a unilateral contract that responding to the broadcast offer as Carlill did with the Carbolic Smoke Ball Company’s offer was accepting the contract.
(If people want to know what we’re going on about – there is – as usual – a good summary on Wikipedia.)
http://en.wikipedia.org/wiki/Carlill_v._Carbolic_Smoke_Ball_Company
Yes Nicholas I agree that you can usually characterize the intention to be bouund via the offer and acceptance formula. But as a matter of legal theory the general point stands that aconstitutive contractual element is the manifestation of an “intention to be bound”.
A further thought on the estoppel point, a “handshake” informal “promise” has, as it always has I suppose, little value in the halls of power unlike for the rest of us in life quotidian. The spirit of Machiavelli lives on and all that.
Gaby
Promissory estoppel requires the promisee to alter his/her position in reliance on the promise. If Howard is telling the truth in asserting that Costello continued expressly to reserve his entitlement to run for the leadership even after Howard had given his “undertaking” (and the fact that Costello hasn’t denied this suggests it IS true), then it would be difficult for Costello to establish that he relied on the promise in making his eventual decision against running. More likely he decided not to run because he didn’t have the numbers or for some other reason thought it wasn’t a good idea.
Moreover, the concept can only apply as a general analogy not as an argument that could succeed in a court of law. In administrative law, promissory estoppel doesn’t apply as a matter of principle, because the courts consider that the public interest in public officials making the best and most appropriate decision at the time outweighs any private interest in enforcing prior promises/representations (to do something else) that may have been made to particular individuals adversely affected by the decision. Of course, political party decisions are not being made under statute nor by public officials as such, but nevertheless they are arguably fulfilling a public rather than private role, and I suspect that a court would be very reluctant to extend the doctrine of promissory estoppel to such a situation. That is also suggested by the fact that courts have generally been very reluctant to allow contract and quasi-contract arguments to be deployed by club and political party members seeking to enforce complaince with club/party rules against each other. These are generally considered “domestic” matters in which courts don’t interfere.
Nicholas
I have some sympathy with the argument that consideration is a redundant element of contract in common law countries. But even on the question of intention to create legal relations, I think Costello might well have a problem. Political promises between members of the same party aren’t quite in the same class as domestic or family promises (e.g. between husband and wife) where there is a presumption against an intention to create legally enforceable relations, but nevertheless I strongly suspect that if you asked politicians doing deals in smoke-filled rooms whether they intended that those deals would be enforceable in a court of law, their answers would mostly be emphatically in the negative. The contemplated enforcement mechanisms for political deals tend to be extra-legal in nature.
Thanks for the reply Ken but I think you are taking me too literally. I was only suggesting an analogy with promissory estoppel as a relatively better type of analysis than contract, essentially because of the creation of legal relations point. Promissory estoppel doesn’t have this, as it only needs reliance. Of course, I don’t think any such undertaking or pact would be justiciable for the reasons you state. I didn’t think it was being seriously argued that it would be. Hence, my view that the moral considerations are more significant.
Costello’s only relevant “reliance” is not in fact running. But he would be faced with all of the difficulties that you and Richard have pointed out.
I can’t remember my comparative law, but does any one know whether in practice or substance the Continental law of obligations differs all that much from the common law of contract? My memory is that the two tend to converge.
Yes Ken, I agree. I wasn’t seeking to strengthen Costello’s argument. Just pointing out the idiocy of the doctrine of consideration.
Nicholas for someone who couldnt agree more I couldnt disagree more. consideration is a good thing. Not as good, perhaps, as Guus Hiddink or twelve bar blues, but pretty good.
The point of contract law is to decide which promises will be legally enforced. You obviously don’t want to enforce every promise. How do you decide?
You can’t just say “intention to create legal relations” because then youd be in court for the rest of your life deciding what the indications of intention were. “Offer and acceptance” won’t work: “I’ll always love you” “thank you darling” and there you go.
