Formation of Contracts 2:

Consideration,
Promissory Estoppel &
Privity of Contract
AB1301

Seminar 3
©Katherine Khoo

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A. General Concepts Relating to Contracts
Elements of a legally enforceable contract

Offer Intention to create

= proposal
legal relations
Acceptance = intend legal consequences for breach
= unconditional “Yes”
Consideration
= something in exchange
for something
Collectively called
“the agreement”

concerns enforceability of contract

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A. Consideration
Consideration
A valuable consideration is …some benefit accruing to
one party (the promisor) or some detriment suffered by
the other party (the promisee). Currie v Misa

• Consideration is the price for which the promise is bought.

• Consideration must have value eg goods, services, forbearance to sue.
It cannot be intangible.
• Think: Benefit – detriment analysis
• Consideration is required for all contracts except those under seal ie deeds.

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A. Consideration
• Person who makes the promise is the Promisor.
• Person to whom promise is made is Promisee.
• Promisee can enforce Promisor’s promise if he has done/ agreed to do something
in return for that promise.

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 Types of Consideration

Executory Executed Past

Consideration Consideration Consideration

Consideration that has Consideration that has Act performed prior to, and to
yet to be performed been performed that extent independent of the
promises being exchanged.

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 CONSIDERATION DEFINED:
Something of value in the eyes of the law given in exchange for a promise

Benefit-Detriment Exchange Value in the

“Price of promise” eyes of the law
Some benefit accruing to the
promisor or some detriment
suffered by the promisee

Consideration must be Consideration must Consideration Consideration must

requested by promisor move from the promisee must not be past be sufficient; need
Promisee can enforce not be adequate
Promisor’s promise if he
has done/ agreed to do
something in return for
that promise.
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As adapted from Principles of Business Law by Loo Wee Ling, pg 204, & expanded by Katherine Khoo
Principles of Consideration
• Rules :
• 1. Must be requested by the Promisor.

• 2. Must move from Promisee but need not move to Promisor.

• (1) Promisee must show consideration moved from him so as to
enforce promise
• (2) Although promisee must provide consideration, promisor need
not be the one to benefit.

• 3. Need not be adequate but must be sufficient.

• 4. Consideration must not be past consideration.

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1. Consideration must be requested from the promisor
• The idea of exchange requires that the benefit conferred on the promisor or the
detriment suffered by the promisee must be requested by the promisor.
• Combe v Combe (1951) 2 KB 217
• During divorce proceedings, a husband promised to pay his wife £100 each year
as maintenance. Relying on her ex-husband’s promise, she refrained from
applying to court for maintenance. A few years later, she brought an action to
claim the arrears that were owed under their agreement.
• Held: Defendant ex-husband’s promise was not supported by any consideration
as he had not requested for her to so refrain from applying for maintenance.

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2. Consideration must move from the promisee
• The promisee who wants to enforce the promise must show that he has
given consideration for that promise.
• Only a party who has provided consideration can enforce the promise.
• Tweddle v Atkinson (1861)
• Son-in-law who sought to enforce a contract between his father-in-law
and his father to give him monetary payments was unsuccessful , as he
was neither a party to the contract nor did he give consideration for its
promises within.

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3. Consideration must be sufficient
but need not be adequate
• It must be sufficient, need not be adequate i.e. each party’s consideration
need not be equal in value:
• e.g. Tom sells his 6 month’ old sportscar worth $250 000 to Belle for $20k.
Court will not question adequacy or fairness of consideration.
• Chappell & Co v Nestle Co Ltd (1960)
• Held that 3 used chocolate bar wrappers constituted sufficient
consideration to receive a music record.

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4. Consideration must not be past
• Past consideration is not valid consideration.
• Re McArdle (1951)
• The promise to make payment for the repair and renovations done to
the property came after the renovations were already done ie
consideration had been performed and the renovation work was not
done in contemplation that it would be paid for; therefore the promise
to make payment was not binding. Past consideration is not valid.

