CONTRACT – CONSIDERATION AND INTENTION

Law: Together with offer and acceptance, consideration and intention form the other 2 elements of a contract.
Issue: The issue is whether there is sufficient consideration. To begin, we will define consideration.
Consideration (Pg 85)
Consideration, as defined by Sir Frederick Pollock in Dunlop v Selfridge (1915) – an act or forbearance of one
party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given
for value is enforceable. The state of mind of the parties, especially the one performing the act is critical.
Executory Executory consideration refers to consideration, which is yet to be performed.
Consideration
Executed Executed consideration refers to consideration, which has been performed. In other
Consideration words, executed consideration involves an act or forbearance, which has been fulfilled.
Past Consideration refers to an act performed prior to and to that extent independent of,
the promises being exchanged. The general rule is that past consideration is an invalid
consideration.
Roscorla v Thomas (1842) – The court held that the promise was made after the
transaction had already been concluded and therefore past consideration. Followed in

Sim Tony v Lim Ah Ghee (1995) – past consideration is no consideration.

In Pao On v Lau Yiu Long (1980) – “an act before the giving of a promise to make a
payment or to confer some other benefit can sometimes be consideration for the
Past Consideration promise. The act must have been done at the promisor’s request, the parties must have
understood that the act was to be remunerated further 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.”

(Exceptions for Past Consideration) Pao On’s three requirements.

Past Consideration becomes Executed Consideration
1. Act done at promisor’s request
2. Parties understood act is to be remunerated
3. Contract must otherwise be enforceable
IF all of these 3 requirements are met, the past consideration will be valid.
Two Main Rules on Consideration
1. Must move from promisee but need not move to promisor. Tweedle v Atkinson (1861) – the court held that
Tweedle could not enforce the contract between the two fathers because he is not a party, and secondly, no
consideration flowed from him.
2. Need not be adequate but must be sufficient. Chappell & Co Ltd v Nestle Co Ltd (1960) – The HOL held
that the consideration included the wrappers even though they were of no value to Nestle.
Goods,
Services,
Money and
Property
A promise to forbear from suing or enforcing a valid claim can constitute
sufficient or valuable consideration. Alliance Bank Ltd v Broom (1864).
K-Rex Finance Ltd v Cheng Chih Cheng (1993) – The court spoke the
words of Cockburn CJ in Callisher v Bischoffsheim (1870).

Sufficient The same applies to a compromise of a legal action. The req. is that the
Forbearance to
legal action must be reasonable and not frivolous, that the claimant has an
sue
honest belief that in the chance of success of the claim and that the
claimant has not concealed from the other party any fact which, to the
claimant’s knowledge, might affect its validity. Miles v New Zealand
Alford Estate Co (1886)

Performance of The Eurymedon (1975) – The Privy Council held that even though the
existing defendant was already contractually bound to a third party to do so, the
 contractual defendant’s act of unloading the ship formed good consideration for the
duty to third contract with the plaintiff. This was also clarified in Pao On v Lau Yiu
party Long (1980) by the HOL. This was also accepted in the Singapore High
Court in SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992).
Eastwood v Kenyon (1840) – The court rejected the plaintiff’s view and
Moral held that moral obligation is insufficient consideration for a fresh promise.
obligation & Thomas v Thomas (1842) – The court held that the nominal rent was
motives sufficient consideration by t the husband’s wishes were irrelevant; motives
is not the same thing as consideration.
Vague or White v Bluett (1853) – The court held that Bluett’s promise was nothing
insubstantial more than a promise “not to bore his father”. As such it was too vague and
consideration was insufficient consideration for the alleged discharge by his father.
Collins v Godefroy (1831) – the words of Lord Tenterden “if it be a duty
imposed by law upon a party regularly subpoenaed to attend from time to
time to give his evidence, then a promise to give him remuneration for loss
Performance of
of time incurred in such attendance is a promise without consideration.
existing public
duty
If the court finds the promisee did something more that required by an
existing public duty, then it may be sufficient. – Glassbrook Bros Ltd v
Glamorgan City Council (1925)
Insufficient Stilk v Myrick (1809) – It was held that there was no consideration for the
captain’s promise because the remaining crew did what they were
contractually required. Two sailors deserting was within the usual
emergencies found in such a voyage.
Performance of
existing However, if it is more than what is contractually required, that may
contractual constitute good consideration – Williams v Roffey Bros and Nicholls
duty (Contractors) Ltd (1991) – The English Court of Appeal held that as long
as the extra payment was not given under duress or fraud, the oral
promise was enforceable because the defendant obtained “practical
benefits” from the plaintiff’s work. The benefit was that they would not be
liable under the main contract for late completion.
Pinnel’s Case (1602) – The part payment of a debt does not discharge the entire debt unless
the part payment was made at the request of the creditor and the payment was made earlier,
at a different place, or in conjunction with some other valuable consideration.

