A bare promise is not binding Q8 – Estate Agent's Examination Part 1&2

Q.
"A bare promise is not binding", explain this statement supported by relevant cases.

(20 marks, 2015 Q8)

(16.09.2015, added 17.09.2015)
A.
The general way to answer the question is to go through the elements of the contract -

Offer v Invitation to treat
Acceptance
Intention to create legal relationship
Consideration
Certainty
Capacity

However, the above may not be answering the key reasoning in the question, and relevant cases are too wide to choose from.

The other way is to choose a particular element which is most associated with the question. In this case, it is - Consideration.

Although consideration is a necessity in contracts in English Law, it may not be so in Malaysian Contracts Law. This had been highlighted in earlier posts on two major deviations.

Without consideration a valid contract?
Past Consideration is Good Consideration

Hence, a bare promise without a consideration is not binding is true in English Law and so in many countries. This can be a way to answer the question using cases as from 'consideration'. Australian Contract Law has a good summary below:

Consideration

Consideration is the price that is asked by the promisor in exchange for their promise – the price for a promise. In many jurisdictions consideration is not an essential element of a contract – it is sufficient that parties have reached a binding agreement. However, the common law requires that, for an agreement to be binding, the promisee (or promisees) must provide consideration (payment of some kind) for the promise they have received. Thus, gratuitous promises are generally not enforceable, subject to the limited exceptions discussed below.

Requirement and nature
Real not adequate
Past consideration
Performing existing duty
Part payment of a debt
Executed v executory
Consideration v condition
Exceptions (inc promissory estoppel)

The requirement and nature of consideration

Price stipulated for the promise
As noted above, consideration is the price stipulated by the promisor for the promise made. Price, in this sense, is used in a broad sense; it need not be monetary or even of monetary value; while it requires some 'detriment' on behalf of the promisee, this detriment can take the form of giving up a freedom otherwise enjoyed (such as promising to stop smoking or to study every Saturday night) and the promisor need not receive any tangible benefit. In Carlill, for example the Court said that it would be sufficient if Mrs Carlill suffered the detriment from using the smoke ball as directed even if the Carbolic Smoke Ball Co received no benefit (this was obiter as the Court did concluded that the company did in fact receive a benefit).

CARLILL V CARBOLIC SMOKE BALL CO

It follows from this that consideration must move from the promisee but need move to the promisor. For example, if promisor (A) asks promisee (B) to pay (C) a sum of money as consideration for A's promise to B, that will be good consideration. However, if promisor (A) asks (C) to provide a payment as consideration for A's promise to B, that will not constitute good consideration (there is no detriment to B in such as case). In the case of joint promisees, it is sufficient if consideration moves from one of the parties.

COULLS V BAGOTS

Can be anything stipulated by Promisor
It is for the promisor to stipulate the consideration for his/her promise (directly or indirectly), not for the promisee to proffer something and call it consideration - however, as indicated above, provided the consideration stipulated it legal, it can take virtually any form and, importantly, need not be of comparable value to the promise for which it is provided.

The most famous case regarding the nature of consideration is Chappell v Nestle in which Lord Somervell of Harrow expressed the view that a 'peppercorn' could constitute valuable consideration (if stipulated by the promisor) even if the promisor was not fond of peppers and would discard the corn (note, however, that adequacy of consideration may be relevant in other respects; in particular, it may be evidence of duress or unconscionable conduct which may render the contract voidable. Other key cases discussing consideration include:

Carlill in which the inconvenience associated with using the smoke ball was held to constitute consideration.
Dunton v Dunton in which giving up a freedom constituted good consideration
Wigan v Edwards in which giving up a legal right was held to be good consideration.

Ref:
Consideration. Australian Contract Law. Available at,
http://www.australiancontractlaw.com/law/formation-consideration.html

(Earlier answer below)
Another term in law for 'bare promise' is 'Nudum pactum'.

Nudum pactum in Latin literally means 'Bare or Naked Promise.' In common law, it refers to a promise that is not legally enforceable for want of consideration. An example of a nudum pactum would be an offer to sell something without a corresponding offer of value in exchange. While the offer may bind a person morally, since the offer has not been created with any consideration, it is gratuitous and treated as a unilateral contract. The offer is therefore revocable at any time by the offeror before acceptance by the offeree.

Below is verbatim from FreeAdvice.com.

A bare contract is a contract that is not legally enforceable because it is missing an essential legal requirement for contracts called consideration. A bare contract essentially refers to a promise that one person made to another that the law will do nothing to enforce.

