08 BizLaw2ed

Chapter 8
Consideration and Intention to

Create Legal Relations
8.18.2
Introduction
8.38.9
Consideration
8.10
Consideration Must be Requested for by the Promisor
8.118.17
Consideration Must Not be Past
8.188.19
Consideration Must Move from the Promisee
8.208.22
8.238.24
8.258.26
8.278.28
8.29
8.308.39
8.408.43
8.44
8.45
8.46
8.478.48
8.498.60
8.618.62
8.638.64
8.658.68
08 BizLaw2ed.indd 215
Consideration Must be Sufficient

Concept of Sufficiency
Intangibles and Moral Obligations
Forbearance and Compromise
Existing Public or Legal Duty
Existing Contractual Duty
(1) Owed to third party
(2) Owed to the promisor
(a) In return for a promise for more
(b) In return for a promise for less
When Consideration is Not Required: The Exceptions
Contract by Deed
Promissory Estoppel
(1) Meaning and origin
(2) Elements of promissory estoppel
(a) Clear and unequivocal promise
(b) Reliance
(c) Inequitable to go back on promise
(d) Shield, not sword
(3) Effect of promissory estoppel: Suspensive or extinctive?
1/11/13 10:52:26 AM
Principles of Singapore Business Law
8.698.70
Intention to Create Legal Relations
8.718.74
Social and Domestic Agreements
8.758.79
Business and Commercial Agreements
8.808.82
Conclusion
216
1/11/13 10:52:26 AM
Chapter 8: Consideration and Intention to Create Legal Relations
Introduction
8.1
In Chapter 7, we considered the circumstances in which the law would

recognise that parties have come to an agreement. However, the law does not
enforce all agreements. Generally, ideas of fairness, the concern to give effect
to the intention of parties to the agreement (thus facilitating free market
economy) and general public policy concerns are relevant in deciding which
agreements to enforce.
8.2
Hence, two other elements (in addition to the presence of an agreement) are
required for the formation of a contract: consideration and intention to create
legal relations. In this chapter, we shall consider the following questions for
each of these legal requirements:
What are these legal requirements and the rationale or justification for
them?
When, if at all, are these requirements not necessary for the enforcement
of an agreement (the exceptions) and what are the justifications for
allowing such exceptions?
Is the law on these legal requirements and exceptions coherent and

satisfactory?
Consideration
8.3
The general rule is that a promise is only enforceable if it is supported by

consideration, that is, where the promise is given in exchange for something
of value. Such reciprocity is said to be the reason and justification for
the enforcement of the promise. However, the reader should note that
exceptions to the general rule exist and will be discussed in detail later (see
paras 8.448.68).
8.4
So what exactly is consideration? Consideration is defined as something

that has value in the eyes of the law and given in exchange for a promise.
Traditionally, the benefitdetriment analysis is used to explain consideration
(Currie v Misa (1875) at p 162):
A valuable consideration, in the sense of the law, may consist either
in some right, interest, profit, or benefit accruing to the one party, or
217
1/11/13 10:52:27 AM
some forbearance, detriment, loss, or responsibility given, suffered, or

undertaken by the other.
8.5
Take the example where A agrees to purchase Bs car at the price of $50,000
(see Figure 8.1). As is typical of most agreements, there are two promises.
There is As promise to purchase Bs car at $50,000 and Bs promise to transfer
ownership and possession of his car to A. For each promise to be enforceable,
the recipient of the promise must provide consideration in exchange. The
law refers to the maker of a promise as the promisor and the recipient
of a promise as the promisee. To determine if each promise is supported
by consideration and therefore enforceable, the benefitdetriment analysis
is used as follows:
In return for As promise: B provides consideration in the form of either

a benefit conferred upon A (ie, A obtains the right to ownership and
possession of the car) or a detriment suffered by B (ie, B having to part
with the car).
In return for Bs promise: A provides consideration either by conferring

upon B a benefit (ie, the promise to pay B the purchase price), or by
suffering a detriment (ie, A having to part with his money).
Several observations can be made from the above example:
In return for a promise, a promisee may often have conferred a benefit

as well as suffered a detriment. However, the law only requires either a
benefit or detriment to satisfy the requirement of consideration (see para
8.29 for an example where only a benefit exists to support a promise
without a detriment being suffered by the promisee).
In any one agreement, a party may be both a promisor and a promisee

depending on the promise under discussion. Thus, it is important to
specify the promise that is sought to be enforced when we are trying to
decide if consideration exists to support that promise.
[Promisor]
[Promisee]
a promises to purchase and pay $50,000 for Bs car
B
B Promises to sell and deliver his car to A
[Promisee]
[Promisor]
Figure 8.1 Two sets of promises in an agreement
218
1/11/13 10:52:27 AM
8.6
Consideration may also be defined as the price for purchasing a promise.

