Consideration

1.0.0 Consideration

 Beside O&A + certainty + ITCLR, agreements still require something additional in order for them to be
held enforceable.
 Consideration gives contracts the “badge of enforceability”.
 Definition (M Chen, Contract Law, Fourth Edition, 2012):
 The basic idea of the consideration requirement is that in order to acquire the right to enforce an
undertaking, a party must undertake to give, or actually give, something stipulated by the other as
the price for his undertaking. Enforcement of agreements prioritizes bargains over gifts.
 Without consideration, English law will only enforce promises that comply with certain formal
requirements (e.g. deed) or promises that induce the promisee’s reliance via promissory estoppel.
o Consideration is the “agreed, equivalent and inducing cause of promise”
o
 Consideration connotes something of value that is given in exchange for the other party’s promise or
performance. It’s primary function is to place some legal limits on the types of agreements that may
be enforced.
 Thus, my undertaking (promise) X is enforceable by you if you have given:
 A reciprocal undertaking of Y (on a bilateral contract analysis), or
 Actual performance of Y (on a unilateral contract analysis)
 Without consideration, English law will only enforce promises that comply with certain requirements
(e.g. deed) or promises that induce the promisee’s reliance via promissory estoppel.
 Therefore contract only enforceable if:
 B has 'paid for' it;
 B has relied on A's undertaking and it would be unconscionable for A to go back on it; or
 it is embodied in the necessary formal instrument.

Reasons behind the importance of consideration

 Consideration is evidence of the existence and seriousness of the undertaking.

 Its presence ensures that a promise was actually made (evidentiary), the promisor took care in making
it (cautionary), and understood its consequences (channeling)
 Valuable signal that parties intend to be bound by their agreement
 On this view, consideration is unnecessary if a party’s serious intention to be bound can be proved in
other ways (e.g. deed)
 Welfare maximisation: consideration is an indicator of value-maximising transactions
  Reciprocity – the intuitive justice of exchange, one should get something in exchange for something
else. This is the concept of quid pro quo
 Reciprocation is the norm between equals in most social interactions, symbolises an ideal of fairness,
because it distinguishes trading from taking, and bargains from instances of exploitation.
 Marking the boundary of appropriate legal involvement: draws the line between the public
enforceable transactions and private unenforceable agreements.
 Consideration enforces transactions in the public realm but not those in the private realm between
family and friends
 Legal enforcement is unnecessary in arrangements with friends and family between whom trust
exists, and moral/sanctions back these arrangements up. (social & moral norms will ‘enforce’ the
agreement)
 This allows the law to distinguish between the bargains (which it seeks to protect) and gratuitous
promises (which it does not seek to protect)
Criticisms of Consideration

 Sometiems yield results inconsistent with the intention of the parties

 Over-inclusive, in enforcing some non-bargains as bargains
 Under-inclusive, in failing to enforce some undertaking that deserve enforcement
 Over technical, artificial and internally incoherent
 Some courts have gone to extraordinary lengths to conjure up consideration. The time may have
come for this pretence of finding consideration to be shed
o Chwee Kin Keong v. Digilandmall.com Pte Ltd [2004] 2 SLR 594 (HC): Per VK Rajah
JC - “The modern approach in contract law requires very little to find the existence
of consideration. The marrow of contractual relationships should be the parties’
intention to create legal relations.”

The requirement of Nexus

When I undertake X in exchange for you undertaking Y, there must be necessary nexus (causal
connection) between:

a) The parties me and you; and

b) The undertakings X and Y (each should be induced by and be the price for the other)

Consideration must move from the claimant

 Only the undertakings that have been paid for are enforceable
 Only the party who has for the undertaking can enforce it.
  You can enforce my undertaking to you because you have given me consideration for it. (traditional
view)
 The corollary is that a party who ahs not provided consideration for a promise cannot enforce it. Thus,
a third party cannot enforce my undertaking because you (not the third party) provided the
consideration for it.
 Basis of privity rule, which bars a third party from suing on a contract even where it was made for her
benefit
 Whilst promises continue to be enforceable only if they are supported by consideration, Contracts
(Rights of Third Parties) Act dispenses with the requirement that consideration must move from the
claimant. Hence, a third party can enforce a contract made for her benefit even if she gives no
consideration for it. Thus the consideration requirement is relaxed.
 As such, privity concerns very clearly as to WHO may enforce a contract (one who is a party to the
contract) while consideration is concerned with the TYPE of promises that may be enforced.
(promises supported by consideration)
 There is no requirement that consideration must move to the promisor. Consideration may move
from promisee to a third party. In Tse Soo Sin nee Oei Karen v Ng Yee Hoon [2008] SGHC 30, it was
found that the agreement between 3 brothers to make a gift of part of their inheritance to their
sisters was binding. It was immaterial that the consideration, comprising of their respective
contributions to the gift, were given to their sisters, who were not parties to the agreement.
Consideration must be requested by the promisor (Consideration must be in return for a promise)

 The benefit conferred or the detriment incurred must be stipulated by the promisor and thus there is
no consideration if promise incurs a detriment or confers a benefit merely in reliance on and not in
return for the promise
Case Combe v. Combe [1951] 2 KB 215
Wife’s consideration that was given in reliance on, but not in return for
husband’s promise held to be invalid consideration.
Consideration must be requested
Facts  A husband promised to pay his wife £100 a year on their divorce.
 The wife claimed that she gave consideration for it by not applying
for maintenance.
Holding Promise was unenforceable. The wife had not given consideration for her
husband’s promise.
Rule/Remarks  The alleged consideration was a result of the promise to pay her but
not made in return for it. The husband had not requested her to do it
= No consideration if promisee acted in reliance on, rather than in
 return for, promise. (no consideration if promise incurs a detriment or
confers a benefit merely in reliance on, rather than in return for, the
promise)
 Her forbearance resulted from his promise to pay but was not given in return
for it.
 Promissory estoppel could not be employed here because it could not create
new causes of action where they had not existed before.
 Justice consideration: Wife earned more than ex-husband and only sued 6
years later – she clearly did not need the money.

However, the court can imply a request in finding consideration.

Case Alliance Bank v. Broom [1864] 2 Dr & Sim 289

A party was held to have implied a request for forbearance which led to
consideration being found
Facts  Df promised to provide security for its debt to Pf (presumably so that Pf
would not sue him).
 When Df failed to provide the security, Pf sued to enforce this.
 Df claimed that Df’s promise was not enforceable because Pf had not
provided consideration.
Holding Promise was enforceable.
Rule/Remarks  As a result of Df’s promise, Pf had refrained from suing Df to recover the
debt.
 Thus, by not suing, the bank had shown forbearance and this was held to be
valid consideration.
 Although Df had not not explicitly ask P to forebear, it was implied
that Df did so because Pf had not acted merely in reliance on, but also
in return for, Df’s undertaking.
 Shows that courts are also prepared to imply a request of forbearance
even if it was not explicitly requested

Past consideration is not good consideration

  As consideration has to be given in response to the promise, it cannot logically be given before the
other’s promise was made. In these cases, the law will regard it as a gratuitous response to the initial
gift.
Why would consideration be considered past

a) If it has already been given for a reciprocal promise and cannot buy additional promises from the
same promisor.
 I pay $5 for a book. I cannot rely on the same $5 to enforce your later promise to give me an
additional book.
 Roscorla v Thomas (1842) – R purchased a horse from T. T’s subsequent assurance to R that the horse
was sound and free from vice was unenforceable because the only possible consideration for it was
the price already payable under the original contract and that consideration was past
b) Its performance pre-dates the promise sought to be enforced
a. Eastwood v Kenyan (1840) – A young girl’s guardian raised a loan to educate her and
improve her marriage prospects. After her marriage, her husband promised to pay off
the loan, but the guardian was unable to enforce this promise because his consideration,
in bringing up and financing the girl, was past.

 The Courts will look at the actually sequence of events, instead of the contractual words.
 Re McArdle (1951) – Consideration was held to be past because, although the promise was made “in
consideration of your carrying out” certain work, the work was completed before the promise was
made: it was not something yet to be performed.
Case In re McArdle, Decd [1951] Ch 669
Past consideration not valid even if the contractual words implied that the
promise was in response to past consideration
Facts  Occupants of a house did works on the house and were
subsequently promised payment by the owner “in consideration of
[their] carrying out” the works.
 The owner died before payment was made and her representatives
refused to honour the promise.
Holding Promise was unenforceable.
Rule/Remarks  The evidence established that all the work was completed before the
promise was made.
 Courts look to actual sequence of events rather than contractual
words
  There is an exception to the rule which is the doctrine of implied assumpsit. The court can hold the
promisor’s promise and the promisee’s past actions are part of the same overall transaction
 1.3 (a) Exception – DOCTRINE OF IMPLIED ASSUMPSIT
 Doctrine of Implied assumpsit – when the promisee (these three elements held in Pao On v Lau Yiu
Long [1980] A. C. 614):
a) Performed the act at the promisor’s request
b) It was clearly understood or implied when the act was originally requested that the promisee
would be rewarded – held in Sim Tony v Lim Ah Gee [1995] 2 SLR 466 that where there was no
expectation of reward at the time of the promise, implied assumpsit cannot be used.
c) The eventual promise is one which would have been enforceable if it had been made at the time
of the act.
 Courts can not only imply the request for performance but also the promise to pay for it at the time
of the request.

Case Pao On v. Lau Yiu Long [1980] A.C. 614

Exchange of shares – implied assumpsit – promise enforceable
Facts  Parties agreed to exchange shares in their companies.
 Pf agreed not to sell 60% of the shares it received for a year to avoid
triggering a fall in their value. In exchange, Df agreed to buy back the
shares at $2.50 each at or before the end of the year.
 When Pf realised that might disadvantage them as they could be
compelled to sell for $2.50 even if the shares increased in value, they
refused to assent unless Df agreed to a guarantee by way of indemnity
(that Df would only buy back the shares if their value rose above $2.50).
The indemnity arrangement was signed.
 The share values fell sharply and Df refused to acknowledge either
arrangement, alleging the buy-back to be non-existent and the
indemnity to be enforceable for lack of consideration.
Holding The indemnity arrangement was enforceable even though consideration was
technically past, i.e. Pao’s promise not to sell had taken place before Df’s
promise of indemnity.
Rule/Remarks  The promise not to sell was a valid consideration even though Df’s
subsequent promise only came after Pf’s consideration, because Pf’s
promise was given at Df’s request and it was the common intention
 that Df should protect Pf against drop in value.
 This intention (i.e. the understanding amongst the parties that there
was to be some form of protection in return against a risk of a drop in
share prices) survived through cancellation of the buy back
agreement.
 Df’s subsequent promise may be regarded as either evidence of the amount
payable or a new agreement in the nature of a compromise settling the
amount payable.
 At 629: “An act done before the giving of a promise to make a payment or to
confer some other benefit can sometimes be consideration for the promise.
The act must have been done at the promisor’s request: the parties must
have understood that the act was to be renumerated either by a payment or
the conferment of some other benefit: and payment, or the conferment of a
benefit, must have been legally enforceable had it been promised in
advance.”