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4. Consideration must not be past
• Past consideration is not valid consideration.
• Exception :
• when one party does something at the request of the other party
and
• both parties envisage payment all along,
• consideration is not past, and contract is enforceable – Pao On v Lau
Yiu Long (1980)
• Here, consideration is considered ‘executed’.

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Consideration
Sufficient Consideration
- Means good or valuable
- Money, goods, services
- Forbearance to sue
- Performance of existing
contractual duty owed to 3P:
The Eurymedon (1975)
• Insufficient Consideration
• - Vague promises
• - Moral obligations
• - Performance of existing contractual
duty owed to promisor: Stilk v Myrick
• - Performance of existing public duty
• - Part payment of existing debt :
• Pinnel’s case
• - Past Consideration
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Sufficiency of Consideration
Sufficient Consideration
• What is sufficient consideration ?
• Sufficient = good or valuable consideration
• 1. Goods
• 2. services
• 3. money
• 4. property

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Sufficiency of Consideration
Sufficient Consideration
• 2. Forbearance to sue
• The right to take legal action is something of worth.
• So withholding one’s right to sue is sufficient consideration for forming a
contract.
• Forbearance is sufficient consideration as long as forbearing party can establish :
• i) he has reasonable grounds for his claim
• ii) he honestly believes he has a fair chance of success, and
• iii) he has not concealed from the other party any fact which he knows may
affect the validity of his claim.

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Sufficiency of Consideration
Sufficient Consideration
• 3. Performance of existing contractual duty owed to 3rd party
• - When contracting party promises to carry out his contractual obligations but this
promise is not made to the original contracting party but to a new 3rd party,
performance of an existing contractual duty owed to a 3rd party is good consideration
– Pao On v Lau Yiu Long (1980)

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 Sufficiency of Consideration
Insufficient Consideration
• What is insufficient consideration ?

• 1. Vague Promises
• White v Bluett (1853)
• Son issued a promissory note to father who loaned him money to pay
off his debts in exchange for not complaining anymore about how his
father divided the property between the siblings. Estate claimed
against the son for the outstanding debt when the father died.
• Held: there was no consideration for any discharge of the obligation
to repay. The son had ‘no right to complain’ anyway. The
consideration was vague and insufficient for the alleged discharge by
his father.

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Insufficient Consideration
• 2. Moral obligations
• Eastwood v Kenyon (1840)
• Child who grew up promised to repay her guardian for all the
expenses incurred in her upbringing. She got married and her
husband also promised to pay. Guardian sued his ward’s
husband when he failed to pay arguing that he had a moral
obligation to pay him. Court held that moral obligation does
not constitute consideration.

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 Insufficient Consideration
• 3. Performance of an existing public duty is not sufficient consideration.
• Collins v Godefroy (1831) 1 B & Ad 950; 109 ER 1040
• C was subpoenaed to attend court as a witness in G’s case and gave G an invoice
to cover his time spent at court. Held that C was under an existing public duty to
attend court due to the subpoena, hence G was not required to pay him.

• Exception: Where promisee did something more than that required by the existing
public duty imposed by the law, that would be considered sufficient consideration.
• Glassbrook Bros Ltd v Glamorgan City Council (1925)
• Police provided defendants with extra manpower which defendants had
requested to protect them from a miners’ strike and submitted an invoice to the
defendants for the extra costs incurred. Defendants argued that the police were
under an existing public duty to provide protection and keep the peace. Court held
that police had gone beyond their existing public duty, by providing in excess of
what the police thought was adequate and were therefore entitled to payment. 19
 Insufficient Consideration
• 4. Performance of an existing contractual duty owed to the promisor
– Stilk v Myrick (1809)
• Rationale : promisee suffers no extra detriment in performing original
contract.
• Stilk v Myrick (1809)
• Stilk was a seaman on a ship sailing from London to the Baltic where
2 sailors deserted. The captain promised the crew that the wages of
the deserted sailors would be divided among the remainder if they
worked to bring the ship home. Stilk sought to claim the extra wages.
• Held: There was no consideration for the captain’s promise because
the remaining crew did what they were contractually required to do.
2 sailors deserting was within the usual emergencies found in such a
voyage.