In the example above, A can be said to have bought Bs promise of sale
and delivery of the latters car at the price or consideration of $50,000.
Conversely, B can be said to have bought As promise of payment at a price
or consideration equivalent to the car.
8.7
Consideration must be distinguished from a condition to which a promise is

subject. If A says to B I will buy you a car when you attain the age of 21,
the question is whether A is promising a gift subject to the fulfilment of a
condition or making a contractual promise to be accepted by a reciprocal
promise by B. In the example above where the fulfilment of the condition
is not within the control of the promisee, the promise is likely to be a mere
conditional gift. However, where the fulfilment of the condition involves the
performance of some act by the promisee, it is not as clear.
8.8
The difficulty is illustrated by the differing views between the majority and
minority judges in Chappell & Co Ltd v Nestl Co Ltd (1960). The defendant
company, Nestl, offered to sell records of the tune Rockin Shoes for a
nominal cash price and three wrappers of their chocolate bars. The court had
to decide whether the chocolate wrappers formed part of the consideration
for the purchase of the records. The majority of the House of Lords thought
so as Nestl had (indirectly) benefited from the receipt of the chocolate
wrappers since its chocolate sales might have increased in connection with
the promotion. Alternatively, the purchaser had suffered a detriment having
been put to the trouble of purchasing the chocolate bars in order to purchase
the record. The minority judges, however, disagreed as they felt that the
requirement for the wrappers was merely a condition which a purchaser had
to fulfil before he could purchase the records.
8.9
The definition of consideration is also significant in other ways (see Figure

8.2). First, consideration is defined as something given in exchange for a
promise. The idea of exchange or reciprocity is said to indicate that the law
will only enforce bargains as opposed to gifts. Thus gratuitous promises,
that is, promises to confer some thing or service for nothing in return, are
generally not enforceable (see exception in para 8.44). It also underlies other
rules concerning consideration:
a benefit or detriment must have been requested by the promisor in order

to constitute a valid consideration;
219
1/11/13 10:52:27 AM
past consideration is no consideration; and

consideration must move from the promisee.
Second, consideration is defined as something that has value in the eyes of

the law. What the layman may consider factually to be a benefit or detriment
may not be accepted by the law as consideration. The law only recognises
consideration which it deems to be sufficient (and it does not concern itself
with the adequacy of the consideration). Thus whether consideration (and
the related concepts of benefit and detriment) exists is a legal inquiry rather
than a factual one. The reader is cautioned that the notion of consideration
is far from simple and commentators have suggested that consideration is
actually about the policy reasons that justify the enforcement of a promise
(see R Halson, Contract Law (2001) at p 160).
CONSIDERATION DEFINED:
Something of value in the eyes of the law given in exchange for a promise
BenefitDetriment
Price of promise
Consideration must
be requested by
promisor
Exchange
Consideration
must not be past
Value in eyes of law
Consideration
must move from
promisee
Consideration
must be
sufficient; need
not be adequate
Figure 8.2 Significance of the definition of consideration
Consideration Must
8.10
be
Requested
for by the
Promisor
The idea of exchange requires that the benefit conferred or detriment suffered
by the promisee must be requested by the promisor. Thus, in Combe v Combe
(1951), the plaintiff was unsuccessful when she sued her ex-husband for
breach of a promise to pay her an annual maintenance of 100 after their
divorce. Although she had, in reliance on her ex-husbands promise, refrained
from applying to the court for maintenance (and thus arguably conferred
a benefit on her husband), the court held that the defendant ex-husbands
promise was not supported by any consideration as he had not requested her
to so refrain.
220
1/11/13 10:52:28 AM
Consideration Must Not
be
Past
8.11
An act done prior to and independently of a promise cannot be regarded as