The way to decide needs to be objective and simple. You can, like the Europeans used to do, say that only signed promises in writing are enforceable. Or like the hobbits, in green ink. Or you could, say, mark enforceable promises by cutting off a finger joint like the yakuza.
But the way the poms developed, based on a theory of contracts as bargains, was that if there was consideration – that is, some sort of price – then the deal was enforceable. Easier than writing. Less messy than finger joints.
For mine, this is a good system that works fairly well. In passing, it marks the mercantile accent of the common law. “Nation of shopkeepers” was, if NB had only realised, a compliment.
We also have a system of written documents (“deeds”) that make promises without consideration enforceable.
I think the consideration bit of the howard/costello is straightforward: Costello provided consideration by his agreement not to run.
My problem, which is as much a matter of commonsense as law, is that the deal itself was incoherent, undefined, and no more than a temporary arrangement. There could not possibly have been an intention to create legal relations, because the deal is, in my view, unenforceable, against public policy, probably illegal, and, as I already said, dopey.
Gaby same thing with estoppel. Estoppel would, perhaps, sort of work, but Ken is right about it not being available in admin law, and the only real estoppel would be that H would not be allowed deny that if C ran dead then at some undefinable stage, subject to a raft of conditions and qualifications, he would not oppose C running.
BTW Ken, thanks Ill get back to you after I try again it is llkely that being really dumb I have just not understood your clear and courteous instructions.
In passing, doesn’t the appallingly clumsy and unspeakable cruel way that some groups (most recently in Mumbai) have to state their claims and attempt to enforce their views make you thankful for the rule of law? I used to have clients from places like Somalia and every time I saw them I used to send a little atheists prayer to our system of representative democracy. Put like that it sounds cheesy, I know, but it is a real deal and a big deal. And one of the amazing things is, that even though politics is peopled with knaves, vagabond, three card trick merchants and decaying hacks, it still delivers a relatively benevolent structure as it wheezes and shambles along.
rp
Nice one Richard. Ah Guus…good man…in fact “guus” should become the superlative of “good” for a coach…X is the guus coach…the only highlight of the World Cup for me was Australia’s performances, otherwise a very average tournament.
But my hunch is still that the bargains the civil law enforces will pretty much square with those held enforceable by the common law.
“Democracy is the worst political system, except for all the others” or so, per Winston Churchill (via a footnote in Krugman’s “Peddling Prosperity” I think).
Richard, with the greatest respect . . . and speaking as one who had the greatest admiration for you when you couldn’t agree more with me . . .
Intention to create legal relations is a perfectly sufficient test. You say it’s unclear. Well the law is full of this kind of qualitative test. The ‘reasonable man’ is all over the place. Common law tests of things are pretty much nothing but this kind of thing. At least when I did contracts the case law on intention to create legal relations drew the line quite nicely as I recall.
I guess to make your case you need to show;
a) that the current test of intention to create legal relations produces capricious results – if so can you cite some examples?
b) that it could not be fixed with better precedents or statute law
c) that the doctrine of consideration performs as good a service as any in filling this gap.
Since all three elements of a contract must be demonstrated, the three requirements of
1) offer and acceptance (mutatis mutandis for Gaby’s concerns with this terminology)
2) consideration having passed and
3) intention to create legal relations
are only of relevance when two can be established but one cannot. Thus the only situation of significance for consideration is where it has been found that tests 1) and 3) are passed, but 2) is not – consideration has not passed. Some clever dick forgot to craft the contract as an exchange of promises between the parties – for instance with the provision of a peppercorn from the side which would not otherwise have given consideration (for Chrissakes).
So point me to a case where the court found that there was offer and acceptance and an intention to create legal relations which was then vitiated by a lack of consideration passing between the parties and I’ll show you a case that produced an unfair result – and more to the point unnecessarily failed to produce an unfair result. It just produced an unfair result with no redeeming benefits.