Foakes v Beer (1884) affirmed Pinnel’s Case – the HOL held that Beer’s promise not to take
further action was not supported by consideration. She could claim the money.
Promissory Estoppel is an equitable doctrine whose origin may be traced to Lord Cairns in
Hughes v Metropolitan Railway Co (1877). When p.e. is established, the court may enforce
a promise despite the fact that there was no consideration.

4 Elements (Central London Property Trust v High Trees House Ltd (1947), + D&C
Builders v Rees (1966))
Promissory Parties must have existing legal relationship
Estoppel Clear and unequivocal promise which affects the legal relationship
(For no Promisee relied upon promise and altered his position
consideration)p Inequitable for the promisor to go back on his promise.
g 98-100 Suspensive or Extinctive
When the promisor gives reasonable notice of his intention to revert to the original legal
relationship, the original relationship is restored. The effect of p.e. is to suspend promisor’s
rights temporarily. Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1995)

However, the promise could become ‘final and irrevocable if the promisee cannot resume his
position.” Ajayi v R T Briscoe (Nigeria) Ltd (1964)
Shield not sword
This means that it can only be raised as a shield and not a sword, i.e. a defense against a
claim and not to commence a suit. Combe v Combe (1951) (people sue you then can use)
Assoland Construction Pte Ltd v Malayan Credit Properties Pte Ltd (1993)
Intention to Create Legal Relations (Pg 101)
The test is whether a reasonable person viewing all the circumstances of the case would consider that the promisor
intended his promise to have legal consequences.
There is a general presumption that such agreements lack the necessary intention to form a
contract. (Balfour v Balfour (1919)) – The English Court of Appeal held that the claim failed
because the parties did not intend the promise to be legally binding. In Choo Tiong Hin v Choo
Social and
Hock Swee (1959) – the plaintiff’s promises were not enforceable because the lack of intention to
Domestic
create legal relations.
Agreements
However in Merritt v Merritt (1970) – The English Court of Appeal found the necessary intention
and held that the wife succeeded in her claim for breach of contract.
There is a general presumption that there is necessary intention to create legal relations. Edwards
v Skyway Ltd (1964) – The court held that Skyways was legally bound.

Honour Clauses
When parties have expressly stated that their agreement is not to be legally binding (Rose & Frank
Commercial
Co v J R Cromption & Bros Ltd (1925))
Agreements
Letter of Comfort, intent and MOUs are all not legally binding.
(Hong Kong and Shanghai Banking Corp Ltd v Jurong Engineering & Others (2000) – Letter of
awareness held not binding. Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad
(1989) – Court only found a moral not legal obligation.
Law:
Privity of Contract (Pg 105)
The general rule is that no one, other than a person who is a party to the contract may be entitled to enforce or be
bound by the terms of the contract. – Price v Easton (1833) – court held that Price could not succeed, as he was
not a party to the contract between the debtor and the Easton.

Exceptions (Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd (1993)
- Agency relationship
- Assignment of choses in action
- Letter of Credit