valid consideration for the promise since it is not done in exchange for the
promise. Hence, if A voluntarily washes Bs car and thereafter, B, impressed
by As kindness, promises to pay $50 to A, the promise is not enforceable as
the consideration provided by A occurred prior to Bs promise. Such past
acts are conveniently referred to as past consideration.
8.12
Past consideration must be distinguished from executed consideration. To

appreciate this distinction, we must understand the concepts of executory
and executed consideration. For example, B promises to sell his car to A
and deliver it in a months time in return for As promise to make payment
on delivery. At the time the contract is formed, both A and Bs promises
have yet to be performed. They are executory in nature but are still valid
consideration for each others promise. If, at the time of agreement, A hands
the purchase price to B, who delivers his car to A simultaneously, both parties
have furnished executed consideration; the consideration is performed at the
time the contract is formed.
8.13
Typically, executed consideration is also the acceptance of an offer in a

unilateral contract. In Carlill v Carbolic Smoke Ball Co (1893) (see Chapter 7,
para 7.12), the plaintiff was held to have accepted the defendants unilateral
offer by taking the smoke ball thrice daily for two weeks. This act of acceptance
is also consideration for the defendants promise as the defendants benefited
from the sale of the smoke ball while the plaintiff suffered a detriment by
using the smoke ball as instructed. Thus the consideration provided by the
plaintiff was executed at the time the contract was formed.
8.14
Executed consideration is therefore an act or forbearance undertaken in

return for the promisors offer unlike past consideration, which involves an
act or forbearance undertaken without any reference to the promisors offer.
8.15
Are all acts or forbearance occurring before the promise invalid consideration
for the promise? This may not be so. In Pao On v Lau Yiu Long (1980), the
plaintiffs had agreed, at the defendants request, not to sell the shares of a
company for a period of one year. Subsequently, the defendants agreed to
indemnify the plaintiffs for any loss which they might suffer as a result of
their earlier promise not to sell the shares. Eventually, the plaintiffs did suffer
221
1/11/13 10:52:28 AM
losses and sued the defendants on the indemnity. In defence, the defendants
argued that their promise to indemnify the plaintiffs was not enforceable as
it was not supported by consideration; the plaintiff s promise not to sell the
shares was given before the indemnity and was therefore past consideration.
8.16
The Privy Council rejected the defendants argument and held that the
indemnity was enforceable. Even though the plaintiffs promise to hold
the shares was given before the defendants promise to indemnify, it was
nonetheless good consideration as it satisfied all the conditions below:
the act was done at the promisors request;

there was an understanding between the parties, at the time the request
was made, that the act would be compensated by payment or some other
benefit conferred; and
such compensation would be enforceable if it had been promised in
advance.
This decision is often regarded as an exception to the rule that past

consideration is no consideration and has been endorsed in Singapore (Sim
Tony v Lim Ah Ghee (1995); Rainforest Trading Ltd and another v State Bank
of India Singapore (2012)).
8.17
The first and second conditions are easy enough to understand. The third
condition is best explained as a safeguard against enforcing a promise that
would not have been enforceable for any reason under contract law (eg, due
to the lack of an intention to create legal relations or the presence of vitiating
factors, etc) even if the problem of past consideration is overcome by virtue
of the first and second conditions being satisfied.
Box 8.1
Reflecting
on the law
Pao Ons decision a true exception?
If payment was contemplated by both parties at the time the act was requested,
it would be more accurate to say that the promisees act was executed for a
payment to be fixed in the future (ie, the promisees act is executed and not past
consideration for the promised payment). Indeed, a strictly chronological view of the
events should not be taken in deciding if an act is in fact past consideration. Rather,
the more important question is whether the preceding act and the subsequent
promise are in substance part and parcel of one and the same transaction.
222
1/11/13 10:52:28 AM
Consideration Must Move
from the
Promisee
8.18
A person can only enforce a promise if the consideration for the promise
is furnished by him. Hence, in Tweddle v Atkinson (1861), A and B, the
respective fathers of a married couple, entered into a contract where each
undertook to pay a sum of money to C (the husband). When C tried to
enforce the contract against the estate of B after Bs death, he failed as the
consideration for the promise was furnished by A and not by him. This
decision can also be explained on a different ground; that C was unable to
enforce the contract because he was not a party or not privy to the contract
(on privity of contract, see Chapter 9, para 9.50 onwards).
8.19
While consideration must move from the promisee, it does not have to move
to the promisor. Hence, if A promises to pay B $50 if B washes Cs car, the
consideration provided by B is valid even though it does not confer a direct
benefit on A, the promisor (see Figure 8.3).
[Promisor]
[Promisee]
A promises to pay $50 to B if
B
B washes Cs car
[Third party]
Figure 8.3 Consideration moving from promisee to third party
Consideration Must
be
Sufficient
Concept of Sufficiency
8.20
As mentioned, consideration must be sufficient but need not be adequate.