Now there may be cases where the result was fair and where the doctrine of consideration was used somehow in lieu of some more specific argument – for instance that a bargain ‘concentrates the mind’. But if you think that this is necessary to reach the right result, then the law should build the test around that concept, not around an essentially arbitrary idea that contracts absolutely HAVE to have the formal structure of a bargain (even if a house is exchanged for a peppercorn).
Oh and by the way, I’m not trying to argue ANYTHING regarding our esteemed Prime Minister and Treasurer.
Mind if I have a go, Nicholas?
A few initial points. Intention to create legal relations is quite a low level element and invariably easily satisfied. There is a rebuttable presumption against such relations in domestic or social contexts. I think, but am not sure, whether there is a presumption in favour in business contexts.
Also, the law doesn’t concern itself with the “adequacy” of consideration. So a peppercorn is sufficient. But so is a promise in exchange for another promise.
Secondly, your list of elements for a valid contract are not exhaustive. You also need agreement on the terms of the contract, 2 parties with contractual capacity and that the contract not be illegal or against public policy.
Finally, the purpose of the law of contract is to provide redress for breaches of whatever it holds to be valid and enforceable contracts. The primary means of redress available are damages and in a limited range of cases injunctions to enjoin performance. So the big question is for breaches of which promises should the law provide a legal remedy?
You say that any case with an intenion to create legal relations and an intention to be bound, but no consideration , and which is not enforceable, will be unfair. I don’t have any texts handy, so I can’t give you any cases, but how about the following as a possible counter-example? Note that it is based on my understanding of the creation of legal relations test.
A has a photo shop. B, a casual acquaintance drops in and says, “Hey A, I want these photos printed for nothing. Would you promise to do them for me by tomorrow?” A agrees but doesn’t end up doing it.
Here we have a business context and hence prima facie legal relations, since no evidence to rebut. We have offer and acceptance. But I can’t see any unfairness in not giving B a remedy.
OK my response is this.
1) The correct test is intention to create legal relations. The absence of a bargain suggests that there is no intention – though as you say other aspects of the context like it’s situation in a business suggest and intention. I’d expect the cases to be quite commonsensical about this and involve a weighing up of the evidence and a decision.
2) If there is an intention to create legal relations – and it’s shared then B’s enforcement of the contract may be capricious or impolite (and that fact goes or should go to the test of intention to create legal relations also). But if it is truly the case that B did intend to create legal relations, then there is no injustice. To put the point another way, what is the public policy rationale of stripping B of his right to create legal relations with A in this situation?
3) If B added to the contract – oh – “sure I’ll do it for you if you blow me a kiss”, then there’s consideration and the contract. It all seems so peculiar.
4) If we say that B’s enforcement in this case is unfair, then there are lots of cases where contracts are enforced unfairly. But we take the view that (subject to exceptions where they’re well enough thought out) the law seeks to empower people to make decisions and also to bind themselves by those agreements. It is simply ridiculous to say instead that it gives them the power to bind themselves so long as they have a lawyer wispering in their ear “add a bit of nonesense about a peppercorn to your agreement”.
Nicholas,
Re 1) it seems to me that you may be sliding a consideration type concept in the backdoor by making the creation of legal relations partially dependent on the existence of a bargain. And my hunch is that the civil law does something similar but I just can’t remember the details from a comparative law course many years ago.
Re 2) the public policy rationale is to delimit the set of promises that are legally enforceable in a particular manner. It can’t be right for just B unilaterally to intend to create legal relations. The point about legal relations is that it must be the intention of the contractiong parties to do so construed in the light of all relevant surrounding circumstances. The common law already says this.
Further, the legal rationale is to distinguish a contract from a gift. In the example I gave, A is basically offering B a gift of some services and photos. And I think it is right that the law distinguish between these two cases by requiring a quid pro quo for a contract and offering different remedies. It seems to me to be a perfectly sensible solution.
Re 3 and 4) An important aspect is that consideration must move from the promisee. Also, as I said, the adequacy of consideration is not an issue. Hence the pepporcorns and reciprocal promises.
