Indicia of Seriousness
by Hein Kötz
1. In general
If somebody promises something without obtaining a counter-performance, or promise for a counter-performance, there may be some doubt as to whether the promisor seriously intended to undertake a legal obligation to render the agreed performance or be liable in damages for non-performance. For this reason it is generally recognized that a legally binding obligation requires certain ‘indicia of seriousness’ to be present or certain ‘tests of earnestness’ to be satisfied. In Roman law the problem had not yet arisen since a promise was enforceable only where there was no doubt that the promisor seriously intended a legal obligation, either because the promise had been made in the strict form of a stipulatio or because it formed part of the limited number of ‘consensual contracts’. When in the course of the 17th century canon law and the needs of business and commerce had led to the general principle that legal effect ought to be given to every contractual agreement (pactum), the question immediately arose whether this principle was not too wide. Should an enforceable contractual obligation arise every time parties with capacity had made a pactum untainted by mistake, fraud or duress? No system so held. They all required that there must be something more than the mere fact of consent. In France it was assumed that an enforceable promise must be supported by a valid cause. ‘Tout engagement doit avoir une cause honnête’ said Pothier in 1761 (Traité des obligations, n 42), and the French Code civil provides to this day that ‘l’obligation sans cause ou sur une fausse cause, ou sur une cause illicite, ne peut avoir aucun effet’. A similar rule was developed in England. When it had been accepted that damages could be claimed, by way of a writ of assumpsit, whenever a duty undertaken by contract was not or not properly performed, the rule was added that this writ lay only when the defendant’s promise was for a reasonable motive or for a ‘good’, ‘sufficient’ or ‘adequate consideration’.
2. Formal requirements
All legal systems have rules providing that in order to be valid and enforceable certain contractual promises must be drawn up in a particular form. For this reason formal requirements are laid down by statute requiring certain promises to be documented in some particular form so as to protect the promisor from exposure to unconsidered risks, undue haste or thoughtlessness. In particular, formal requirements must be satisfied where the promise entails an important risk for the promisor, as for example when he agrees to stand as a surety (suretyship), enters into an agreement for the sale of real estate, or submits to the jurisdiction of a certain court or arbitral tribunal (jurisdiction (PIL)). In continental legal systems, gift promises must even be laid down in a ‘notarial document’ or acte authentique to make sure that the donor did not act out of ill-considered generosity or was motivated by flattery, persuasion, or a sob story. No such protection is needed where the donor executed the gift by handing a thing or money over to the donee or by instructing his bank to transfer the money to the donee’s account. The donor cannot therefore reclaim what he has given on the ground that the promise was not made in the prescribed form. Despite the lack of notarial form, the courts have sometimes upheld a promise on the ground that it was not really ‘gratuitous’ since it was made by the promisor on philanthropic or other meritorious grounds or for the performance of a moral duty, or where the promisee relied on the promise and changed his position or accepted some detriment, however trivial. In addition, continental legal systems do not treat a promise as a ‘gift promise’ unless its performance would diminish the promisor’s estate, eg by paying a sum of money or transferring a thing or some other right. Thus no notarial form is needed for a promise to let someone use a house for some time without payment, to grant him interest-free credit, or to provide him with information or take his goods under custody for nothing (gratuitous transactions).
3. Intention to enter a legal obligation
In many legal systems promises will be held valid only if the promisor acted with an ‘intention of creating legal relations’ or en vue de produire des effets juridiques. No such intention may be found to exist in cases in which the promise is given and accepted in an inter-spousal or family relationship or where somebody undertakes to do another a favour such as providing him with information or transacting some other business for him merely par pure complaisance or out of kindness, generosity and benevolence and therefore not with an intention to create a legally binding obligation.