Singapore case - Sim Tony v Lim Ah Gee [1995] 2 S.L.R. 466

Case Sim Tony v Lim Ah Gee [1995] 2 SLR 466

Limb (b) of implied assumpsit not fulfilled as there was no expectation of reward
at the time of the promise
Facts  Appellant (Pf) was a civil servant, who was asked to refer prospective
buyers to the owner of some properties.
 Two estate agents found a potential buyer, but wanted to deal with the
vendor through the respondent (Df) acting as front man. The appellant
agreed to introduce the respondent to the vendor.
 The appellant was motivated by friendship and did not seek any reward
for making the introduction. At their first meeting, the vendor agreed to
pay the respondent a half percent commission should the sale and
purchase be completed. 
 Appellant then brought this action alleging that there was a
contract to share the half percent commission among the
respondent, the estate agents and himself.
Holding Consideration was past in this case. Pf’s claim failed.
 Rule/Remarks  Accepted the applicability of the Pao On exception (i.e. implied assumpsit) in
Singapore
 [16]: “[T]he learned trial judge held that the appellant failed to satisfy
the second of the three conditions laid down by the Privy Council
in Pao On… a court should not take a strictly chronological view in
deciding whether consideration was past.”

In this case:
 In this case, consideration here was provided before the promisee indicated to
the alleged promisor that he would like such reward; the promisee provided
consideration not with any hope for any reward or benefit but out of friendship;
and the thought of paying the promisee never entered the alleged promisor’s
mind. Thus, condition (2) of Pao On, which established that it must have been
understood that promisee would earn a reward for his act, was not fulfilled.
(paraphrased from [21])

Principle in Pao On has been endorsed in Sim where Lai Siu Chui J agreed that it is inappropriate to
apply a strictly chronological test in determining whether consideration is past. Instead the more
pertinent consideration is whether the promise and the alleged consideration are in fact “part of one
and the same transaction”.

- Need to give effect to situations where a binding promise to pay has already been formed and the
subsequent agreement does no more than fix the amount of payment
- Applied to the facts, the second principle was not satisfied as the plaintiff has not expected any
remuneration for his services at the time of the introduction.

Principle in Pao On only applies in situations where all relevant conduct and promises constitute a
single transaction and is thus not exactly inconsistent with the general rule that past consideration is
not good consideration if the earlier agreement and the ensuing promise are all part and parcel of
the same transaction.

Consideration must have value

Currie v Misa (1875) LR 10 EX 153:

‘a valuable consideration, in the sense of the law, may consist either in some right, interest, profit or
benefit to one party, or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other.’

Categories of value

Benefit and Detriment

 Usually a benefit will be the detriment of another but this does not always apply
 E.g. paying for something is a detriment to the buyer and a benefit to the seller; it renders the seller’s
promise to deliver goods or perform a service enforceable
 Conversely, delivering or performing something is a detriment to the seller and a benefit to the buyer,
and renders the buyer’s promise to pay enforceable.
 While B/D may be apparent where consideration is executed (i.e. performed), where consideration is
executory (i.e. yet to be performed), benefit or detriment can only be understood in terms of the right
to enforced the promised performance.
Factual or legal

 Factual benefits or detriments are likely to be considered as sufficient consideration, the Courts may
insist on a legal one
 Legal benefits or detriments means that they have value in the eyes of the law
 E.g there is no legal value if the promise performs his pre-existing contractual duty even though it
may have factual benefit to the promisor and factual detriment to the promise
Request

 Value is subjective and if a party requests something, then he or she must have value, and be factually
benefitted by, its receipt. However, this can blur the distinction between the value question and the
nexus question, between consideration and motive, and between bargains and conditional gifts
Tangible and Intangible value

 Performance with economic value readily qualifies as consideration, but difficulty arises with non-
monetary performance of doubtful economic value to the promisor
 Shadwell v Shadwell (1860) – an uncle’s promise to pay sum on the event of his nephew’s marriage to
a particular person found to be valuable consideration
 Ward v Byham (1956) – a man’s promise to pay a sum if the mother of his child promised that the
child would be “well looked after and happy” – found to be valuable consideration.
Invented consideration

 Atiyah argues that the legal conception of ‘consideration’ is used in a wider sense than simply bargain
– when the courts find a sufficient reason for enforcing a promise, they enforced it and when they did
 not find a sufficient reason, they did not enforce it. Consideration is not meant to be more than that
there was a ‘reason’ to enforce the promise
 Treitel argues for the traditional view of bargain consideration. However, he emphasises the flexibility
of bargain consideration and the possibility of English courts ‘inventing’ consideration by treating an
act or forbearance as valid consideration, although it was not the promisor’s purpose to obtain it (e.g.
Chappell v Nestle (1960) and although there is no prejudice to the promise (e.g. Shadwell v Shadwell)

By moving between the different conceptions of value, courts have considerably latitude in
determining whether to find consideration and hence whether to enforce a promise.

- Affected by the different pros and cons towards determining enforcement

o Pro factors for identifying the presence of consideration
 Recognising performances actually bargained for when there is some technical
obstacle to its qualifying as consideration (e.g nominal consideration in Chappel v
Nestle or the idea of practical benefits in Williams v Roffey Brothers)
 Recognising the subjectivity of values and respecting the parties’ intentions
 Protecting the promisee’s reliance (e.g forbearance to sue)
 Preventing the promisor’s enrichment at the promisee’s expense (Pao On)
 Encouraging finality in dispute resolution (e.g compromises and forbearance to sue)
o Con factors that restrain the scope of enforceable promises
  Gifts and other transactions in the private domain, because the law’s involvement
may lead to more harm than benefit
 Wholly one-sided “bargains” – illusory considerations
 Prevention of extortion or corruption – preventing the finding of consideration
when there is already the performance of a legal duty.

Consideration need not be adequate, but must be sufficient

 As long as something has legal value (a benefit or detriment that is valuable in the eyes of the law) is
exchanged, there is valid consideration.
 Sufficient refers to the legal validity
 Doctrine of consideration requires the existence of a bargain, but it does not demand that the bargain
be a good one.
 Central premise is that the parties themselves determine what they value and how much they value
it, fitting with the free-market philosophy underlining the economic efficiency theories that underpin
contract law
 Nonetheless, consideration can still be set aside if there are other vitiating factors. Whether the
contract is unfair is governed by other doctrines such as duress, misrepresentation and undue
influence

Lord Somervell said in Chappell v Nestle: “A contracting party can stipulate for what consideration he
chooses. A peppercorn does not cease to be good consideration if it is established that the promisee
does not like pepper and will throw away the corn.”

 A promise supplied three wrappers from the promisor’s chocolate bates, in exchange for a promised
gramophone record.

Case Chappell & Co v. Nestle [1960] AC 87

Nestle chocolate wrappers – valid consideration – as long as it has value in the
eye of the law
Facts  Pf were owners of a copyright in a musical work.
 Df offered to supply gramophone records of that work with anyone
sending in a postal order together with three chocolate wrappers from
their chocolate bars (this was a marketing strategy to get people to
consume their chocolate bars).
 The Copyright Act 1956 s 8 said a 6.25% royalty needed to be paid
 on the ‘ordinary retail selling price’ to the owners of copyrights. Pf
sought injunction to prevent Df’s infringement of copyright (as Df
had failed to pay a percentage of sales/royalties represented by
the extra value of the wrappers).
 The question for the court was whether the chocolate bar wrappers
formed part of the consideration.
o If they did, Nestle would not have complied with their obligation
to give notice of the ordinary retail selling price (because they
had failed to account for the value of the wrappers).
o If the wrappers were a mere token or condition of sale rather
than constituting consideration, then the notice would be valid
and Nestle could sell the records.
Holding Pfs won the case; nominal consideration is still good consideration. In any case,
chocolate wrappers were symbolic of the advertising campaign to raise sales and
were worth something.
Rule/Remarks  HL held that three chocolate wrappers constituted valid consideration.
Lord Somervell: “ It is said that when received the wrappers are of no
value to Nestlé's. This I would have thought irrelevant. A contracting
party can stipulate for what consideration he chooses. A peppercorn
does not cease to be good consideration if it is established that the
promisee does not like pepper and will throw away the corn. As the
whole object of selling the record, if it was a sale, was to increase the
sales of chocolate, it seems to me wrong-not to treat the stipulated
evidence of such sales as part of the consideration.”
 Furthermore, the wrappers had value in Nestle’s marketing strategy
(increased sales) – not just for Nestle to retain the whole benefit of
enhanced sales without paying owners of the copyright in music.
Where it is desirable to find consideration, Courts prepared to resort
to the request conception of value to overcome apparent absence of
factual benefit/detriment.
  Atiyah argues no consideration in Nestle since it would be ridiculous to assert that the sending or the
receipt of the wrappers necessarily involved an actual detriment to the sender or a benefit to the
defendants.
 Trietel bridges the gap with his concept of “invented" consideration and by emphasis that
consideration need not be adequate.
Limit to nominal consideration device:

- The promise is unenforceable if the consideration alleged is incontrovertibly less than the promise
sought to be enforced, as a matter of arithmetic (i.e. if both parties are paying using exactly the same
means of currency in the same circumstances)
o For example, cannot enforce me paying you $500 in exchange of you paying me $1.
However, exchange of $500 for a pear (nominal), exchange of specific money
(bearing certain date/in certain currency), or payment at an earlier time in exchange
for a sum of greater face value, is enforceable.
- The contractual rights purchased by nominal consideration is less secure, if not negated, in certain
circumstances.

Valueless consideration in the eye of the law

Although consideration need not be adequate, it must have some minimum content. A promisor will
always have a motive (reason) for making a promise, but her promise is only enforceable if her
motive can be construed as that of obtaining something valuable in the eye of the law from the
promise

Mere motive
 Where A promises to transfer a property to B so as to fulfil C’s dying wish, it was held that C’s desire
or motive was not sufficient consideration for A’s promise
Case Thomas v. Thomas (1842) 2 QB 851
Motive is not valid consideration
Facts  A testator expressed desire for his widow to have his house for the rest
of her life.
 After his death, his executors promised to carry out the testator’s desire
if the widow paid £1 per annum towards ground rent and kept the house
in repair.
 However, they later failed to do so.
Holding Though the testator’s desire was merely a motive for the transaction, the
 executor’s promise was met by the widow’s consideration (her promise to
pay and make repairs) and therefore, the promise was enforceable.
Rule/Remarks  Payment of one pound and promise to make repairs was valid consideration.
 Patteson J: “We cannot mix motive with consideration. Motive is not the same thing
as consideration. Consideration exists if there is some benefit to P or some
detriment to D. The contract includes provisions requiring P to pay ground rent and
make repairs.”