The term sufficient refers to legal validity, that is, something having
value in the eyes of the law. Once an act or forbearance is deemed sufficient
consideration at law, it is not necessary to show that it is also adequate
that it has a value comparable to the value of the promise. The rationale
is that contracting parties are taken to be perfectly able to assess the merits
223
1/11/13 10:52:28 AM
of their own bargains and the courts role is to ascertain whether a bargain
has been made, not whether it is a good bargain. This is consistent with
the free market philosophy of minimal state interference into bargains that
are freely and voluntarily made by its citizens. Hence, if A agrees to sell
his car to B for $20,000 although it has a market value of $50,000, Bs
payment of $20,000 is sufficient consideration even if it may not be a fair
price for As car. A more extreme example can be found in Chappell &
Co Ltd v Nestl Co Ltd (1960) (see para 8.8), where it was held that even
used chocolate wrappers which were discarded on receipt could constitute
sufficient consideration for the sale of records. Thus a nominal consideration
can be sufficient consideration as long as parties freely consented to it.
8.21
Sometimes, a grossly inadequate consideration may indicate that the promisor

did not freely and willingly consent to a bargain but was in fact coerced or
improperly influenced into such agreement. In such situations, the contract
may be set aside on the ground of duress or undue influence. The relevant
legal principles will be considered in Chapter 14.
8.22
How then do we identify value in the eyes of the law? Clearly, where the
consideration is given in monetary terms or is readily measured in economic
terms, such consideration is sufficient in the eyes of the law. This is so in
most commercial contracts, where consideration is furnished in the form of
monetary payment or the provision of goods or services (with ascertainable
market prices). Where such price tags cannot be readily ascertained, identifying such value becomes a much more difficult task. Table 8.1 provides a
list of what may be considered sufficient or insufficient consideration and the
underlying rationale.
Intangibles and Moral Obligations

8.23
Would natural love and affection, as well as other motives of a purely

sentimental nature be sufficient consideration in return for a promise? The
answer is generally not. The rationale is that such motives lack certainty
for purposes of enforcement. Also there is the policy concern that love and
affection should not be held at ransom in return for a promise.
8.24
Would the promisees promise of an act which he is already under a moral

obligation to perform be sufficient consideration in support of a promisors
224
1/11/13 10:52:29 AM
promise? In White v Bluett (1853), a father who was wearied by his sons
frequent complaints that he had distributed his assets unfairly among
his children, agreed to release his son from his debt obligation under a
promissory note if he would cease complaining. It was held that the father
was not bound by his promise it was his right to distribute the property as
he wished and the son had no right to complain. In ceasing his complaints,
the son was only doing what he was morally obliged to do and that was
no consideration for his fathers promise. As a matter of policy, the law
would not allow moral obligations or good behaviour to be used to extort
a favourable promise from the other party.
Forbearance and Compromise

8.25
Where a party has a claim against another, he may agree to refrain from
enforcing the claim for a promise given by the latter and such an agreement
is described as a forbearance. Similarly, the parties to a dispute may consider
it more beneficial to enter into a compromise whereby one party agrees
to surrender his claim in consideration for the others payment or other
promises, as costly and time-consuming litigation to enforce the claim can
be avoided. In both instances, the promisors agreement not to pursue a
claim is good consideration for the promises given in exchange.
8.26
Where a person promises not to enforce an invalid claim and it is shown