Understanding a Bare Contract

A contract is a legally enforceable agreement made between two parties. Essentially, this means that a contract is an agreement that the court will enforce and is a private legal obligation that two parties create for themselves. Contracts take two forms in the United States: bilateral contracts or unilateral contracts.

In a bilateral contract, the two parties to the contract exchange promises. For instance, Ann might promise to paint Tim's house and Tim will promise to pay Ann $100 in exchange. Each party has to do what was promised or can be sued for breach of contract. If Ann doesn't paint and Tim has to hire someone else who charges $200, Tim could sue Ann for the $100 in damages he incurred because of her broken promise. Likewise, if Tim didn't pay, Ann could sue for her $100 in damages.

In a unilateral contract, on the other hand, only one person makes a promise; the other party has to act on the basis of the promise for the contract to become legally binding. For instance, in a unilateral contract, Tim would promise to pay Ann $100 but Ann would make no reciprocal promise to paint his house. Ann would bind Tim to the contract (obliging him to pay) only by actually painting the house.

Both unilateral and bilateral contracts may generally either be written or oral (although there are certain kinds of contracts that are enforceable only if written). This means that as long as a formal agreement exists and the court can interpret and determine what the contractual obligations were, the court can take action when one party breaches his obligations under the contract.

Of course, people make agreements or promises that do not rise to the level of a contract. When a person promises his spouse that he will mow the lawn next weekend, this promise doesn't necessarily give his spouse the right to file a breach of contract lawsuit if the lawn is not mowed.

In order to distinguish promises - which are not enforceable in court - from contractual agreements, the law has carved out a number of requirements for contracts. One such requirement is referred to as consideration. Consideration is essentially a mutual exchange of something of value. Without this mutual exchange of consideration, the contract is considered a bare contract and will not be enforced.

Determining if a Contract is a Bare Contract

Determining if a contract is a bare contract, and thus not legally enforceable, will need to be done on a case-by-case basis. In order to make this determination, it is important to look at whether there is a mutual exchange of something that was bargained for and exchanged during the making of the contract.

If Tim simply promises Alice $100 and Alice does not have to do anything to get it, then Tim has given something of value (a promise of $100) but Alice has not given anything in return, so there is no consideration and the contract is a bare contract. Likewise, if Alice simply shows up and paints Tim's house with no promise from Tim that he would give her any money, then there is no consideration and no contractual obligation on Tim's part to give Alice anything.

When assessing whether something of value exists that can constitute consideration for a contract, there is no requirement that the things exchanged by the parties to the contract be of equal value. For instance, if Tim promised Alice $1 and Alice promised to paint his entire house, Alice would become contractually obligated to do the painting once she had accepted the deal because Tim did give her something.

Examples of Bare Contracts

Although the mutually exchanged items of value that serve as consideration do not have to be equal, the consideration given can be imaginary and cannot be something that seems to have value when really it is worth nothing at all. When this occurs, the contract will be considered a bare contract despite the appearance of consideration.

For instance, if Tim offered Ann $100 in exchange for Ann refraining from drinking until she turned 18 and if Ann in turn did not drink until she was 18, at first glance this contract appears enforceable: Tim gave Ann $100 and Ann gave up the opportunity to drink. However, this would be a bare contract and not be a valid legal agreement that was enforceable. The reason being Ann didn't actually give any consideration or anything of value. She was already obligated not to drink by the laws of the U.S., which does not allow alcohol consumption until age 21. Her obligation not to drink was a prior obligation and a prior obligation cannot be consideration for a contract.

An illusory promise is another example of something that cannot constitute consideration for a contract. As such, contracts based on illusory promises are bare contracts as well. An illusory promise is a promise that seems like a promise but which really doesn't create any obligation at all. For example, if Tim promised Ann $100 to paint and Ann promised to paint "as much of the house as she deemed dirty", then Ann hasn't really promised anything at all since she might decide that none of the house was in need of any painting.

As these examples show, determining whether there is adequate consideration for a contract can be tricky. It is often best to seek competent legal advice from an experienced attorney when there is doubt regarding whether a contract is a bare contract or not.

What Happens if a Contract is a Bare Contract?

Those who have entered into a bare contract do not have an enforceable contract, but this does not mean that they have no legal options at all. In certain cases, the court may effectively enforce a bare contract based on equity (fairness). As such, if you believe you have a contractual agreement, you should always consult with an experienced attorney to determine your best course of action and to explore all your potential legal options.

Ref:
Bare Contract, in FreeAdvice.com
As above
Wikipedia search 'Nudum pactum', available at
https://en.m.wikipedia.org/wiki/Nudum_pactum