Conditional gifts

 The promisee’s satisfaction of the qualifying condition for a promise is not good consideration unless
that condition was request as the price of the promise
 Cannot be independent of the promisee’s action which would otherwise be an unenforceable
conditional gift e.g. I’ll pay you $20 if it rains tomorrow
 But conditions that consist of some action by the promise are likely to be regarded as good
consideration:
 Sending in chocolate wrappers in Chappell v Nestle
 Buying a smoke ball, & using it as directed & catching influenza in Carlil v Cabolic Smoke Ball

Intangible benefits

 The line between gratuitous promises and bargains is reinforced by not recognising intangible
benefits as consideration
 Intangible benefits are uncertain and impossible to enforce
 However, the intangibility of the benefits promises poses no insurmountable obstacle if the courts
think it just to enforce the reciprocal promise
 A mother’s promise to see that her child is ‘well looked after and happy’ in exchange for the father’s
promise to pay towards her upkeep (Ward v Byham)
Case Hamer v. Sidway (1891) 124 NY 538
Pay sum of money if nephew abstained from drinking and gambling – Nephew
had legal right to take part in these activities – Valid consideration
Facts  The uncle promised his nephew that if he would refrain from drinking
liquor, using tobacco, swearing and playing cards or billiards for money,
he would be paid a sum of money upon turning 21.
 Uncle later refused to honour promise on the basis that there was no
valid consideration for the sum of money.
Holding Promise was enforceable. The nephew’s abstinence from drinking and gambling
was valid consideration
Rule/Remarks  The abstinence from liquor, tobacco, swearing and gambling is a
consideration because the nephew had the legal right to do so. The
right he abandoned for a period of years upon the strength of the
promise of the testator that for such forbearance, he would give him
$5k.
Remarks:
 Much more meritorious claim than White
 Assumed to represent position in English law, though it’s an American case

Case White v. Bluett (1853) 23 LJ Ex 36

Discharged from loan if son promised not to complain – Son had no right to
complain – No consideration
Facts  A father lent money to his son and the son in return gave his father a
promissory note by which he promised to repay the money.
 The father’s executors claimed the loan after his death.
 The son defended the claim on the basis that his father promised to
discharge him from liability if he stopped complaining about his father’s
distribution of the estate.
Holding Promise was unenforceable. The son’s abstinence from complaining was not
valid consideration.
Rule/Remarks  The son ceasing to complain is no consideration. In the first place, he had “no
right to complain”, for the father can distribute his property as he pleased.
 The abstinence from doing what he had no right to do is no
consideration.


Policy reasons (Distinguish from Hamer):

  In this case, son’s conduct was much less meritorious than that in Hamer
 A promise not to complain is like a promise not to be a nuisance; courts would
not have wanted to reinforce this as consideration

White v Bluett could be defended on the ground of policy, that one should not be encouraged to
extort favourable bargains by misbehaving (or threatening to misbehave). In Hamer v Sidway, there
was no evidence that nephew was taking advantage of his own bad habits. Agreement appeared to
have been initiated by the uncle to encourage him to quit these habits.

Illusory consideration

 The law will not accept consideration that is illusory where the recipient would inevitably get nothing,
nothing which is enforceable or nothing more than he or she would have received anyway, such as in:
 Impossible to fulfil promise
 If promisee’s performance is known by both parties to be physically or legally impossible at formation,
the parties could not be supposed to have so contracted.
 Discretionary promises
 “if I feel like it, I will …”
 Un-induced performance by the promise
 It is no consideration to refrain from a course of action which it was never intended to pursue
 Arrale V Costain Civil Engineering Ltd (1976)
 E.g. if the nephew in Hamer v Sidaway never intended to drink, smoke or gamble, the newphew could
not have enforced his uncle’s promise to pay him from refraining

Case Arrale v Costain Civil Engineering Ltd (1976) 1 Lloyd’s Rep 98

Facts  An employee was injured at work. Legislation in force at the workplace

gave him an undisputed right to a fixed lump sum of £490. He also had a
common law right to sue the employers in tort for unliquidated damages.

Holding  Any promise the employee might have made not to pursue the common
law claim was not binding as the employers’ payment of £450 was not
valid consideration (it was illusory).

Rule/Remarks  In making the payment, the employers were merely doing what they were
already bound to do. Hence, it was not valid consideration.

Compromise and Forbearance to sue

  When X has a claim against Y, X provides consideration for Y’s promise if X:
 Forbears from suing on his claim – Y concedes X’s claims and X agrees not to enforce it for a specific
time or at all (e.g. a creditor gives a debtor extra time to pay)
 Compromise his claim – Y does not concede X claim but X agrees to abandon his claim (e.g. where the
parties agree to settle their differences)
 Where X’s claim is valid in law, his or her compromise or forbearance is good consideration for a
reciprocal promise. or
 Forbearance is only good consideration if it is requested by the promisor. However, a court may be
prepared to imply a request where the promisee’s actual forbearance is not merely in reliance on, but
also in return for, the other party’s promise
 Where X’s claim is doubtful in law, his or her compromise or forbearance is still good consideration –
Haigh v Brooks (1839)
 If X knows his claim is invalid, his or her compromise or forberance is not good consideration

Case Wade v. Simeon (1846) 2 CB 548

Invalid claim – not based on good faith – invalid consideration
Facts  Pf brought an action against the Df to recover £1300 and £700. Def
promised to pay the sum claimed provided Pf did not pursue his claim. Df
did not fulfil his promise and Pf sued.
Holding No good cause of action – Invalid consideration; Promise unenforceable
Rule/Remarks  Court held that the Pf’s cause of action was invalid (promissory estoppel) – Tindal CJ
“It is almost contra bonos mores (against good conscience), and certainly contrary to
all principles of natural justice, that a man should institute proceedings against
another, when he is conscious that he has no good cause of action.”

Since the surrender of a groundless claim was neither a benefit to the promisee nor a detriment to
the promisor, the plaintiff could not be said to have provided consideration. However, Treitel
observed that reasoning is not entirely convincing as defendant may, in fact, benefit from an
abandonment of a claim known to claimant to be invalid as he is saved from trouble and annoyance
of having to defend the claim. Thus this decision may be better based on grounds of public policy
where a man should not institute proceedings against another when he knows he has no good cause
of action.

 When a person forbears to sue, he gives up what he believes to be a right of action, and the other
party gets an advantage and, instead of being annoyed with an action, he escapes from the vexations
incident to it… It would be another matter if a person made a claim which he knew to be unfounded,
and by a compromise, derived an advantage under it: it that case his conduct would be fraudulent.
Pre-existing duties

Question as to whether X gives good consideration where X does or promises to do something that X
was already legally bound to do.

There are three different kinds of pre-existing duties:

- By the general law

- By a contract with a third party

- By and existing contract with the promisor

General Law

 General rule is that a promise to perform an existing public duty is no consideration for a reciprocal
promise. – even if there is undoubtful factual value to the recipient
 Reasoning: To prevent public officers from extorting money for services, which they were legally
bound to render
 Criticism: This denies both the practical and legal benefit that such promises can confer on recipients.
It also denies the legal detriment to the promisors (they become liable to the promisees, aside from
any liability for breaching their public duty).
 Modern compromise: In practice, where enforcement is judged to be desirable and not contrary to
the public interest, this can be achieved by finding either that more was being promised than was
previously required or that it conferred a practical benefit (controversial).

Collins v Godefroy
(1831) 1 B & Ad 950
Facts Plaintiff unsuccessfully sued the defendant for a payment which the defendant had
allegedly promised in return for the plaintiff’s attendance in court to testify on his behalf.

Held Court held that plaintiff had provided no consideration for the defendant’s promise since
he had in fact been subpoenaed and was subject to a legal duty to give evidence in court.
Existing public duty – no consideration

Where such act or conduct exceeds the requirements of the legal duty, such act or conduct may
constitute good consideration:

Case Glasbrook Bros v Glamorgan County Council [1925] AC 270

 Mine strike – requested police protection – police went over and beyond
obligations imposed by public duty – valid consideration
Facts  Pf, a mine owner, applied for police protection during a strike. Police
superintendent felt it was unnecessary but agreed to garrison 70
policemen at the Pf’s colliery after Pf signed a contract in which he
promised to pay for the agreed level of service.
 Subsequently, Pf refused to reward the police for their additional
services.
Holding As the police had done more than they would otherwise have been obliged to do
(what they thought was necessary), there was valid consideration.
Rule/Remarks Policy considerations:
 Should the law encourage this behaviour – implication that public services
should be open to sale to the highest bidder? May encourage corruption in the
public service, or perpetuate the mindset that public authorities should be paid
more to do jobs they are already obliged to do.
 If principle is applied to pre-existing duties owed to third party, then going over
and beyond duty in serving the person in question may cause neglect in primary
duty owed to third party. Law should not encourage this.

Case Ward v. Byham [1956] 1 WLR 496

Pf agreed to keep the child happy – doing more than statutory duty – valid
consideration
Facts  Pf and Df were unmarried. They lived together as partners for several
years and Pf gave birth to an illegitimate child. Df turned Pf out of the
family home.
 Pf agreed with Df to care for child A (and keep the child happy) and that
Df must pay Pf £1 a week.
 Pf remarried and Df refused payment on the basis that the mother was
simply performing her existing legal duty as mother to the illegitimate
child.
 It was argued in defence that no consideration had been provided for the
father’s promise since the mother was in any event bound to maintain
the child under the English National Assistance Act 1948.
Holding Promise was enforceable. Valid consideration was given.
 Rule/Remarks  By keeping the child “happy”, Pf was doing more than his statutory duty and thus
has furnished sufficient consideration for Pf’s promise,
 The fact that “natural love and affection” is not generally sufficient consideration did
not prevent the court from enforcing what was regarded as an appropriate payment.

In substance, the mother’s promise to look after her child was not significantly different from the
son’s promise not to complain in White v Bluett. This approach in Ward is evidence of how judges
are willing to invent consideration just so the promise can, on occasion, be upheld. Is consideration
still useful?

Denning LJ in Ward did not think that the mother had done any more than was legally required of
her. He was however, prepared to hold that she had provided consideration because in his view,
such promise to perform an existing duty was sufficient consideration. Since the father had factually
benefitted from her care for the child, he had obtained what he had bargained for and was obliged
to perform his side of the bargain.

Pre-existing contractual duties owed to a third party

Performance (or promise to perform) an existing contractual obligation owed to a third party will
constitute valid consideration as the promisee undertakes a new liability to the promisor that is
independent of prior contract.

Case Shadwell v. Shadwell (1860) 9 CB (NS) 159

Pf agreed to marry girl in exchange for money from uncle – valid consideration
Facts  Uncle promised nephew to give him £150 yearly if he married a girl
called Ellen Nicholl (as he was contracted to do).
 Nephew sought to enforce the promise
Holding Promise was enforceable. Valid consideration was given.
Rule/Remarks  The promise is enforceable because the nephew provided consideration for the
uncle by performing the requested act, even though he was already contractually
bound to marry her.
 The fact that the value of the marriage to the uncle was at most
intangible/sentimental did not preclude the possibility of valid enforcement.

