ROADMAP – Consideration & Contractual Intention

Consideration
The classic definition of consideration is either a benefit (+) to the promisor or a detriment (-) to the
promisee.
Note that the promisee who wishes to enforce the promise against the other party (promisor) need only
show one or the other, not both. If he can show both, consideration is more than satisfied (overkill).

In a bilateral promise, there is an exchange of two promises (thus the word “bi”):

Ask yourself this question: which promise are you enforcing? If the promisor (A) of Promise 1 made a
promise to the promisee (B) and A reneges from his promise, the law will require the promisee B to
show that A’s promise is supported by consideration, usually moving from B.

Promise 1

Promise 2

Conversely, if B breaks his promise (Promise 2) to A and A wishes to sue B to enforce B’s promise, the
law will require A (promisee of Promise 2) to show that he has furnished consideration in support of B’s
promise.

The following are some examples of Benefit-Detriment:

BENEFIT
Increased sales
Revenue
Joy of recovering lost dog
Builder not liable to Main contractor for late completion: Williams v Roffey (1991) English CA [“practical
benefit”]

DETRIMENT
Forbearance to sue
Opportunity cost
Effort, labour, expense
Consideration must move from the promise but it need not move to the promisor; it can move from the
promisee to a third party.

Consideration cannot be past.

Consideration cannot be vague or insubstantial (“I promise to pay you $100 in consideration that you
will not bore me!”: See White v Bluett (1853).

Consideration cannot be performance of a public duty. Why? Corruption, bribery, secret gifts…

Consideration cannot be performance of an existing contractual duty: Stilk v Myrick (1809), but see new
developments in UK which suggest that it can still be good consideration so long as the promisor enjoys
a “practical benefit”: Williams v Roffey (1991). Which view does Singapore take – the strict common law
rule in Stilk v Myrick or Williams v Roffey? It seems that Singapore courts treat W v R as a case of ‘limited
exception’, suggesting a cautious approach: Sea-Land case.

In a bilateral contract the consideration is executor (promise in exchange of another promise). The
consideration is complete no sooner when parties exchange promises.

A classic example is found in section 2 of the Employment Act (Cap 91):

A "contract of service" means any agreement … whereby one person agrees to employ another as an
employee and that other agrees to serve his employer as an employee ……..

In a unilateral contract the consideration is executed. A unilateral contract arises when one party
makes a promise to another in exchange for an act. (Remember that there is no such terminology as a
unilateral offer!)The consideration is complete when the promisee has fully performed the act. The
consideration is also the acceptance. The “reward” cases are good examples of executed consideration.

VK Rajah JC in Digilandmall (2004) HC:

“(94) Historically, the common law has recognised an anomaly in the

contractual features pertaining to a display of goods for sale. The goods are
not on offer but are said to be an invitation to treat. The prospective buyer has
to make an offer to purchase which is then accepted by the merchant. While
this is the general principle for shop displays, it is open to a merchant to offer
by way of an advertisement the mechanics of a unilateral or bilateral contract.
This is essentially a matter of language and intention, objectively ascertained.
As with any normal contract, Internet merchants have to be cautious how they
present an advertisement, since this determines whether the advertisement will
be construed as an invitation to treat or a unilateral contract. Loose language
may result in inadvertently establishing contractual liability to a much wider
range of purchasers than resources permit.”

See Section 14(1) ETA and the presumption of ITT (only applies to advertisements using electronic
communications).

Contractual Intention
An agreement will not be enforced unless it can be reasonably be regarded as having been made in
contemplation of legal consequences: Balfour v Balfour (1919). The test is objectively ascertained.
Subjective intention of the parties is irrelevant.

The law proceeds on the basis of rebuttable presumptions which can be displaced by contrary evidence:

Presumption Husband & Natural love

of no Wife & affection
intention

Parent &
Presumption Child
of no Siblings
intention
weakens as
Relatives
we move
down the
table Close Friends

Acquaintance
s
Business
Partners

Presumption Parties at Atomistic,

of intention arm’s length self-
regarding
individuals

Figure showing rebuttable presumptions

© Assoc Prof Dennis Ong

August 2018