that he knew such claim to be invalid at the time of his promise, such
forbearance is no consideration (see Wade v Simeon (1846)). The rationale
is that the surrender of a groundless claim is neither a benefit to the other
party nor a detriment to the one purporting to give up the claim. However,
it is not necessary for the person surrendering his claim to show that he
has given up a valid claim. It is sufficient if he could establish, first, that
he has reasonable grounds for his claim; and secondly, that he honestly
believes that he has a fair chance of success; and finally, that he has not
concealed from the other party any fact which he knows may affect the
validity of the claim (see Callisher v Bischoffsheim (1870)). This means that
the consideration furnished lies not in giving up a valid claim, but rather, in
giving up a right to claim. This makes practical sense as most compromises
and settlements relate to doubtful claims, the validity of which could not be
ascertained without a complete trial.
225
1/11/13 10:52:29 AM
Existing Public or Legal Duty

8.27
In general, where A makes a promise to B in consideration for Bs promise

to do something which B is already legally obliged to do, Bs promise is not
good consideration. The rationale appears to be that an act obliged by law is
neither a benefit to A nor a detriment to B. Also, such a rule is said to be
necessary to prevent public officers from extorting money for services which
they were legally bound to render.
8.28
Where the act or conduct in question exceeds the requirements of the legal
duty, it may constitute good consideration. In Glasbrook Bros v Glamorgan
County Council (1925), the appellant mining company agreed to pay the
respondent police authority to maintain a stationary troop at its mine to
protect workers returning to work during a strike. Later, the appellant refused
to make the promised payment and argued that the police authority had
provided no consideration for the promise as they were merely discharging
their legal duty to protect life and property. The House of Lords rejected
this argument; holding that the police were only legally obliged to provide a
mobile force in the circumstances, and by providing a stationary force, had
gone beyond their legal duty.
Existing Contractual Duty

(1) Owed to third party
8.29
The performance of, or the promise to perform, an existing contractual

duty owed to a third party is sufficient consideration for a promise given in
exchange. In Scotson v Pegg (1861), A contracted with X to deliver goods to
X or his nominee and X nominated B to accept the goods. B later contracted
with A that if A would deliver the same goods to B, B would unload them
from the ship at a fixed rate. B did not honour his promise and A sued
for breach of contract. B contended that A had provided no consideration
because in delivering the goods, A was merely performing his existing
contractual duty to X. The court disagreed. When A promised B to perform
an existing contractual duty which A owed to X, such a promise benefits B
by conferring on B the personal right to enforce that promise. Note that A
would not have suffered a detriment in performing the act as A is already
contractually obliged to X to so perform. However, it should be recalled that
the law only requires either a benefit conferred or a detriment suffered to
constitute consideration.
226
1/11/13 10:52:29 AM
(2) Owed to the promisor

(a) In return for a promise for more
8.30
What if the alleged consideration lies in the performance, or a promise

to perform, an existing contractual duty owed to the promisor? The
traditional view is that such a promise is generally not regarded as sufficient
consideration the promisor derives no benefit from a performance to
which he is already entitled and the promisee suffers no detriment for doing
what he is already bound to do. In Stilk v Myrick (1809), the captain of a
ship, unable to replace two crewmen who had deserted in the course of a
voyage, promised to divide the wages of the deserters equally among the
rest of the crew if they would work the ship safely back to London. One
of the seamen sued to enforce this promise after the completion of the
voyage. The court rejected the claim, holding that the seamen were already
bound under the terms of their existing contracts to complete the voyage
and hence a subsequent promise to do the same was no consideration for
the captains promise.
8.31
It has been suggested that the rationale behind Stilk v Myricks decision is to
discourage seamen from holding their employer to ransom by threatening to
breach their contracts and aggravating the perils of seafaring. A party should
not be encouraged to extort further concessions from the other party after
having already concluded a contract.
8.32
However, any performance which is over and above the promisees existing
contractual duty is sufficient consideration for a promise given in exchange.
In Hartley v Ponsonby (1857), 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 promise was held to be
binding because in such circumstances, the remaining crew members were
no longer bound to complete the voyage and in agreeing to do so, they
have done more than what was required under their original contractual
undertakings.
8.33
Stilk v Myrick should be contrasted with the controversial case of Williams v