Case Pao On v. Lau Yiu Long [1980] AC 614 (See “Past Consideration – Implied
 Assumpsit for full facts)
Rule/Remarks  House of Lords affirmed that the mere promise of performing the duty owed to a 3 rd
party (Fu Chip) is good consideration. Pao On agreed separately with Fu Chip not to
sell their shares thereby depressing its value.
 In Pau On, the plaintiffs undertook a promise to hold shares. While the duty (of not
selling) was to a 3rd party (Co.Y) and not to the defendants, it was held that this
existing duty was sufficient consideration to the defendants (for the indemnity). The
indemnity was given in return for the consideration to perform an existing
contractual duty (to hold shares) to a 3rd party (Co. Y). In the same vein, the
defendants, in indemnifying the plaintiffs, now have the benefit of enforcing the
promise.


The reason suggested (in comparison to existing public duty) was that the danger of extortion was
relatively less compared to a situation where a public duty is imposed on the promisee by law

Pre-existing duty owed to the other party – Contract Modifications

In general, contract parties can make an enforceable agreement to end or vary their contract as long
as it is supported by consideration

 Agreement to end the contract is good consideration if both parties owe outstanding obligations to
each other and consideration released them from their outstanding rights
 However, it would not be good consideration if only one party promises to give up their contractual
rights as this is entirely unilateral and unsupported by consideration – If I have outstanding
obligations to you but you have none to me, your promise to release me form my obligations is
unsupported by consideration; I must give you something extra to enforce your promise
 Modifications of the contract can be:
 Ending the existing contract & making a new one
 Supported by good consideration
 Modification supported by consideration on both sides
 Each party has to give consideration by conferring a new benefit or assuming a new burden and the
mere possibility that either party may benefit or be prejudiced by the new arrangement is enough
 Modifications that only benefit one contracting party.
  The same for more – promisor promising to pay more for the same performance originally contracted
for
 Less for the same – promisor agrees to accept less in satisfaction of the performance originally
contracted for
The same for more

Promisor agrees to pay more for the same contractual duty owed by the promisee

Traditionally, it was held that there is no consideration as the promisee’s reciprocal promise of the
same for more is not considered to be valid consideration.

Traditional answer found in Stilk v Myrick (1809)

Case Stilk v. Myrick (1809) 2 Camp. 317

Seamen deserted – Wages to be shared amongst remainder – Sailors did not do
more than they were obliged to - “same for more” not valid consideration
(traditional rule)
Facts  Df (captain of a ship) agreed to pay Pf, a seaman, to work a voyage. 2 out
of 11 seamen deserted during the voyage.
 Unable to find replacements, Df agreed to share the deserters’ wages
with the remainder if they would work the ship back to London. Df
refused to pay afterwards.
Holding Promise was unenforceable. The sailors were already contractually obliged to
work the ship.
Rule/Remarks  Pf’s claim failed because he provided no consideration for Df’s promise to share the
deserters’ wages. Pf was already obliged to sail the ship home and thus this is not a
valid consideration because sailors were not doing more than what they were
obliged to do
Policy reasons:
 Courts wanted to prevent the possibility of sailors on the high seas making
extortionate demands to perform their contractual duty bringing the ship back
safely; fear of duress and opportunistic exploitation

If the performance is over and above the promisee’s existing contractual duty, it is sufficient
consideration for a promise given in exchange

Case Hartley v Ponsoby [1857] E & B 872

 Additional legal benefit received by promisor – valid consideration
Facts  The remaining crewmen were also promised additional wages to continue on a
voyage, which had become too hazardous after the desertion of 17 (out of 36)
sailors. (The remaining crewmen were entitled not to continue with the original
contract because it required them to do more than they were obliged to do.)
Holding  Promise was held to be binding because in such circumstances, the remaining crew
were no longer bound to complete the voyage and hence in agreeing and doing so,
they had done more than was required under their original contract undertakings.
This gave consideration for the promise of more pay

Stilk v Myrick is significant as it stands for the traditional rule that consideration is only found in legal
benefits or detriments. Factual benefits or detriment would generally not suffice

However, this was threatened in the English COA case in Williams v Roffey Bros & Nicholls
(Contractors) Ltd.

Case Williams v. Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1**
Practical benefit (not having to change contractor) was good consideration
Facts  Df (head contractor) contracted to refurbish 27 flats, subcontracting the
carpentry work to Pf (sub-contractor) for £20k.
 Pf finished 9 flats but was at risk at not completing the rest due to
financial difficulties arising partly from under-pricing of the work and
partly from deficiencies in Pf’s supervision of workers.
 Realising this and mindful of their liability to the main employer (liable
for penalty for delay under the main contract), Df promised to pay Pf
additional £575 on the timely completion of each of the remaining 18
flats (total of £10,847).
 Pf completed 8 flats but Df refused to pay. Df engaged other carpenters
to finish the work and incurred one-week penalty.
 Pf brought an action to enforce Df’s promise of additional payments
Holding Promise was enforceable. The practical benefit accrued to Pf was sufficient
consideration.
Rule/Remarks Court held where the promisor agrees to pay more for the same act and
derives a practical benefit, there is valid consideration. Note that this
principle was not expressly stated in the case itself but can be inferred
from the facts and holding of the case.

If promisee’s same performance confers practical benefits onto promisor, that

counts as sufficient consideration. “Practical benefit” is good consideration. This
is justified because Df obtained practical benefits of timely completion and
avoiding of hassle and avoiding of additional costs of hiring a new subcontractor.

This practical benefit must be obtained by the promisor as a result of the second
promise the promisor has given the promisee.

(Consideration valid when ‘more was being promised or done than was
previously required or, more controversially, that it conferred a practical
benefit’)
Practical benefit accrued to Pf in this case was:
1. Pf’s continued performance.
2. Df avoiding the trouble and expense of obtaining a substitute.
3. Df avoiding the penalty of payment for late performance under main
contract (as Pf can complete his work faster).
4. Df’s promise to pay more only as each flat was completed gave W the incentive
to perform in a more orderly manner, this allowed RB to coordinate its other
subcontractors more effectively and efficiently towards timely completion of the
main contract. (replaced a haphazard scheme of payment with a more
structured one)

Technically, only the last practical benefit is a new promise that was not already
contractually obligated and it is not a legal promise because RB only obtained the
chance (not the assurance) of a more desirable sequence of performance which
it could not have enforced.
However, note that the conferment of practical benefits only by W did not give
him full rights to contractual recovery as it only managed to recover £3 500
based explicitly on the extent of W’s performance up to RB’s breach and W’s
reliance.
- Note that the promisor in this situation would be worse off as contract damages
would increase by trying to salvage the situation.
 - Case enlarged the scope of consideration to include any practical benefit moving to the promisor.
Contrary to Stilk v Myrick, legal benefits (rights) or detriments (obligations) additional to those
contained in the existing contract are unnecessary.
- Any concerns about the promisee applying improper pressure to induce the promisor’s agreement to
pay more should be dealt with the doctrine of duress.
o The defendant’s promise was not procured by duress, as there was evidence that the
additional payments were first proposed by the defendant’s own employee

How do we reconcile Williams v Roffey Brothers and Stilk v Myrick?

Williams v Roffey stands for two propositions:

Consideration, in the bargain sense, is still necessary to enforce promises of more for the same. Still
v Myrick has not been overruled, but only ‘refined’ and ‘limited’. The scope of consideration is
enlarged to include practical benefit moving to the promisor.

Any concerns about the promisee applying improper pressure to induce the promiser's agreement to
pay more should be dealt with by the doctrine of economic duress. Preventing even the chance of
duress is how Williams v Roffey explains the outcome in Stilk v Myrick. However, the two cases are
obviously analogous: if RB received practical benefit from W's promise to complete performance, so
must the master of the ship have received benefit from S's promise to work the ship back home.
Thus, while Williams v Roffey affirms the need for fresh consideration to enforce an additional
promise, it has overruled Stilk v Myrick as to what counts as fresh consideration.

Although both cases argue that there needs to be fresh consideration to enforce an additional
promise, it overruled Stilk v Myrick as to what counts as fresh consideration, holding that practical
benefit and not legal benefit will be sufficient.

- Logically, since Williams did not need to deal with the question of duress, the more expansionist
approach to consideration in Williams is coupled with the call to control improper pressure via the
doctrine of economic distress.
- The elements of duress are that there is (i) an illegitimate threat by one party that (ii) leaves the other
party with “no practicable alternative” but to submit.
 - However, would expanding the approach of duress negate the effect of recognising practical benefit?
o Coleman J in South Caribbean Trading held that the promisee who threatens not to perform
an existing duty cannot rely on the benefit that his or her performance would confer on the
promisor, because their threat is analogous to economic duress if the threat is not based on
an argument that the promisee was discharged from its original obligation.
o If the promisee’s non-performance is justified anyways, any subsequent promise to pay more
is enforceable as a legitimate compromise of his claim.

SINGAPORE CASES – MORE FOR THE SAME

SGHC in Sunny Metal [2007] 1 SLR 853 [30] : The combined effect of ‘ practical benefit’ and the “well-
established proposition that consideration must be sufficient but need not be adequate… is that…it
will, absent exceptional circumstances, be all too easy to locate some element of consideration
between contracting parties. This would render the requirement of consideration otiose or
redundant, at least for the most part.”

Eastern Resource v Chiu Teng Construction [2016]

Issue was whether there was consideration for the 2011 agreement. SGHC was not convinced that
there was no consideration offered. Held hat 2011 agreement was a variation of the 2008
agreement and it was made with the 2008 terms in mind.

- Consideration had been given in the sense that the Defendant continued with the arrangement under
the 2008 agreement instead of terminating the agreement.
- “‘In my opinion, consideration is a legal concept that can be somewhat artificial in the context of
businessmen negotiating without legal advice.… The parties clearly benefited from the [variation], if
not there would be no other reason why they continued to work with each other regarding testing
quotas till 2014. Consideration had been given in the sense that the Defendant continued with the
arrangement under the [original] agreement instead of terminating the agreement, which was the
Defendant’s right. ”
Case S Pacific Resources Ltd v Tomolugen Holdings Ltd [2016] 3 SLR 1049 (In
reading list)

Facts  The parties were in an agreement to purchase shares. Df extended

Pf’s option to purchase shares but subsequently defaulted on this
promise.
Holding  The promise was enforceable as Df received practical benefit (valid
 consideration) for it.
Rule/Remarks  There was increased probability that Pf would not exercise the
option by an earlier date, which would have resulted in Df losing
money. This increased probability of a benefit was in itself enough
to constitute valid consideration.
S Pacific Resources It is settled law that the court does not concern itself with the adequacy
of consideration but does so with the sufficiency of consideration.
Lowered risk of an outcome eventuating is sufficient consideration.