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Insufficient Consideration
• If a party to a contract does more than their contractual duty, over and
above what they were contractually obliged to do, it would be considered
fresh consideration.
• Hartley v Ponsonby (1857)
• 17 of the 36 man crew deserted from P’s ship where H was crew and only
6 of the remainder were competent seamen. It was unsafe for the
remaining crew to continue the voyage with so many crew missing, but
they agreed after P promised extra pay. When they arrived at port, P
refused to pay the extra wages promised.
• Stilk v Myrick was upheld, but here, the desertion of so many competent
crewmen changed the nature of the remaining sailors’ duties to the point
where the contract could be considered discharged. The offer by P to pay
the crew to sail back and the acceptance by the crew could be considered
an entirely new contract, & the crew in manning the ship all the way back
to port was valid consideration for P’s promise of extra wages.

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 Insufficient Consideration
• Qualification to the rule in Stilk v Myrick
Performance of an existing contractual But performance of an existing duty may constitute
duty owed to the promisor is no good good consideration for a new promise, in the
consideration– Stilk v Myrick circumstances where there are practical benefits to
• Williams v Roffey (1991) the promisor and where no duress or fraud are found.
• Facts : R (main contractor) contracted with W (carpenter) to refurbish
flats for £20,000. W was unable to complete works as he underpriced the
work and ran out of money. If W breaches contract, R would be liable to
pay developers compensation for late completion. R promised W an extra
£575 per flat to complete works. W completed contract but R reneged on
extra payments.
• UKCA upheld principle that performance of an existing contractual duty
owed to promisor is not good consideration: Stilk v Myrick
Rationale – promisee suffers no extra detriment in performing original
contract
• UKCA held promisor R willingly promised the extra money; no duress or
pressure applied by W. Promisor also enjoyed a practical benefit in that
contract was performed & he would not be liable to pay money to the
developers under the main contract which was compensation for late
completion. This practical benefit is good consideration. 22
Is there a possible conflict ?
- which do we follow?
Stilk v Myrick(1809) Williams v Roffey(1989)
• Old common law rule • “Newer” law
• Ship voyage – captain • Practical, sensible,
reneged on his promise equitable
to remunerate remaining • So long as no extortion
crew
• Analysis of benefit to
• Harsh and (sometimes) promisor rather than
inequitable detriment to promisee
• Singapore courts’ qualified
endorsement of principle –
“limited exception”
(cautious) 23
 Insufficient Consideration
• 5. Part payment of existing debt does not discharge promisee’s obligations
to pay full debt
• Pinnel’s Case (1602)
• Facts: Pinnel sued Cole for a debt of 8 pounds which was due on 11 Nov
1600. Cole argued that, at Pinnel’s request, he had paid 5 pounds to
Pinnel on 1 October which Pinnel accepted in full satisfaction of the debt.
• Held: Payment of a lesser sum….in satisfaction of a greater sum cannot be
any satisfaction for the whole…unless that 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.
• Pinnel’s case was reaffirmed by the House of Lords in Foakes v Beer (1884)

Consideration to the creditor is that he receives part of the $ now instead of

later = benefit. Debtor has to come out with $ now instead of later = detriment
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 Insufficient Consideration
Rule in Pinnel’s case:
Payment of a lesser sum cannot discharge the
obligation to repay the full sum, even if the creditor
initially agrees to take it in full discharge.

• Unless consideration is provided as in the following scenarios:

At the the creditor’s At the the creditor’s At the creditor’s request,

request, payment of a request, payment of a payment of a smaller sum
smaller sum was made smaller sum was made together with something
before the due date is at a different place is else that constitutes
valid consideration valid consideration valuable consideration,(like
a gift) is valid consideration.

