Notes - Pillans and Rose v. Van Mierop and Hopkins

NOTE

Lord Mansfield's victory over the consideration doctrine was rather short-lived. Rann v. Hughes, 7 T.R. 350 n., 101 Eng. Rep. 1014 n. (1778):

It is undoubtedly true that every man is by the law of nature, bound to fulfil his engagements. It is equally true that the law of this country supplies no means, nor affords any remedy, to compel the performance of an agreement made without sufficient consideration. . . . All contracts are, by the laws of England, distinguished into agreements by specialty, and agreements by parol; nor is there any such third class as some of the counsel have endeavoured to maintain, as contracts in writing. If they be merely written and not specialities, they are parol, and a consideration must be proved.

Despite this setback, Justice Yates' treatment of the consideration doctrine should not be overlooked. His opinion contains the seeds of a possible expansion of consideration which would include not only actual reliance (forbearance) on the part of the promisee but also the likelihood or risk of reliance. Outside commercial cases, however, the potentialities inherent in this approach have been developed hardly at all. Occasionally, it is true, courts have shown a tendency to regard the consideration doctrine as satisfied where facts show the likelihood of reliance but do not permit proof of actual reliance. See, e.g., Lawrence v. Oglesby, 178 Ill. 122, 52 N.E. 945 (1899), discussed in Note, 7 U. Chi. L. Rev. 124, 133 (1939). But the significance of this and similar cases should not be exaggerated. The reluctance of the courts to apply a risk of reliance doctrine is strikingly illustrated by their treatment of firm offers. Under a risk of reliance doctrine, the enforcement of a firm offer would present no doctrinal difficulty.

Even in a field as significant commercially as negotiable instruments, the courts have not developed an explicit doctrine of risk of reliance. The most one can say is that in some cases, actual reliance is defined so liberally that it is hardly to be distinguished from a mere risk of reliance. But while risk of reliance has received little explicit development, it is implicit in the doctrine of "value" in negotiable instruments. Under this doctrine, a person who has taken an instrument in payment of, or as collateral security for, an antecedent debt is regarded as a bona fide purchaser of the instrument for value, and is protected, among other things, from defenses available against his predecessors, irrespective of whether he has given consideration. The reason for this protection is that taking an instrument in payment of, or as security for, an antecedent debt entails a risk of reliance on his part. Uniform Commercial Code §§3-302, 3-303; Swift v. Tyson, 16 Pet. 1 (U.S. 1842). For an explanation of the place of value in the world of negotiable instruments, and its function as a corrective of the consideration doctrine, consult Note, 7 U. Chi. L. Rev. 124 (1939). See also Steffen, Cases on Commercial and Investment Paper 707, 708 (3d ed. 1964); Fuller, Consideration and Form, 41 Colum. L. Rev. 799, 812 (1941). The Uniform Commercial Code has abolished the consideration doctrine with regard to letters of credit, U.C.C. §5-105.