Finally, as a matter of public policy, it seems to be a reasonable compromise to only extend legal enforceability to those promises that have been “bought” and for the impetus for the performance of “unilateral” promises to be left to goodwill and commercial comity.
Gaby,
By way of introduction and clarificaiton – Yes, when when I spoke of B intending legal relations I was presuming that meant both. If both don’t wish to create legal relations then the legal system has no business creating them.
Now onto the substance:
Yes some ‘consideration’ issues could be considered under ‘intention to create legal relations’. That isn’t me having it both ways. It’s ordering the argument in the appropriate way. Arguments for retaining the doctrine of consideration usually actually appeal to the idea of intention to create legal relations – as in your case. My point is that in this case the consideration doctrine is redundant.
The point about then thinking of consideration arguments under the test of intention to create legal relations is that that’s the right place to think about them not as some separate test. You say that the law has decided to draw some kind of line between gifts and contracts as agreements, and also that consideration need not be adequate.
But this leads to all sorts of artifice – like peppercorns and ‘deeds’ to make gifts legally enforcible. And indeed the ‘doctrine of consideration’ itself. Here’s a few lists from Wikipedia about the common-law ‘doctrine of consideration’.
That’s just the beginning of it.
How’s this for another branch (or should that be division) of the doctrine of consideration.
Performance of an existing contractual duty is not consideration
The performance of an existing contractual duty owed to the promisor is not good consideration for a fresh promise given by the promisor.
For example, in Stilk v Myrick, Stilk, a seaman, agreed with Myrick to sail his boat to the Baltic Sea and back for
I’m not sure that it would in practice be so simple all of the time… But I have to admit that your last comment was a good one and has made me think long and hard.
I don’t really want to defend all of the details of the doctrine of consideration, and they are being elaborated on all of the time, as you rightly indicate by Williams v. Roffey. Many of the aspects you cite rely on precedents that are centuries old. For example, the principle that a smaller sum can’t discharge a debt for a greater amount goes back to Pinnel’s case in 1602, although it was re-affirmed by the House of Lords (I think) in Foakes v. Beer in the 1880’s. It is a useful principle though, which I have in fact relied upon. Say someone owes you $200 and sends you a cheque for $100 “in full and final satisfaction”. My advice, based on Pinnel’s Case, is bank the cheque and sue for the remainder.
First, I think I need to clarify a point. I don’t think it matters in substance, but just for tidiness. This is that we have a different understanding of the intention to create legal relations requirement as I tried to allude to above.
My understanding of it is that it is a relatively easy requirement to satisfy and only very rarely called in question. The relatively more important element of a contract is what I want to call having “an intention to be bound” or an “intention to enter into a contract”, and what you term “offer and acceptance”. So I would view your proposal to consider “consideration” type matters as relevant to whether this requirement has been fulfilled. I think this is the right way to pursue the issue on my understanding of contract law.
My hunch is that it is not going to matter much which way you examine it, because I reckon even on your proposal of considering consideration type matters as part of contractual intention, any sophisticated law of “promises” is going to want to make pretty similar distinctions between enforceable and unenforceable obligations especially in relation to what can be styled “bargains”, or gifts, etc. Your proposal will constitute as valid contracts many arrangements that fail to comply with various abstruse, precedent-dependent aspects of the law of consideration, but this will come at the cost of greater uncertainty in evidencing an intention to contract in the absence of consideration in instances such as in my counter-example.
In short, I still think my counter-example stands and that it is unfair for B to have a cause of action in those circumstances. And that requiring consideration as a separate element of a valid contract adds to commercial certainty as to what is the class of enforceable contratual obligations. But this is not an argument for stare decisis on all aspects of the doctrine and that various of these should not be revised in the light of current commercial practice and expectations.
The common law is a wonderful, evolving thing as Lord Atkin more or less said in Donoghue v. Stevenson.
Where can find contact Margot Kingston now? Anyone got an email or phone number please?
[…] when I studied law were were the doctrine of consideration and the rule against hearsay. I argued here that the doctrine of consideration is completely redundant. One could remove it, and possibly very […]