Problems with practical benefit

a. The recognition of practical benefit as valuable consideration can logically extend very far – to
contract formation, illusory consideration, bad faith compromise or forbearance, promises to perform
an existing legal duty, etc.
b. Affirms that a contract right is worth less than contractual performance. This disrespects the very idea
of contract as creating binding obligations.
c. The measure of recovery in practical benefit cases punish the promisor for trying to salvage the
situation. If the promisor agrees to pay more for the same, he receives less in damages when the
promisee fails to perform (since damages = price of substitute performance – original price of
performance). The injustice of this has been recognised by some countries, which take the
appropriate deduction to be the original sum promised, rather than the subsequent promise.
d. May lead to promisees placing duress on promisors in order to extract a larger payment.
Duress

- The fourth problem with practical benefit (i.e. duress on promisors) led to the development of the
doctrine of economic duress.
- Duress rests on the finding that there is: i) an ‘illegitimate threat’ by one party that ii) leaves the other
party with ‘no practical alternative’ but to submit (Universe Tankships Inc of Monrovia v
International Transport Workers Federation (1983)).
- There are several problems with this doctrine; chief among which is that it seems liable to take away
what is recognised by ‘practical benefit’, especially since the very reasons for ‘practical benefit’ are
the same ones for finding duress.
Less for the same: Part performance

The promisor promises to accept less than contractually agreed

The general rule is that a promise to accept part-payment of a debt in discharge of the whole debt is
unenforceable for want of consideration, despite the presence of practical benefit

Case Foakes v. Beer (1884) 9 App. Cas. 605

Part payment is not valid consideration, despite practical benefits involved
Facts  Respondents obtained judgment against appellants for a sum of money.
 The parties agreed in writing that if the appellant made a down payment
at once and gave the balance by installments, the respondent would not
make further legal proceedings to claim interest on the debt.
 However, appellant finished payment, respondents sued for interest.
Holding B was entitled to interests. Promise to abandon her claim to interest was held to
be unenforceable for want of consideration
Rule/Remarks  The decision rested heavily on preserving the status quo in an earlier case,
Pinnel’s Case (1602), which was authority for the proposition that a lesser sum
could not be satisfaction for a debt (i.e. part payment is not a valid
consideration).
 BUT, Lord Blackburn (dissenting) pointed out the practical benefits in commerce
of receiving prompt payment of a lesser sum as opposed to delayed payment of
the whole debt. (Andrew Phang at 155 submits that the majority’s decision here
was premised on little substantial reasoning, and Lord Blackburn’s dissenting
judgment was more persuasive.)
 “What principally weighs with me in thinking that Lord Coke made a mistake of
fact [in Pinnel's Case] is my conviction that all men of business, whether
merchants or tradesmen, do every day recognise and act on the ground that
prompt payment of a part of their demand may be more beneficial to them than
it would be to insist on their rights and enforce payment of the whole.”
 Note that practical benefit in receiving prompt payment of a lesser sum as
opposed to delayed payment of the whole debt is not valid consideration in the
context of part-performance.

Case Fong Holdings Pte Ltd v Computer Library (S) Pte Ltd
Facts  Agreement for the early termination of a lease was upheld.
 The tenant was found to have given consideration for the landlord's promise of early
release by making due payments of the rental and maintenance that were in arrears.
 Even though the tenant was already legally bound to make these payments, it was
said that the landlord still derived a benefit from their receipt, for no payment might
have been forthcoming but for the agreement to surrender the lease.
 Further, the court also took into account the "benefit" that the landlord
 enjoyed in being able to let the same premises out early, although in fact the
premises were not let out until after the expiry of the earlier (surrendered)
lease.
Holding

Rule/Remarks [25]     … I think that there was consideration for the promise of the
plaintiffs to agree to the surrender. … It should be recalled that the
defendants’ business was poor and losing money. There was no certainty
that the defendants would have been able to pay the arrears of rent or
future rent if they had stayed on. Moreover, the plaintiffs also derived a
benefit in being able to let the premises out again…. In Williams v Roffey
Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 512, the Court of Appeal
held that where a promisor makes a promise as a result of which he
obtains a benefit or obviates a disbenefit, that was sufficient consideration
for his promise, even though the promisee did not suffer any detriment. In
that case, the promisee did not suffer any detriment because he had done
what he was under a legal obligation to the promisor to do in return for
the promise of the promisor.”
Appear to be a very liberal application of Williams v Roffey Bros & Nicholls
(Contractors) Ltd
It appears to accept that even the mere possibility that a breach of contract
could confer a benefit on the innocent party was sufficient
Never cite foakes v beers?

Case In re Selectmove [1995] 1 WLR 474

Part performance is not valid consideration
Practical benefit not valid consideration
Facts  A company challenged an order for its compulsory winding up on the
 petition of the Revenue, to which it owed arrears in taxes.
 The company argued that the debt was not due since the Revenue
agreed to let the company defer payment and therefore obtained the
practical benefit of “recover[ing] more from not enforcing its debt
against the company which was known to be in financial difficulties, than
from putting the company into liquidation.”
Holding No valid consideration.
Rule/Remarks  Practical benefit is not a valid consideration in this case because the HL in
Foakes did not consider it as a valid consideration. Further, Foakes was not
expressly considered in Roffey Bros – the extension of it would leave Foakes
without any application (stare decisis argument). Any extension should be made
by the HL or Parliament.
 Essentially, leaving up to HL or parliament to settle the inconsistency between
Roffey Bros and Foakes
 This case also shows how events subsequent to the modification can also
be taken into account. The judge found rejected the claim of promissory
estoppel because ‘it was not inequitable or unfair’ to go back on that
agreement since ‘the company failed to honour its [lesser] promise’. i.e.
since the promise failed to actually perform his reduced obligations, the
promisor could revert to its original rights.
 Declined to extend holding in Williams v Roffey Bros that practical
benefit was good consideration to cases regarding part-payment of
a debt as it would essentially overrule the HL’s holding in Foakes v
Beer. Hence it was held that the practical benefit that Pf, since it
was not liquidated, could pay a greater portion of its debt to Df,
was not good consideration.
 Extending Williams to less for the same modifications would create
a remedial conundrum. The promisor offering to accept less would
be worse off than before offering to accept a lower debt as the
claim for damages would be now restricted

Case D & C Builders v. Rees [1966] 2 QB 617

 Did not pay debt – Promisor in dire financial straits and agreed to accept less due
to necessity – Practical benefit not valid consideration even when promisor
voluntarily agrees to accept less
Facts  Pf, a small building company, carried out building work for Df. Df paid
£250 on account and a balance of £482 13s. 1d. outstanding.
 Pf made several requests for payment but received no reply.
 Pf was later in “desperate financial straits” and Df’s wife offered £300 in
settlement of the whole claim. P initially refused but later accepted the
settlement as they had no choice.
Holding No valid consideration. Could not rely on PE to enforce promise either.
Rule/Remarks  The purported settlement did not bar Pf from recovering the balance of debt.
Part payment is not a valid consideration and a settlement for a lesser sum does
not bind the creditor to the agreement.
 Lord Denning: “Where there has been true accord under which the creditor
voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts
upon that accord by paying the lesser sum and the creditor accepts it, then it is
inequitable for the creditor afterwards to insist on the balance.” (essentially
referring to promissory estoppel).
 However, Rees could not rely on estoppel as there was no true agreement to
accept less and because Mrs Rees had taken advantage of the builder's position:
She had “held the creditor to ransom” and “really behaved very badly” because
she knew of Pf’s financial situation and used their desperation to intimidate
them.

Case MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553
(COA)

Practical benefit is good consideration (Williams v Roffey Bros)

Facts  R incurred arrears while occupying M’s office space. An oral agreement was
reached to vary the payment schedule under the license. One of the issues was
whether the contract modification (which effectively gave “the same for less”
but had practical benefit for M).
Holding  COA: Followed Williams v Roffey Bros instead of Foakes v Beer on the issue of
whether practical benefit constituted valid consideration for cases of “the same
for less”.
  Applied Williams v Roffey Bros that practical benefit amounts to good
consideration
 Although this was a case of part-payment of a debt, the court distinguished this
from Selectmove and Foakes v Beer as MWB would obtain the additional
practical benefit of having Rock remain as its tenant instead of running the risk
of the property standing empty for some time (squatters,etc)
 UKSC: Oral agreement was invalidated due to no oral modification clause
(separate issue). UKSC did not rule on the issue of practical benefit.

Traditional exceptions to the general rule where the promise to accept less is enforceable

 Promisee gives something additional for the dispensation granted by the promisor
o E.g. payment in a different currency, part payment at earlier date/new place
o Part-payment cannot discharge the whole debt “but the gift of a hore, hawk or robe, in
satisfaction is good for … [they] might be more beneficial to the plaintiff than the money … or
otherwise the plaintiff would not have accepted it in satisfaction.”
 Promisee disputes claim and modification results in a compromise
 Claim is unquantified and new agreement just fixes the sum owed by the promise
 When the promise is made to third parties (e.g. you agree to accept less from a third party in exchange for
not suing me) This exception is necessary to support a composition among creditors for where a
composition having been agreed, it would be fraud on other creditors for you, having promised to take
less and received it, then to sue me for the balance.

Relationship between consideration, promissory estoppel and economic duress

- Increasing the scope of consideration will reduce the need to invoke promissory estoppel. Increasing
the scope of economic duress would undermine the effect of expanding the scope of consideration.
- Can attempt a use of promissory estoppel in negotiations – D&C Builders v Rees
o PE rejected because it was not inequitable for D&C to go back on its promise to accept less
because of R’s behaviour
o Behaviour subsequent to the modification can also be taken into account for promissory
estoppel. Peter Gibson LJ rejected the claim in Re Selectmove Ltd because he held that it was
“not inequitable or unfair” to go back on the agreement since “the company had failed to
honour its [lesser promise]”
Assessment of Consideration

Overall criticisms of the doctrine of consideration

- Inconsistent with the intention of the parties

- Over-inclusive in enforcing some non-bargains as bargains – Williams v Roffey
- Under-inclusive in failing to enforce some undertakings that deserve enforcement
- Overly technical artificial and internally inconsistent

Overall, the courts seem to manipulate the abstract concept of value in respond to the factual matrix
of a particular case.

- Sunny Metal & Engineering Pte Ltd v Ng Khim Meng Eric [2007] 1 SLR 853
 The combined effect of practical/factual benefit being sufficient consideration and the “well-
established proposition that consideration must be sufficient but need not be adequate… is
that… it will, absent exceptional circumstances, be all too easy to locate some element of
consideration between contracting parties. This would render the requirement of
consideration otiose or redundant, at least for the most part.” [30]
- Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594
 “The modern approach in contract law requires very little to find the existence of
consideration. The marrow of contractual relationships should be the parties’ intention to
create legal relations.”
- Gay Choon Ing v Loh Tze Ti Terence Peter [2009] SGCA 3
 “[A]ny proposed reform of the doctrine is much ado about nothing. Indeed, the doctrine of
consideration is…an established part of [Singapore law]…However, because the doctrine of
consideration does contain basic weaknesses…it almost certainly needs to be reformed…
even if the doctrine of consideration is abolished, an alternative (or alternatives) must take
its place.” – at [17].

Gay Choon Ing – difficulties of consideration

Sunny Metal v Ng Khim Ming Eric – absent exceptional circumstances, all too easy to locate
consideration

Suggestions to reform Consideration

(1)

- Replace consideration with a test for intention

Williams v Roffey signals a shift away from the bargain view of consideration towards one based on
the intentions of the parties, especially when bargaining powers are not unequal. On this view,
consideration is simply evidence of the primary question of whether the parties intended to be
contractually bound.