Roffey Bros & Nicholls (Contractors) Ltd (1991). The defendants (Roffey Bros)
were building contractors who were awarded a contract to refurbish 27 flats.
For that purpose, they engaged the plaintiff (Williams) as sub-contractor to
227
1/11/13 10:52:29 AM
carry out the carpentry work for 20,000. Shortly after commencing work,
the plaintiff got into financial difficulty; the agreed price of 20,000 was too
low to enable him to carry out the work satisfactorily and this was aggravated
by the slow progress of the work due to his own inadequate supervision. The
defendants, being aware of the plaintiff s problems, were concerned that if
the plaintiff did not complete the carpentry work on time, the defendants
would incur a delay penalty under the main contract. After some negotiation,
the defendants agreed to pay the plaintiff an additional sum of 10,300 at
the rate of 575 for each flat completed. Thereafter, the plaintiff resumed
work and substantially completed the work on eight more units but received
only one further payment of 1,500 from the defendants. The plaintiff then
ceased works and brought an action to enforce the defendants promise of
additional payment.
8.34
Relying on Stilk v Myrick, the defendants resisted the plaintiff s claim on

the ground that no consideration was furnished for the defendants promise
of additional payments the plaintiff was already bound to complete the
carpentry work under the original sub-contract. However, the English Court
of Appeal disagreed. Clearly, the defendants had agreed to the additional
payment because they considered it advantageous to do so. They stood to
enjoy practical or factual benefits from the plaintiff s promise to complete
the work on time such as avoiding the need to engage another subcontractor and, more importantly, the avoidance of liability for delay to the
owners under the main contract. Such practical or factual benefits were held
to be sufficient consideration for the defendants promise. The result of this
decision is that the promise to perform an existing contractual duty owed to
the promisor may constitute sufficient consideration if the promisor derived
practical benefits from the performance. As summarised by Glidewell LJ
(at pp 1516):
(1) if A has entered into a contract with B to do work for, or to supply
goods or services to, B in return for payment by B; and
(2) at some stage before A has completely performed his obligations under
the contract, B has reason to doubt whether A will, or will be able to,
complete his side of the bargain; and
(3) B thereupon promises A an additional payment in return for As promise
to perform his contractual obligations on time; and
228
1/11/13 10:52:30 AM
(4) as a result of giving his promise, B obtains in practice a benefit, or

obviates a disbenefit; and
(5) Bs promise is not given as a result of economic duress or fraud on the
part of A; then
(6) the benefit to B is capable of being consideration for Bs promise, so that
the promise will be legally binding.
8.35
Clearly, Williams v Roffey marks a significant departure from the traditional

position represented by Stilk v Myrick. The defendant in Stilk v Myrick had
also benefited from the crews promise to sail the vessel back to the destined
port, yet such benefit was not held to be sufficient consideration. These
two decisions are (despite denials of the judges in Williams v Roffey to the
contrary) clearly inconsistent with each other. At present, the inconsistency
remains unresolved.
8.36
Williams v Roffey has been endorsed in two local decisions with, unfor
tunately, dissimilar suggestions as to its ambit. In Sea-Land Service Inc v
Cheong Fook Chee Vincent (1994), the defendant employer issued a 30-day
termination notice to the plaintiff employee stating that his severance benefit
included an enhanced severance payment of $14,340 (which was not an
existing contractual entitlement). Subsequently, after serving out the notice
period, the defendants refused to pay the enhanced severance payment but
offered an ex gratia allowance of $4,780 instead. The plaintiff sued to enforce
the enhanced severance payment, arguing that the defendants had in fact
benefited from his services during the last month of his employment which
constituted consideration for the promised payment.
8.37
The Court of Appeal disagreed. It regarded Williams v Roffey as a limited

exception (see [11][14]) and held that in this case, the defendants derived
no benefit from the plaintiff s work in the last month because a company
would only retrench employees who were no longer essential to its operations
and hence the value of such employees work in the final month was at best
minimal. This reasoning suggests that the concept of practical benefits
ought to be understood narrowly such that only a real and significant benefit
(and not just any benefit) would constitute sufficient consideration under the
principle established in Williams v Roffey (see J Carter, A Phang and J Poole,
Reactions to Williams v Roffey (1995) 8 Journal of Contract Law 248).
229
1/11/13 10:52:30 AM
8.38
In Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd

(2001) (see Chapter 14, paras 14.2114.22) however, the concept appears
to be interpreted more broadly. In this case, the defendant agreed to make
additional payments to the plaintiff in exchange for the latters promise to
deliver goods, which it was already bound to do under its existing contract
with the defendant. The Singapore High Court applied Williams v Roffey to
enforce the defendants promise. It found that the defendant had benefited
from the timely delivery of the goods and avoided negative commercial
consequences such as the damage to its reputation arising from its failure
to meet its customers orders. However, no attempt was made to reconcile
Williams v Roffeys approach with that in Stilk v Myrick nor was the previous
Court of Appeal decision of Sea Land Services referred to. The law in
Singapore thus remains equally unsettled.
8.39
The Sea Land Services decision has been subsequently referred to by the
Singapore High Court in Teo Seng Kee Bob v Arianecorp Ltd (2008) and the
principle in Williams v Roffey applied; again without any discussion as to its
scope of application. Despite remaining ambiguities, the Williams v Roffey
exception is part of Singapore law. Indeed, the Singapore Court of Appeal in
Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal (2009) affirmed
as much (at [118]), in observing that a diluted doctrine of consideration
represents the current state of Singapore law. The traditional role played
by the doctrine of consideration in guarding against extortionate behaviour
is diluted if practical or factual, as opposed to legal, benefit is accepted as
sufficient consideration in return for a promise for more (see Implications
of Williams v Roffey in Box 8.2).
Box 8.2
Reflecting
on the law
Implications of Williams v Roffey
(1) Doctrine of Consideration
Theoretically, the captain in Stilk v Myrick could sue the sailors for breach if they
decided to discontinue the voyage, but the practical value of such action is minimal
compared to the loss, expense and inconvenience which could result from a delayed
or abandoned voyage. Thus the sailors promise to sail the ship to the destined
230
1/11/13 10:52:30 AM

Box 8.2 (Continued )
port was undoubtedly a factual benefit. But the court appears to have construed
consideration as a legal rather than a factual concept.

By accepting practical benefits as sufficient consideration, the court in Williams
v Roffey has shifted the focus of enquiry from Has the promisee provided something
that has value in the eyes of the law? to Did the promisor in fact benefit from
the promisees promise? This is a broader and more flexible understanding of the
concept of consideration which arguably accords with commercial reality parties
do often agree to pay more for the same goods or services (or render more services
for the same price) where it is beneficial to do so.

Yet, if the slightest benefit could constitute consideration, almost all modifications
of (especially commercial) contracts will be upheld as the promisor would almost
always benefit more from the promisees continued performance than a breach of his
contractual duty. In practice, this will mean that the requirement for consideration
will cease to have a meaningful role in defining the kinds of agreements which
are enforceable at law.
(2) Contract Modification and Economic Duress
The inconsistency between these two cases is also reflective of the tension between
two legitimate concerns when deciding whether a contract modification is valid and
enforceable. On the one hand, there is concern that such modification might have
resulted from one partys exploitation of the others weaker bargaining position.
In Stilk v Myrick, the court dealt with such risks by insisting on the presence
of consideration, the assumption being that where fresh consideration has been
furnished, the variation is less likely the result of duress or coercion. However, a
counter argument is that a freely agreed modification should be upheld even in the
absence of consideration. If one party encounters problems in the performance of
his contractual obligations, should he not seek a solution by negotiating with the
other party for a modification of the contract terms? Such self-help methods are
likely to be more time and cost effective than formal dispute resolution processes
such as litigation.

Indeed, some commentators have argued that the concept of consideration
is no longer necessary to curb such risks, as this function is more aptly performed
by the doctrine of economic duress (see Chapter 14, Box 14.1). See R Halson,
Sailors, Sub-Contractors and Consideration (1990) 106 Law Quarterly Review 183;
A Phang, Whither Economic Duress? Reflections on Two Recent Cases (1990)
53 Modern Law Review 107; and A Phang, Consideration at the Crossroads
(1991) 107 Law Quarterly Review 21. They argue that instead of depending on the
presence or absence of consideration, such modification is valid as long as it can
be shown that both parties intended to be bound by the modification and that no
improper pressure has been applied on the promisor in the bargaining process.
This reasoning is persuasive in that, if accepted, it will bring the law closer to
commercial reality.
231
1/11/13 10:52:30 AM

Table 8.1 Sufficiency of Consideration Proferred and Rationale
Promises/Acts
proffered as
consideration in
return for a promise
Is it
sufficient?
Rationale
Of nominal value
The law does not interfere with bargains freely

entered into by private citizens in a free market
economy.
Intangibles
Too uncertain for purposes of enforcement.

