What is the meaning of the consensual principle for the basis of making the law of contract?


A consensual contract is one that requires no formality or further action beyond the consent of the parties

Most contracts are of this type (see What is a contract and what is required for them to be valid?).

Contracts that are required to be in writing (e.g. many real estate related contracts) are not consensual since, after the parties have agreed to contract, a further step is required to make the contract binding.


To dilate upon Dale M's answer, let's consider contracts that AREN'T consensual. I'll quote English contract law textbooks that explain this better. Note that all these textbooks have new eds. published in Apr 2020.

O'Sullivan & Hilliard's The Law of Contract (2018 8 ed). p 2.

1.6 Similar objections are levelled at the second thread, that contractual obligations are consensual and based on the intention of the parties. Critics point to the prevalence of the printed standard form and the frequent insertion of ‘implied terms’ into contracts,

p. 3

some justified as giving effect to the intentions of the parties but others, like the implied conditions that goods sold in the course of the seller’s business are of satisfactory quality and fit for their purpose, are inserted by statute regardless of intention. Contracts are sometimes described as requiring a ‘meeting of minds’, but even in the nineteenth century, this was misleading. This is because the parties’ intention is judged objectively—how would their words and actions have appeared to a reasonable person? So, although questions about the formation, contents, and interpretation of a contract are resolved by reference to the parties’ intentions, this is not really an enquiry into what the parties subjectively intended or wanted. After all, as Rix LJ pointed out in Procter & Gamble v Svenska Cellulosa Aktiebolaget SA (2012), ‘when it comes to a dispute the [subjective] question of actual intention is likely to be submerged in wishful thinking.’

Anson's Law of Contract (2016 30 ed). p 7.

(iv) Implied terms and the standard of ‘reasonableness’

Finally, the negative aspect of freedom of contract, that there should be no liability without consent embodied in a valid contract, sits uneasily with the practice of implication of terms into the contract, and the use of the standard of ‘reasonableness’ as a way of dealing with gaps in the contractual language.28 Terms are implied not only under statute, but also at common law. Although the basis of such implication is said to be ‘necessity’29 or in the case of custom ‘presumed consent’,30 in many cases this is rather artificial, and in truth in many standard transactions the implied terms are the legal incidents of the transaction,31 from which the parties are, subject to statute, often free to deviate although in practice many parties will simply be bound by those implied terms without seeking to negotiate otherwise. Freedom of contract is also difficult to reconcile with the adoption of the ‘objective theory’ which provides, in essence, that a person (A), whose conduct is such that the other party reasonably believes that A has assented to the terms of a contract, will be bound no matter what A’s real intention is.32 This rule can lead to the imposition of non- consensual obligations, since what creates the obligation is not consent in fact but acting as if consent is being given.

Contract Law: Text, Cases, and Materials (2018 8 ed). p 11.

(2) The individualistic ideology

A persistent theme in Market- Individualism is that judges should play a non- interventionist role with respect to contracts. This distinctive non- interventionism derives from the individualistic side of the ideology. The essential idea is that parties should enter the market, choose their fellow- contractors, set their own terms, strike their bargains and stick to them. The linchpins of this individualistic philosophy are the doctrines of ‘freedom of contract’ and ‘sanctity of contract’.
      The emphasis of freedom of contract is on the parties’ freedom of choice. First, the parties should be free to choose one another as contractual partners (i.e. partner- freedom). Like the tango, contract takes two. And, ideally the two should consensually choose one another. Secondly, the parties should be free to choose their own terms (i.e. term- freedom). Contract is competitive, but the exchange should be consensual. Contract is about unforced choice.
      In practice, of course, freedom of contract has been considerably eroded. Antidiscrimination statutes restrict partner- freedom; and term- freedom has been restricted by both the common law (e.g. in its restrictions on illegal contracts) and by statute (e.g. the Unfair Contract Terms Act 1977— UCTA) [p. 418, Chapter 13, Section 3]. Moreover, the development of monopolistic enterprises, in the public and private sector alike, has made it impossible for the weaker party actually to exercise the freedoms in many cases. For example, if one wants a British family car, a railway ride, telephone services etc. the other contractual partner is virtually self- selecting. Similarly, where the other side is a standard form or a standard price contractor, the consumer has no say in setting the terms. Nevertheless, none of this should obscure the thrust of the principle of freedom of contract, which is that one should have the freedoms, and that the law should restrict them as little as possible— indeed, it is consistent with the principle (in a widely held view) that the law should facilitate the freedoms by striking down monopolies.

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