This is reinforced by the new emphasis on duress.

- Singapore position: Gay Coon Ing where the SGCA raises the spectre of replacing consideration with
the doctrines of economic duress, undue influence, un unconscionability and promissory estoppel
Counterpoint:

- Consideration is not simply reducible to its evidentiary and cautionary functions as supporters of its
abolition assert. An informal agreement and undertaking is unsupported by consideration even if
there is contractual intention to be bound
- Function of the vitiating factors also not solely that of determining the presence of contractual
intention and the vitiating factors cannot replace the functions performed with consideration.
- Normatively questionable as the idea that the law should enforce all seriously made promises is
doubtful. No reason that the court should not take into account the parties’ subsequent
abandonment of his or her initial choice when both are equally serious expressions of his or her will.
- Even if there is intention to be bound and to create legal relations, hard to determine this is to be
achieved to what legal effect and what rights and liabilities were intended to be transferred or
conferred without consideration.

(2)

- Replace consideration in contract modifications with a test of intention

A more modest approach to do away for the need of consideration in cases of contractual
modification and leaves consideration as a requirement only at the formation of the original
contract.

- Supported by cases in other jurisdictions – Antons Trawling Co Ltd v Smith (2003) where the New
Zealand Court of Appeal said that promises of more for the same should be enforceable in the
absence of contrary “policy reasons”. The policy qualifications, applied flexibly, could perform the
same function as the wide-ranging inquiry under the promissory estoppel doctrine.
Same counterpoints would apply doubting the centrality of the parties’ intentions.

- Policy considerations are somewhat uncertain

- There is a lack of internal coherence in making the distinction between bargains and gifts vital at
formation but not at modification.

(3)

Allow consideration to allow and include any good reason for enforcement. This pluralistic
interpretation of consideration concedes that the courts have always adopted a functional approach
to the finding of bargain consideration where the Courts manipulate the rules to get just results.

Counterpoint is that an expansion into non-bargain criteria for enforcement necessitates enormous
compromises of the fundamentals of contract law which will weaken as opposed to strengthen its
internal coherence.

Reform for Consideration in Singapore?

Chwee Kin Keong v Digilandmall.com [2004]

@ [139]: Modern approach in contract law requires very little to find the existence of consideration.
In difficult cases, the courts in several common law jurisdictions have gone to extraordinary lengths
to conjure up consideration e.g Williams v Roffey Brothers

- Time may have come for the common law to shed the pretence of searching for consideration to
uphold commercial contracts and the marrow of these relationships should be the parties’ intentions
to create a legal relationship.
- Applied to the facts, the promise to pay in exchange for delivery of the laser printers constitute good
consideration.

Promissory Estoppel

- Undertakings that induce reliance may be enforceable via the doctrine of promissory estoppel, even
absent consideration or formality.
- Can only apply in this situation:
 There is a pre-existing legal relationship between A and B.
 A agrees to accept less/suspend his legal rights (clear promise)
 B acts in reliance of this “reduced” promise. (and it is inequitable for A to resile this promise)
  Promissory estoppel can then be used to estop A from resiling this promise.

- Modern foundation laid in Hughes v. Metropolitan Railway Company (1877) 2 App. Cas. 439
- Required elements in PE:
a. There must be a clear and unequivocal promise – held in Woodhouse AC Ltd v Nigerian Produce
Ltd [1972] AC 741.
b. Promise must have induced reliance by the promisee on it- held in Hughes (detrimental reliance)
and subsequently clarified in High Trees (reliance need not be detrimental; change in position is
enough)
c. It would be inequitable for A to resile from the promise – held in Hughes

A. Promissory estoppel B. Consideration

(1) Clear promise Clear promise

(2) Reliance (or change of position) by Promisee must have given consideration
promisee; need not be requested but must which may consist of requested reliance.
be foreseeable by or known to promisor. Promise enforceable without reliance.

(3) Inequitable to resile: by reference to (1), Irrelevant short of vitiating factors (see
(2) above and subsequent events. Part II) with high thresholds.

(4) Suspensory and not extinctive: ie not

necessarily given full expectation; the
Enforcement of full expectation (ie can be
promisor can resume his original rights on
extinctive).
giving reasonable notice to the extent that
the promisee can resume his original
 position.

(5) Shield not sword: only operates as a Shield and sword: can operate as defence
defence to enforce promises to accept less. to enforce promises to accept less and to
Cannot create or add new rights. create or add new rights.

**Is reform desirable to allow the creation

or addition of new rights?

A) A clear and unequivocal promise

- Clear and unequivocal promise not to impose his strict legal rights against promisee
- Promise may not be express but may be implied from the circumstances
- Silence or inactions in the face of a breach will not normally estop a party from suing on the breach
and a party does not lose his or her rights because he or she has failed throughout to insist upon strict
performance
Case Woodhouse AC Ltd v Nigerian Produce Ltd [1972] AC 741
No PE due to lack of clear promise
Facts  Woodhouse and NPM had, until 1966, conducted business in Nigerian
pounds. However, on 30 September NPM informed Woodhouse that
o 'payment can be made in Sterling and in Lagos... If you are agreeable
to these conditions, you are at liberty to make payment in Sterling
not only with contracts already entered into but also with future
contracts.'
 On 18 November the pound sterling was devalued. Woodhouse claimed
that because of NPM's letter of 30 September it could pay for its
contracts made before 18 November in pounds sterling (which would
have meant that NPM would have received 14% less in £N).
Holding No promissory estoppel; W’s claim dismissed.
Rule/Remarks  Lord Hailsham J: To give rise to an estoppel, representations
should be clear and unequivocal, and that, if a representation is
not made in such a form as to comply with this requirement, it
normally does not matter that the representee should have
misconstrued it and relied upon it
  Must be clear nad unequivocal promise which indicates the promisor’s
intention not to insist on his or her strict legal rights against the
promisee
 In this case, the promise was insufficiently “unambiguous and precise” to
form the basis of an estoppel. The letters exchanged were merely a
request for a variation of contractual terms.

Case AL Shams Global Ltd v BNP Paribas [2018] SGHC 143 (In reading list)
No PE due to lack of clear promise

Facts Plaintiff informed the Bank that it was expecting annual instalment payments
from a third party. Bank informed Plaintiff that the payment needed to be
reviewed and to submit more documents. P sent bank some documents. Bank did
not process payment.

Plaintiff sought a claim of action that the Bank was contractually obliged to accept
the payment under the bank’s terms and conditions. P also alleged that the bank
was estopped from refusing to accept the Payment as the P had provided all the
documents requested.

Holding SGHC held that a bank did not breach any duties in contract, tort or as a fiduciary
in refusing to accept an incoming payment into the plaintiff’s customer account.

Rule/Remarks Bank’s email did not amount to a statement by the bank that it would accept the
payment upon the receipt of appropriate documents and without further
consideration.

 Thus, there was no representation or promise by the Bank to accept the

Payment and hence no basis to allege that an estoppel had been created
 A not allowed to rely on promissory estoppel

4b. Reliance (Change in position)

 - Promisee must have relied on the promise
- Conventional requirement is for detrimental reliance (Hughes), in the sense that if the promise is
revoked, the promisee would be worse off than if the promise had not been made in the first place.
This became less clear in High Trees, but arguably the promisee’s commitment of himself to a course
of action he would otherwise not have taken could count as a detriment to him.
- Hence, clear detrimental reliance is not required. A change in position is enough to establish reliance.
The promisee can establish reliance by:
 Committing himself to a course of action that he would not otherwise have adopted (High
Trees), such that
o He would be prejudiced if the promise were to be resiled
o Change of option (he could have chosen to do something else but did not
because of the promise) can also be considered a change in position (and
hence reliance).
Case Hughes v. Metropolitan Railway Company (1877) 2 App. Cas. 439
Foundation for PE laid; detrimental reliance required
Facts  A landlord gave notice to his tenant, requiring him to carry out certain
repairs within 6 months. (Notice was given on October 22 – tenant had
until April to complete repairs.)
 Failure to do the repairs would result in the forfeiture of the lease.
 The tenant proposed to purchase the premises from the landlord and
negotiations began.
 M did not carry out the repairs as he believed they would be purchasing
the premises and the repairs required were not essential to his use of
the property.
 When negotiations broke down, the landlord sued the tenant for breach
of contract and tried to forfeit the lease for the tenant’s failure to repair
in the original timeframe.
 Issue is whether the time limit of six months included the negotiations
period.
Holding Presence of implied promise – Promissory estoppel applies
Rule/Remarks  The tenant was given relief against forfeiture because the
landlord’s conduct had led to his belief that time would stop
running during negotiations to purchase the lease. Therefore, the
6 months would run only from after the negotiations broke down.
Allowing the landlord to enforce his original rights would be
 inequitable to the tenant even though there was no bad faith on
the landlord’s part.
 Dealings between both parties made it inequitable to count the time of
the negotiations as a part of the six months. The defendants relied on
this promise, and therefore it would be unfair to make them liable in this
case.
 The implied promise is enough to allow estoppel to apply.
 Lord Cairns LC: “…if parties who have entered into definite and
distinct terms involving certain legal results…afterwards by their
own act or with their own consent enter upon a course of
negotiation which has the effect of leading one of the parties to
suppose that the strict rights arising under the contract will not
be enforced, or will be kept in suspense, or held in abeyance, the
person who otherwise might have enforced those rights will not be
allowed to enforce them where it would be inequitable having
regard to the dealings which have thus taken place between the
parties.”
 Therefore, M not liable for failing to make repairs during the original
time frame because H’s conduct had induced M to believe that the time
period would stop ‘running’ during the negotiations.

Case Central London Property Trust Ltd v. High Trees House Ltd [1947] 1 KB
130
Reliance need not be ‘mathematically’ detrimental. (can be beneficial)
Facts  P let a block of flats in London to D on a 99-year lease at an annual rent
of £2500.
 In 1940, with the outbreak of war and evacuation of people from
London, D could not sublet enough of flats to generate the rent.
 P agreed to halve the rent. When property market returned to normal,
the flats were fully let at the end of the war in 1945.
 P requested for original rent to be paid but D refused.
Holding Rent could be returned to originally agreed price for the future. But CLP could
 not claim back the arrears during the war years due to promissory estoppel.
Rule/Remarks  Denning J: “[A] promise intended to be binding, intended to be
acted on and in fact acted on, is binding so far as its terms
properly apply.”
 Denning J allowed P to demand the entire rent from the date of notice in
1945. If P had sought to claim for the rent prior to that (i.e. rent foregone
between 1940 and 1945), he would have been estopped.
 Note that case also implies that reliance need not be detrimental:
o In this case, D would have organised their affairs according to the
conditions of the promise, e.g. they may not have budgeted
sufficient $$ to pay for the arrears.

- Following cases show different examples of when there is/isn’t reliance.