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B. Promissory Estoppel
• May be seen as an exception to the rule in Pinnel’s Case.
• Equitable doctrine: A promise may be enforceable against the promisor even if
unsupported by consideration by promisee.
• Where promissory estoppel is established, promisee may have a valid defence
against promisor’s claim (of full amount) even if no consideration has been given.
• Used as a shield or defence; and not as a sword or a basis for legal action.
Mansource Interior v CSG Group (2017)
• Elements to establish for promissory estoppel to arise:
1. Parties are in an existing legal relationship;
2. A clear and unequivocal promise made by promisor not to enforce his
strict legal rights against promisee;
3. Reliance by promisee who alters his position based on promisor’s promise;
4. Inequitable for promisor to go back on his promise.
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Promissory Estoppel
• When promissory estoppel is established, the original legal relationship
may be suspended for the duration of the promise. When the promisor
gives reasonable notice of his intention to revert to the original legal
relationship, the original relationship is restored.
• In certain cases, promissory estoppel may totally extinguish rights of
the promisor under the original agreement. The promise could become
final and irrevocable if the promisee cannot resume his position, and
there is no way of putting the parties back in their status quo ante
(original or previously existing position).
• Whether the effect of promissory estoppel is suspensory (and hence
temporary for the duration of the promise) or extinctive (and totally
extinguishes the rights of the promisor) depends on the facts of each
case.

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Promissory Estoppel
• Central London Property Trust v High Trees House Ltd (1947)
• In 1937, CLP leased a new block of flats to HT at a rent of £2,500 pa. Due to war
in September 1939, and downturn in rental market, HT was unable to let many
premises. CLP agreed verbally to reduce rent by half in January 1940 but this
agreement was not under seal, no consideration was provided and no duration
was specified. After the war, conditions improved and flats were fully occupied.
CLP claimed full rent from the last 2 quarters of 1945 onwards.
• The court expressed in obiter dictum that if CLP tried to claim the full rent from
1940-45, they would fail because they would be estopped by their promise not
to enforce their full legal rights, even though that promise lacked consideration.
• Held : Denning J. : The plaintiff, CLP was entitled to claim full rent incurred after
the war. Intention of parties was that reduction in rent was temporary due to
the war but when the war was over, the moratorium ceased to apply and full
rent was payable.
• UKHC, Denning J. –”Where one party (creditor/promisor) in a contract makes a clear
and unequivocal promise that he will not strictly enforce his strict legal rights against
the other party (debtor/promisee) and the latter relies on that promise and alters his
position, then equity will not allow the creditor/promisor to go back on his promise.”
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 Insufficient Consideration
6. Past Consideration
Past consideration is the act performed prior to and independent
of the promises exchanged, without the promises in mind.
• Past consideration is no consideration.
• Past Consideration could be executed consideration if it can be shown
that at the time of performing the act, the parties intended that the
act would be compensated or paid for by the promise.
• Pao On v Lau Yiu Long (1980)
• 3 Requirements :
• 1. Act done at promisor’s request
• 2. Parties understood that act is to be remunerated by a payment or
the conferment of some other benefit
• 3. Payment or conferment of benefit must be legally enforceable 29
C. Privity of Contract
Only parties to a contract can sue
or be sued under the contract.
3P to the contract cannot enforce Contracting parties cannot, by a
a benefit under the contract contract between them, impose
• Beswick v Beswick (1968) a burden/obligation on a 3P

• Uncle sold his business to his nephew in return for a weekly payment of £6 10s
for the rest of his life, and when he died to leave his widow with £5 a week for
the rest of her life. Nephew honoured his agreement until his uncle’s death but
only made one payment of £5 to his aunt. The aunt claimed against the nephew
in her own name; and in her capacity as administratrix of her husband’s estate.
• Court held that she could not personally claim against the nephew as she was not
privy to the contract; but her claim as administratrix succeeded as she was
claiming on behalf of her late husband, who was privy to the contract.
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 Privity of Contract
Common law rule
Only parties to a contract can sue
or be sued under the contract.
3P to the contract cannot enforce No 3rd party can sue or be Contracting parties cannot, by a
a benefit under the contract sued under the contract contract between them, impose
a burden/obligation on a 3P
Common law Exceptions Statute

