A Bidirectional Anglo-German Comparison of Consideration in Contract Law, by Johannes Ungerer

The concept of consideration is often perceived as one of the most distinctive elements of English contract law in comparison to contract law in Civilian legal systems, such as Germany. Yet from a functional perspective, it can be shown that both English law and German law deal with similar issues and pursue similar objectives, albeit by different means. Consequently, it becomes possible to gain and apply insights in a novel ‘bidirectional’ manner. This is a new way of employing comparative law beyond the traditional tasks of establishing and evaluating similarities and differences. Bidirectional comparative law can yield suggestions on how each legal system can better fulfil the identified common function. ‘Bidirectional’ means that such suggestions can be derived from one legal system for the benefit of the other and vice versa, so that both legal systems are used as an inspiration and both are improved.

Such a bidirectional Anglo-German comparison of the concept of consideration in contract law has resulted in my article published in International and Comparative Law Quarterly, (2023) 72 ICLQ 251. The comparability is based on the proposition that the function of consideration in English contract law is to distinguish between promises which form part of a bargain and promises of gifts. Consideration ensures that the gratuitous promise of a gift, in contrast to the promise to make an exchange as a bargain, is not a legally enforceable contract, unless strict formal requirements are met. A comparable but inverse distinction is made in German law, which also distinguishes promises of gifts from any other promises which form part of a bargain. Yet German law does not require a positive confirmation of the bargain character of every contract which does not meet special formal requirements, because German law does not screen all promises for such positive confirmation in order to make them enforceable. Rather, German law inverts the process: where it detects simple promises of gifts, it denies their enforceability.

On this basis, it can be shown that German law is substantively aligned with leading principles of the English consideration doctrine, namely that consideration must be of value but need not be adequate, and that consideration must not be past. Both of these principles are more universally observed than previously acknowledged. English law and German law can be seen to employ them to distinguish enforceable promises of bargains from unenforceable promises of gifts. Since the English doctrine of consideration has been more intensely debated and has been subjected to greater scrutiny, German courts would profit from having comparative regard to these parallels with the doctrine of consideration when assessing gratuitousness as the operative criterion in German law. This would make it easier to understand the reasoning behind decisions on affirmed or denied enforceability of promises, and it would also help remedy the contradictory treatment of the enforceability of mixed gifts in German law.

In the other direction, it is argued that English law can profit from taking comparative inspiration from German legal doctrine in respect of promises of additional payment to employees. Traditionally, they were unenforceable for want of consideration in English law, and this has only changed due to the much criticised recognition of ‘practical benefits’ as good consideration. However, English law has neglected to respond to the question of whether the promise of additional remuneration in an employment context can ever be considered as gratuitous. German law has developed a much clearer and coherent position on this point during the 20th century. Accordingly, promises of additional benefits in an employment relationship are regularly conditional or at least causally connected to the employee’s performance. Taking account of these comparative reflections can support the reasoning in English law that employers make enforceable, non-gratuitous promises of additional pay. Additionally, the bidirectional comparison underpins the case against the occasional proposal to abolish the doctrine of consideration in English law. Consideration has certainly not developed straightforwardly and it seems antiquated, but it – or an equivalent concept – is necessary to distinguish bargains from gifts. Abolishing consideration would only result in the need to introduce an alternative solution to fulfil the very same function. Hence, my ICLQ article concludes that “what consideration does is neither unique to Common Law, nor superfluous.”

The new method of bidirectional comparison, which has been employed for the first time in the article, provides a valuable tool for scholars more generally to gain a better mutual understanding of legal concepts and to develop the law in their respective jurisdictions through the two-way comparison. The bidirectional approach can, where suitable, lead to a more coherent interpretation and application of legal doctrines and it can enhance the consistency of comparable legal concepts across national borders. It allows comparatists, for instance, to overcome the limitations of a one-sided comparison, where important aspects of the law in one jurisdiction may be overlooked or misunderstood due to the absence of a counter-comparison in the other direction. For instance, had the comparison of consideration in contract law not been conducted bidirectionally, it would not have been possible to establish with the same persuasive force that it is indeed a common feature of both English law and German law to distinguish enforceable promises which form part of a bargain from unenforceable promises of gifts. Without the bidirectional comparison and this insight, it would furthermore not have been possible to identify the respective principles which are perfectly clear in one jurisdiction but are underdeveloped in the other jurisdiction, and vice versa. It would, in particular, not have been possible to make constructive suggestions for both systems, or to realise that light and shade exist in each jurisdiction.

One might fear that bidirectional comparison is particularly prone to overly focus on comparability (in the sense of similarity) at the expense of recognising differences. However, properly understood and applied, the bidirectional approach is able to both acknowledge and benefit from particular differences between legal systems since it does not seek to insist on the existence of a uniform legal concept across the compared jurisdictions. Instead, it recognises that different jurisdictions may have developed distinct legal doctrines deeply rooted in their traditions. Since the method is (only) bidirectional and not, say, omnidirectional, its purpose is not to craft a uniform, artificial solution that ought to replace the national conceptions. Rather, it seeks to facilitate mutual understanding and critical engagement with foreign legal concepts in a way that is respectful of their particularities while recognising the potential benefits of cross-jurisdictional learning and inspiration. Where a comparable concept is characterised by divergent aspects, the bidirectional comparison approach can provide a framework for revealing and exploring these differences and identifying their implications precisely because the comparison is conducted in both ways. In this regard, the bidirectional comparison has the advantage over traditional one-way comparison in that it not only identifies where one system is different from the other but also facilitates a better understanding of the reasons for those differences and their potential benefits or drawbacks.

Bidirectional comparison promises to be a fruitful method in areas where a (functional) comparability of legal concepts can be established, even if this comparability is not obvious at first sight. My article on the concept of consideration in contract law is insofar an example of how bidirectional comparison can be applied to reveal and explore the comparability of a concept that was orthodoxically believed to be unique to Common Law jurisdictions.

By contrast, the bidirectional comparison may not be suitable for legal concepts that are fundamentally different and cannot be compared in a meaningful way, or where the differences between the legal systems are inherent in their cultural or otherwise determined divergence. In such cases, undoubtedly, a more nuanced and contextualised approach may be necessary to appreciate the legal concepts in the respective systems. This is not to say that bidirectional comparison should be dismissed outright in these circumstances, as it may still yield insights into the underlying values and reasons for legal concepts, even if a direct comparison is not possible. In any event, bidirectional comparison would not be more or less suitable than any traditional one-way comparison in such situations.

Therefore, it is to be hoped that my article on consideration in contract law will, beyond its immediate findings on this doctrine in English law and the inverse German criterion of gratuitousness, inspire further research employing the bidirectional method for other legal concepts and areas. It has the unique capability of revealing how ideas from the individual compared jurisdictions can help improve the understanding and application in all compared jurisdictions by suggesting how each jurisdiction can better fulfil the identified common function.

Posted by Dr Johannes Ungerer (Erich Brost Lecturer in German Law and EU Law, Faculty of Law and St Hilda’s College, University of Oxford)

Suggested citation: J. Ungerer, “A Bidirectional Anglo-German Comparison of Consideration in Contract Law”, BACL blog available at https://wp.me/p80U0W-1oV.

Photo Credits : Johannes Ungerer