Case The Post Chaser [1982] 1 All ER 19
Seller not prejudiced by resiling of the promise – no reliance
Facts  Sellers of palm-oil delayed in handing over certain documents in breach
of a contract.
 The buyer waived this breach, but then later rejected the oil.
 The seller claimed that it was inequitable for the buyer to re-assert his
original rights.
Holding Court held that there was no reliance at all as it was not inequitable for
the buyer to enforce its original rights since the seller was not prejudiced
by it.
Rule/Remarks  Reliance as long as the promisee has, or is presumed to have
committed himself to a course of action which he would not
otherwise have adopted such that he would be prejudiced if the
promisor has resiled from the promise.
 But in this case, there was no reliance at all.
o Goff J: “It is not necessary to show detriment; indeed, the
representee may have benefited from the representation, and
yet it may be inequitable, at least without reasonable notice,
for the representor to enforce his legal rights.”
 o The nub of this is the promisee’s inability to resume his original
position due to the reliance. If the promisee can resume his
original position, or can resume his liability on reasonable
notice (High Trees), then there is no inequity in resiling from
promise and therefore no cause for promissory estoppel.
Another important thing here is change of position, not
necessary detriment.

Case Alan v El Nasr [1972] 2 WLR 800

Sale of coffee beans – pound sterling VS Kenyan shillings – valid promise
(implied) – promissory estoppel invoked despite lack of detriment (they
benefitted in this case)
Facts  By contract, the sellers agreed to sell coffee beans in Kenyan shillings to El Nasr
payable on credit.
 At the time of the contract the value of Kenyan shillings and pound sterling were
of equal value.
 Whilst the contract stipulated the price payable in Kenyan shillings, the credit
account referred payment in pound sterling. After the first instalment, the value
of the pound sterling fell drastically, leading to major losses for the seller.
 The sellers then sought to revert to Kenyan shillings and demanded the further
payment. The buyers raised promissory estoppel in their defence in that in
accepting the instalment in pound sterling and redrafting the credit agreement
without changing the currency there was an implied promise that they would
not revert to Kenyan shillings. The sellers argued that the buyers had not acted
to their detriment in reliance of this promise as they had gained a benefit.
Holding Detrimental reliance not an essential requirement of promissory estoppel. In this
case, the sellers could be estopped from reverting to Kenyan shillings.
Rule/Remarks  Detrimental reliance is not a requirement of promissory estoppel. It only needs
to be established that the promisor has changed their position.
 Denning: Once an alternative method of payment is accepted (the pounds
sterling) it is deemed to have been accepted as a term of the contract and the
sellers had waived their right to be paid in shillings. W.J. Alan could not then
withdraw this waiver if it was either too late, or if it would be unconscionable in
the circumstances. On the subject of detriment, there was no support in the
case law for that requirement, simply that the other party had relied on the
 decision and altered their position.

Case Abdul Jalil bin Ahmad bin Talib & Ors v. A Formation Construction Pte
Ltd [2006] 4 SLR 778
Lease agreement for trust properties – new trustees appointed – reliance on
promise to waive rent – promissory estoppel valid
Facts  Appellants entered into lease agreement with respondents for various
trust properties.
 Delays in temporary occupation permits led to delays in rent payments
and negotiations resulted in a compromise agreement to waive arrears
of rent (2002), allegedly entered into by the sole trustee at that time.
 Appellants (trustees appointed by Court order after the original ones had
been discharged) claimed for arrears, including the rent that had been
waived by the sole trustee in 2002.
 Issue was whether there was consideration to support the waiver and if
not, whether the appellants were estopped from denying efficacy of the
waiver.
Holding PE - enforceable promise.
Rule/Remarks PE Principles:
SGCA held (in the narrower context of a promise by a creditor to accept a lesser
sum in settlement of a debt due to him or her) that the following conditions were
necessary:
1. There must be a representation by the creditor that he or she will not enforce
his/her strict legal right to full payment.
2. There must be a reliance by the debtor on that representation
3. There must be circumstances which make it inequitable for the creditor to go
back on his/her promise.

In the present case:

 In accepting the compromise offered by the sole trustee, appellant gave
up any right it may have had to make a claim for damages for breach on
the part of the trustee and this was a valid consideration.
 Even if there was no consideration, appellants would be estopped in
equity from making their claim. Since the respondents had paid all
 moneys required by the sole trustee in the manner and at the times
agreed, it would be inequitable to allow the appellants, the present
trustees, to go back on the offer. Further, respondents had incurred
expenses in completing works in one of the properties.

Case Collier v. P & M J Wright (Holdings) Ltd (2007) EWCA Civ 1329
Business partners owed debt – Df promised Pf he only had to pay a third – resiled
promise – PE, promise enforceable
Facts  Pf and his 2 former business partners owed Df money and each serviced
his share individually.
 When the 2 partners ceased to pay, Df told Pf to continue paying his
share while Df would chase the other 2 debtors.
 After Pf finished paying his one-third of the debt, Df demanded
that Pf pay the balance. Court applied promissory estoppel to
override Foakes v. Beer.
Holding PE – enforceable promise
Rule/Remarks  Arden LJ reformulated the promissory estoppel doctrine: “[I]f (1) a
debtor offers to pay part only of the amount he owes; (2) the
creditor voluntarily accepts that offer, and (3) in reliance on the
creditor’s acceptance the debtor pays that part of the amount he
owes in full, the creditor will, by virtue of the doctrine of
promissory estoppel, be bound to accept that sum in full and
final satisfaction of the whole debt. For him to resile will of itself
be inequitable. In addition, in these circumstances, the promissory
estoppel has the effect of extinguishing the creditor’s right to the
balance of the debt…”

Case Lam Chi Kin David v Deutsche Bank AG [2010]

Change of position is sufficient reliance.
Facts The Plaintiff was a relatively wealthy investor who opened an account with the
Defendant, through which he was active in foreign exchange trading. The
 Account entered into a shortfall in October 2008 and continued to deteriorate.
On 10 October 2008, the Defendant requested the Plaintiff to restore the margin
shortfall of about US$5.5mil by 5pm that day.

The Plaintiff informed the Defendant that he was unable / unwilling to deliver
the additional collateral to clear the margin shortfall, and on 10 October 2008,
the Defendant sold the Plaintiff’s securities. The Plaintiff alleged that the
securities had been wrongfully sold. He claimed that he was contractually
entitled to a notice period of one business day, and that the Defendant’s
managing director had promised to grant him a further 48‐hr grace period.
Rule Whether the defendant was estopped from selling the P’s securities due
to the promise of a 48-hour grace period. – SGCA ruled in favour of the
plaintiff and the promise constituted a binding undertaking which varied
the terms of the original agreements.
Notes SGCA overturned the judgement of the SGHC by finding that there was sufficient
detrimental reliance to raise promissory estoppel.
- Without the grace period, the P might not have exposed himself to such large
FX positions as the extra time would have assisted when he closed out FX
positions.

Obiter: Plaintiff has provided consideration for the variation when he

agreed to and did business with the Bank by entering the relevant FX
contracts with conferred a factual and legal benefit to the Bank
- 48 hours grace period became a contractual term of every transaction, the
consideration needed before the terms can be varied were found.

Reliance includes:
- expenditure of time and money
- incurring any liability
- change of position, and
- the deprivation of a benefit

4c. Inequitable to resile the promise

 - It must be inequitable for the promisor to resile his promise.
 This overlaps with the requirement of reliance but is not always interchangeable
 In cases where the change in position has already led to inequitability (i.e. detrimental
reliance), there is no need to further establish inequitability.
- Other factors which may be relevant in ascertaining inequitability:
i. The time-lag before the assessor resiles his promise and the degree of prejudice of the
promise
ii. The circumstances surrounding the giving of the promise
iii. Events subsequent to the making of the promise

4c (i). Time-lag before the promisor resiles his promise; degree of prejudice of the promise

- Held in The Post Chaser where the promisor resiled his promise 2 days after making it and the
promisee could return to his original position
4c (ii). The circumstances surrounding the giving of the promise

In D & C Builders v Rees [1966] 2 QB 617, the promisor was in a bad financial position and promisee
leveraged on this to extract promise not to impose strict legal rights on promise

Case D & C Builders v. Rees [1966] 2 QB 617

Did not pay debt – Promisor in dire financial straits and agreed to accept less due
to necessity – Practical benefit not valid consideration even when promisor
voluntarily agrees to accept less

Surrounding circumstances will be considered when invoking PE. PE could not

invoked in this case although promisor accepted a part payment because Df’s
wife “held the creditor to ransom” and took advantage of his dire financial
situation. Court held that this was not inequitable to go back on promise

Doctrine of economic duress applies here.

Facts  Pf, a small building company, carried out building work for Df. Df paid
£250 on account and a balance of £482 13s. 1d. outstanding.
 Pf made several requests for payment but received no reply.
 Pf was later in “desperate financial straits” and Df’s wife offered £300 in
settlement of the whole claim. P initially refused but later accepted the
 settlement as they had no choice.
Holding No valid consideration. Could not rely on PE to enforce promise either.
Rule/Remarks  The purported settlement did not bar Pf from recovering the balance of debt.
Part payment is not a valid consideration and a settlement for a lesser sum does
not bind the creditor to the agreement.
 Lord Denning: “Where there has been true accord under which the creditor
voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts
upon that accord by paying the lesser sum and the creditor accepts it, then it is
inequitable for the creditor afterwards to insist on the balance.” (essentially
referring to promissory estoppel).
 However, Rees could not rely on estoppel as there was no true agreement to
accept less and because Mrs Rees had taken advantage of the builder's position:
She had “held the creditor to ransom” and “really behaved very badly” because
she knew of Pf’s financial situation and used their desperation to intimidate
them.

4c (iii). Events subsequent to the making of the promise

- In Williams v Stern [1879] 5 QBD 409, a creditor who had promised not to seize a debtor’s furniture
resiled his promise after he realised that the debtor’s landlord (going after his rent) planned to seize
the furniture as well.
Case Williams v Stern [1879] 5 QBD 409
Creditor promised debtor extra time to pay before seizing furniture –
subsequently, debtor’s landlord wanted to seize same assets – reneged on
promise – not inequitable
Facts  Creditor promised a debtor extra time to pay before he exercised his
right to seize the debtor’s furniture, but he reneged when he heard that
the debtor’s landlord was about to seize the same assets for unpaid rent.
Holding Here, the creditor’s conduct was not inequitable.
Rule/Remarks  Another example: If A excuses B from part of his obligations due to a particular
circumstance (e.g. labour shortages/increase in raw material prices), it may not
be inequitable for A to renege if a subsequent change of circumstances
eliminates the reason for the promise, at least if A gives sufficient notice.
 No inequity if subsequent change of circumstances eliminate reason for promise

4(+). Effects of PE
  Generally suspensory and not extinctive (only extinguishes A’s entitlement up to the end of A’s
reasonable notice to B of A’s intention to resume his rights, but not A’s future entitlements)
o The promisor may, on giving due notice, assert his original rights (Tool Metal
Manufacturing Co Ltd v Tungsten Electric Co Ltd (1955)). This is only if the promisee can
resume his original position.
o Only extinctive if the promisee is unable to resume his original position – as Lord
Hodson explained in Ajayi v RT Briscoe.
 Generally restricted to relieving promises. It can only prevent A from fully enforcing his previous
rights against B, it cannot confer new or additional rights on B. Hence, the doctrine is regarded to
be a defensive one.
Case Ajayi v RT Briscoe (Nigeria) Ltd [1964] 1 WLR 1326
Effect of promise only becomes extinctive when the promisee cannot resume his
original position.
Remarks  Lord Hodson: “The principle which has been described … as promissory estoppel,
is that when one party to a contract in the absence of fresh consideration agrees
not to enforce his rights an equity will be raised in favour of the other party. This
equity is, however, subject to the qualifications (1) that the other party has
altered his position, (2) that the promisor can resile from his promise on giving
reasonable notice, which need not be formal notice, giving the promisee a
reasonable opportunity of resuming his position, (3) the promise only becomes
final and irrevocable if the promisee cannot resume his position.”