•The Contracts (Rights of 3rd Parties) Act,

Agency : Trust : Assignment : Letter of Credit:
Principal bound to Trust Agreements Rights & liabilities can If letter of credit is confirmed Cap 53B
3P as long as agent where trustor vest be assigned to 3P if by buyer’s bank, seller can •3rd party can enforce contractual terms for
had authority to rights/assets to agreed to by both sue bank for non-payment
enter into contract trustee to hold in parties to the contract though underlying sale their benefit
trust for beneficiary. contract is between buyer •Reforms privity rule but does not abolish it
and seller, and underlying
contract for letter of credit is •Applies to 3rd parties even if they did not
between the buyer and bank. give consideration
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 Contracts (Rights of Third Parties) Act Cap 53B
• Right of third party to enforce contractual term
• 2.—
• (1) Subject to the provisions of this Act, a person who is not a
party to a contract (referred to in this Act as a third party) may,
in his own right, enforce a term of the contract if —
• (a) the contract expressly provides that he may; or
• (b) subject to subsection 2, the term purports to confer a
benefit on him.
• (2) Subsection 1 (b) shall not apply if, on a proper construction
of the contract, it appears that the parties did not intend the
term to be enforceable by the third party.
• (3) The third party shall be expressly identified in the contract
by name, as a member of a class or as answering a particular
description but need not be in existence when the contract is
entered into.
• (4) This section shall not confer a right on a third party
to enforce a term of a contract otherwise than subject
to and in accordance with any other relevant terms of
the contract. 32
 Contracts (Rights of Third Parties) Act Cap 53B

• Right of third party to enforce contractual term

• 2 (5) For the purpose of exercising his right to enforce a term of the
contract, there shall be available to the third party any remedy that
would have been available to him in an action for breach of contract
if he had been a party to the contract (and the rules relating to
damages, injunctions, specific performance and other remedy shall
apply accordingly) and such remedy shall not be refused on the
ground that, as against the promisor, the third party is a volunteer.
• (6) Where a term of a contract excludes or limits liability in relation
to any matter, references in this Act to the third party enforcing the
term shall be construed as references to his availing himself of the
exclusion or limitation.
• (7) In this Act, in relation to a term of a contract which is
enforceable by a third party —“promisee” means the party to the
contract by whom the term is enforceable against the promisor;
“promisor” means the party to the contract against whom the term
is enforceable by the third party.

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 Principles of Consideration
2 Rules Vague Promises & Moral obligations

Must move from Need not be Performance of existing

contractual duty owed to
Promisee but adequate but
promisor : Stilk v Myrick
need not move must be Exception: Williams v Roffey
to Promisor sufficient Good consideration where
(1) Promisee must Promisor enjoyed practical
show consideration benefit & promise not made
moved from him so as
Sufficient Insufficient
under duress/fraud
to enforce promise
Performance of existing Public duty.
(2) Although promisee Goods, Exception: Glassbrook Bros v Glamorgan CC : If party
must provide
services, does more than what is req’d under public duty
consideration,
promisor need not be money, Part payment of existing debt :
the one to benefit property Pinnel’s case
Exception : Promissory Estoppel : High
Forbearance to sue Trees - *existing legal rel’p, clear
unequivocal promise by promisor that
he will not enforce his strict legal right
Performance of against promisee, promisee relies on
existing duty to 3P promise & alters position, then equity
will not allow promisor to go back on
promise.
Past Consideration.
Exception : Pao On’s case *act done at Promisor’s
request, act understood to be remunerated by
some payment, payment must be enforceable 34
©Katherine Khoo
Read the relevant chapters of the
textbooks:
- Tabalujan, Ch 4;
- Chandran, Ch 6;
- LWL, Ch 8;
- Shenoy & Loo, Ch 8.
I have every
intention to
consider all this

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