4. The doctrine of consideration
In the common law a comprehensive and ambitious solution of the problem has been developed in the form of the doctrine of consideration which provides that a contractual promise, unless it is in the form of a ‘deed’, is binding and enforceable only if it is made in view of a counter-performance of some sort by the promisee. A ‘deed’ is a signed instrument which makes it clear that it is intended to be a deed, and the signature must be attested by a witness. A person suing on an informal contract must therefore prove not only that the promise was actually made but also that it was given as the ‘price’ for the plaintiff incurring some detriment in law or giving up some benefit. Consequently, some oral promises which, not being gift promises, might be binding in continental legal systems will be unenforceable under the doctrine of consideration. Thus a promise to provide information or perform a certain task for nothing will not be binding. If, however, the information is incorrect or the task is carried out improperly, the promisor may be liable in damages, not because he breached a contractual promise but because he breached a tortious duty of care and thus will be liable in negligence. The doctrine of consideration may also make it difficult to enforce a promise which, though based on the promisor’s excellent intention of rewarding the promisee for past services or fulfilling a moral duty may nevertheless be unenforceable for want of a consideration. Some legal ingenuity is also required to overcome the doctrine of consideration in cases where an existing contract is modified or amplified by a subsequent agreement under which one party, for perfectly sensible business reasons, agrees to pay or receive more or less than originally agreed without getting anything tangible in return. Nor is it plausible why an offeror who expressly agreed to be bound by his offer for a specified period may revoke it at any time before it has been accepted unless he clothed it in a deed or the offeree gave him, or promised to give him, something in return.
5. The doctrine of cause
The civil codes of Italy and Spain follow the French Code civil in making the validity of a contract depend on its having an underlying cause (see Art 1131 Code civil; Arts 1343, 1418 Codice civile; Art 1261 Código civil). It has often been said that cause, like consideration, is designed to deny efficacy to agreements which are not supported by a serious and well-considered reason approved by law. It would seem, however, that cause means quite different things in different contexts and sometimes adds nothing to the proper resolution of the conflict of interest involved. While French courts, like courts in other countries, hold a contract invalid as being contrary to good morals or ordre public, it is not easy to see what contribution is made by the rule that it is not the contract, but its underlying cause which must be forbidden by law or contrary to good morals or ordre public (illegality of contracts). In other cases contracts are held invalid because of the lack of a sufficient cause, but closer analysis reveals that the contract is void for fraud or duress, or because the parties proceeded on the basis of a common mistake, or because one party exploited the inexperience or the improvidence of the other party by promising a counter-performance which was non-existent or lacking in any economic value. In the famous affaire Chronopost (Cass com 22 October 1996, D 1997, 121) the Cour de cassation even used the concept of cause to strike down an unreasonable exemption clause. Though torrents of learned ink have been spilt in France on the true nature of cause, the authors of the 2005-Project for the Reform of the French Law of Obligations followed Jacques Ghestin in proposing detailed rules on cause as a requirement for the validity of a contract.
6. Recent developments in European private law
Under the rules of European contract law a valid contractual agreement must be based on the parties’ intention to enter a legal obligation, but not on any additional requirements to be derived from the doctrines of consideration or cause. According to Art 2:102 PECL a contract is concluded ‘if (a) the parties intend to be legally bound, and (b) they reach a sufficient agreement’ (see also Art 3.2 UNIDROIT PICC, Art II-4:101 DCFR). In obvious rejection of the doctrines of consideration or cause it is added that this applies ‘without any further requirement’. Similarly, the CISG provides in Art 16(2) that an offer is binding if the offeror agreed to be bound for a stated period, and in Art 29(1) that a contract may be modified or terminated ‘by the mere agreement’ of the parties.
Werner Lorenz, ‘Entgeltliche und unentgeltliche Geschäfte—Eine vergleichende Betrachtung des deutschen und des anglo-amerikanischen Rechts’ in Festschrift Max Rheinstein, vol II (1969) 547; John P Dawson, Gifts and Promises—Continental and American Law Compared (1980); Arthur T von Mehren, ‘A General View of Contract’ in IECL VII/1 (1980) ch 1, paras 30 ff; Reinhard Zimmermann, The Law of Obligations (1990) 498 ff, 546 ff; Ferdinand Fromholzer, Consideration, US-amerikanisches Recht im Vergleich zum deutschen Recht (1996); Arthur T von Mehren, ‘Formal Requirements’ in IECL VII/1 (1997) ch 10, paras 128 ff; Tony Weir (tr), Hein Kötz, European Contract Law, vol 1 (1997) 52 ff; Tony Weir (tr), Konrad Zweigert and Hein Kötz, Introduction to Comparative Law (3rd edn, 1998) 388 ff; Jacques Ghestin, ‘Faut-il conserver la cause en droit européen des contrats?’ (2005) 1 ERCL 396.