4(++). PE as a shield but not a sword

- PE operates defensively to prevent the promisor from asserting his original rights
- PE cannot be used offensively to allow the promisor to sue for more than his original rights or on a
new cause of action where there is no pre-existing legal relationship – held in Combe v Combe [1951]
KB 215.
- Can enforce promises of the ‘same for less’ type;
- Cannot enforce promises of the “more for the same”
- Reason: Prevent undermining of consideration as primary test for enforceability by PE.
Case Combe v. Combe [1951] 2 KB 215
Husband promised maintenance fees – Consideration given in reliance on, not in
return for promise – No PE because promise entailed new cause of action
Facts  A husband promised to pay his wife £100 a year on their divorce.
 The wife sought to enforce the promise on the basis that she gave
 consideration for it by not applying for maintenance.
Holding Promise was unenforceable. The wife had not given consideration for her
husband’s promise.
Rule/Remarks  The alleged consideration was a result of the promise to pay her but
not made in return for it. The husband had not requested her to do it
= No consideration if promisee acted in reliance on, rather than in
return for, promise.
 Promissory estoppel could not be employed here because it could not create
new causes of action where they had not existed before.

 Reason: prevent undermining consideration as the primary test of contractual liability by allowing a
promise to be enforceable just with reliance alone
 Long Foo Yit & Anor v Mobil Oil Singapore Pte. Ltd. [1997] SGHC 323 at [50] (HC) per Judith Prakash J:
“The requirements for obtaining relief under this doctrine are that there must be a legal relationship
giving rise to certain rights and duties between the parties; a promise or representation by one party that
he will not enforce against the other his strict legal rights arising out of that relationship, an intention on
the part of the first party that the other will rely on the representation; reliance by the latter party; and,
finally, that it is inequitable for the first party to go back on his promise.”
 However, different forms of estoppel have been used as a sword – proprietary estoppel in Crabb v Arun
D.C. [1979] Ch 179, estoppel by convention in Amalgamated Investment and Property Co v Texas
Commerce International Bank Ltd [1981] 3 All ER 577.

4(+++). Arguments that promissory estoppel should be extended to other forms of promise

a. Promises of ‘more for the same’

 No logical justification for why promissory estoppel is not allowed for such promises but is allowed for
‘same for less’ promises
b. Promises that create or add more rights
 In Combe v Combe, where a husband reneged on his promise to pay his wife 100 pounds a year upon
divorce, the court held that a) the wife’s reliance was not requested by the husband and so was not
good consideration; and b) promissory estoppel did not apply because it could not create new causes
of action where none existed before.
 However, if the promisor’s unconscionability is the essence of promissory estoppel, it should not
matter whether or not there is a pre-existing legal relationship between the parties.
 There are other estoppels that can create new causes of action (refer to Mindy Chen’s textbook pg
154)
4(4+) Promissory Estoppel creating new causes of action

 Permitted in Australia (Waltons Stores (Interstate) Ltd v Maher [1998] HCA 7), where M proceeded
with demolishing a building on W’s assurance that approval for the contract would be forthcoming; W
was estopped from denying the existence of a contract though there was no pre-existing legal
relationship)
 Reason: Great extent of detriment incurred by promisee, promisor’s culpability in standing by and
saying nothing while aware of promisee’s work.
Case Walton’s Stores v. Maher (1988) 164 CLR 387
Negotiations for construction project – Construction project commenced before
contract had formed, but promise that “approval [would] be forthcoming” – PE
used as sword – PE and consideration rest on different bases
Facts  Maher entered into negotiations to lease land to Walton’s Stores for a
major construction project.
 The plan for was for M to demolish the existing building on the site and
erect a new building to W’s specifications.
 W’s solicitors told M’s solicitors that they believed that “approval
[would] be forthcoming” and that they would inform them of any
amendments the following day.
 After signing the documents, M began demolishing the building on his
land in reliance on representations made before the contract was
completed because they were rushing for time.
 W had second thoughts and told their solicitors to “go slow”, even
though W knew that M had commenced work. W then withdrew from
the project 2 months later after M completed a substantial amount of
work.
Holding Pf was estopped from denying the existence of a binding contract.
Rule/Remarks  Australian court decided that estoppel, in certain cases, could create a
cause of action; i.e. it could act as a sword.
 Court concluded that PE and consideration rest on different bases: In
this case, the court also established that enforcement via primary
estoppel rests not on the giving of consideration, but on the ‘creation
or encouragement by the party estopped in the other party of an
assumption that a contract will come into existence... and that other
party relied on that assumption to his detriment to the knowledge of
 the first party’.
 Highlights that:
o Promissory estoppel seeks to avoid the detriment arising from
the promisee’s reliance on the promise, if it would be
inequitable for the promisor to renege (the promisee is not
awarded his full expectation upon completion from the
promise, but merely the detriment he incurred in reliance of
that promise.)
o Consideration, by contrast, yields a contractual cause of action
for the enforcement of the promisee’s full expectation
 PE could be used as a sword here because it was “as justice demands”. In this
case, enforcing the contract was also the most cost-effective solution since it
would have been very expensive for M to knock down what he had
constructed and return the land to its original state

However, this case was interpreted slightly differently in Baird Textile Holdings v Marks & Spencer
(1988) 164 CLR 387:

Case Baird Textile Holdings v Marks & Spencer (1988) 164 CLR 387
Agreement lease was already binding – PE only bridged the gap in formalities and
not consideration in this case
Rule/Remarks  Walton’s Stores v Maher interpreted as a case involving “complete
agreement on the terms of the lease. The agreement was merely
unenforceable for want of compliance with the statute. It may be
arguable that recognition of an estoppel here would not be to use
estoppel “as giving a cause of action in itself”, and it would certainly
not be to undermine the necessity of consideration. Rather, it would
preclude the potential lessee from raising a collateral objection to the
binding nature of the agreed lease.”
 Idea here is that promissory estoppel only bridges the gap in
formalities and not in consideration (i.e. in Walton there was an
agreement, only stopped by lack of formalities).
  Liability this form of promissory estoppel generates:
a. Contractual. Consonant with Atiyah’s interpretation of ‘consideration’ encompassing any good
reasons for contractual enforcement. However, it can be countered that the unconscionability is
located in the promisor’s knowledge that his conduct induces the promisee’s detrimental
reliance.
b. Preferable view is that promissory estoppel is closely aligned to law of wrongs. It protects
promisee from being harmed by promisor’s reprehensible conduct.
i. However, if the wrongdoing view implies a reliance-based response, how do we
explain cases that seem to enforce the promisee’s expectations?
ii. Preferable view is that the extent of enforcement must follow from the reasons for
enforcement. Expectation is sometimes awarded because that is the only way of
fully protecting the promisee’s reliance.
4(5+) Future development of promissory estoppel

a. Extension to promises to comply with formalities (but still require consideration)

b. Extension to promises to give more (starts to fill a consideration gap)
c. Extension to the creation of new actions
o For this not to undermine consideration, a) the requirements (e.g. what is sufficient
reliance?) of promissory estoppel must be clarified; and b) the reliance basis of enforcement
must be emphasised.

5. Conclusion: An assessment of Consideration

a. Inconsistent with the intention of the parties

b. Over-inclusive, in enforcing some non-bargains as bargains

c. Under-inclusive, in failing to enforce some undertakings that deserve enforcement

d. Over technical, artificial and internally incoherent

Alternatives/Criticisms of Consideration

a. Replace consideration completely with a test of intention

b. Replace consideration in contract modifications with a test of intention
c. Consideration is simply any good reason for enforcement
o View that courts decide first and then work backwards to justify their decision through
consideration
d. Retain bargain consideration whilst recognising other good reasons for non-contractual enforcement
FORMALITIES

Instead of Consideration

 Gratuitous promises are enforceable without consideration if they are contained in a deed.
 For a document to constitute a deed:
a. It must be clear on its face that it is intended to be a deed by the person making it
b. It must be validly executed as a deed by that person (either signed by him or at his direction or
delivered as a deed by him or an authorised person on his behalf).
The requirement of formalities in addition to consideration

 Some contracts require compliance with formalities even if they are supported by consideration.
 Generally, contracts which are particularly important or potentially one-sided, or where one party
belongs to a vulnerable group.
 3 main functions of Formalities requirements:
a. Cautionary function: Particularly important in one-sided or traditionally important transactions
(e.g. land transactions) (Ruddick v Ormston (2005), R got O to hastily sign contract agreeing to
sell his house at an undervalued price)
b. Evidentiary function: Formalities provide evidence of the existence and content of the alleged
contract. They also provide a marker to signify the point at which negotiations turn into a binding
contract.
c. Protective function: To protect vulnerable parties in certain types of contracts (e.g. the tenant,
employee, consumer borrower, and guarantor).
Problems with Formalities

a. Formalities can be inconvenient, mysterious and inaccessible to ordinary people.

b. There is inconsistency as to the types of contracts affected. It is impossible to explain why certain
contracts require formalities while other similar contracts do not.
c. Formalities generate much litigation over the jurisdictional question, i.e. whether the disputed
contract comes within the class of contracts which must comply with the formalities.
d. Inconsistencies in what type of formalities are required (a deed, or writing,etc.)
e. Dispute over how to satisfy formalities requirements (e.g. are initials sufficient for a signature?)
f. Hardship can be caused when non-compliance with formality requirements renders the contract
void.
i. This is sometimes used by parties to wrongfully escape their obligations (Pitt v Jones
(2007), refusal to give guarantee to minority shareholders in writing)
(Actionstrength Ltd v International Glass Engineering (2003), no enforcement for
oral contract of guarantee, though both sides were not inexperienced people)
ii. Historically, the doctrine of part performance has mitigated this. It makes a non-
complying contract enforceable if one party had induced or knowingly allowed the
other party to alter his position on the faith of the contract.
iii. Law of Property (Miscellaneous Provisions) Act 1989 changed this: It requires
contracts for the sale or other disposition of an interest in land to be ‘made in
writing’ and no merely ‘evidence in writing’.