Policy not to encourage extortionate behaviour
(eg, holding of love and affection at ransom).
Moral obligation

(ie, holding moral/good behaviour at ransom).
Existing public duty

by public officials. No benefit to promisor nor
detriment to promisee.
Going beyond
existing public duty
No risk of extortionate behaviour by public

officials. Benefit to promisor and detriment to
promisee exist.
Existing contractual
duty owed to third
party
No risk of extortionate behaviour by promisee.

Benefit conferred to promisor although promisee
suffers no detriment.
Existing contractual
duty owed to
promisor
Insufficient: Stilk v Myrick (traditional view)

by contracting parties once a contract is
concluded. No benefit to promisor nor detriment
to promisee.
Sufficient: Williams v Roffey (practical
benefits enjoyed by promisor)
Gives effect to commercial reality.
Problem: Threatens to derail the traditional role
of the doctrine of consideration.
Going beyond
existing contractual
duty
No risk of extortionate behaviour by contracting

parties. Benefit to promisor and detriment to
promisee exist.
232
1/11/13 10:52:31 AM
(b) In return for a promise for less
8.40
A owes B $1,000. A pays $700 to B, which B accepts as complete discharge

of As debt. Can B later sue A for the unpaid balance of $300? In other
words, can A hold B to his promise to accept $700 as complete discharge of
As debt? In this situation, A does not rely on Bs promise to seek additional
payment (unlike the case in Stilk v Myrick) but to avoid part of his liability.
8.41
The general rule laid down in Pinnels case (1602) is that the payment of a
lesser sum is not a complete satisfaction of the debt. The rationale is that a
promisor is not bound by his promise to forego the unpaid portion of the
debt as the promisee has not furnished any consideration for the promise
in making part payment, the promisee has done no more, and in fact, less
than what he is contractually bound to do. Thus, such contract modifications
are not enforceable in the absence of consideration, and in the example
above, B may insist on the full repayment of As debt despite his promise to
the contrary. The rule in Pinnels case has been affirmed and applied by the
House of Lords in Foakes v Beer (1884).
8.42
The rule in Pinnels case does not apply where the debtor has provided
something different to the creditor, at the creditors request. Thus if A owed
B $1,000 and B agreed to treat the debt as discharged in full if A washes
Bs car, or make partial payment of $500 and washes Bs car, the rule in
Pinnels case would not apply since A would have furnished consideration
for Bs promise to forgive the debt or forgo the balance. Alternatively, partial
repayment of a debt at a different place or on an earlier date would suffice
as fresh consideration for the creditors promise.
8.43
The rule in Pinnels case has been criticised on the ground that it runs counter
to the ordinary expectations of the business community. As Lord Blackburn
observed in Foakes v Beer (at p 622):
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 to insist on their rights
and enforce payment of the whole. Even where the debtor is perfectly
solvent, and sure to pay at last, this often is so. Where the credit of the
debtor is doubtful it must be more so.
233
1/11/13 10:52:31 AM
Thus, it is reasonable to ask whether the principle in Williams v Roffey should

apply to contract variations resulting in a promise to accept less. In other
words, why should the practical benefit of receiving a partial payment not be
accepted as good consideration for the promise to forgive the whole debt?
In Re Selectmove Ltd (1995), the English Court of Appeal acknowledged the
force of this argument but did not extend the principle in Williams v Roffey
to situations involving partial payment of debts as that would in effect be
overruling the House of Lords decision in Foakes v Beer, which the Court of
Appeal had no power to do. The court thus correctly adhered to the doctrine
of precedent but unfortunately left the inconsistency between Williams v
Roffey and Foakes v Beer unresolved. In principle, it is difficult to see why
the law should differentiate between these two situations as the practical
benefits which a promisor may derive from the receipt of part payment
is no less real than the benefits of receiving a promised performance (see
J Carter, A Phang and J Poole, Reactions to Williams v Roffey (1995)
8 Journal of Contract Law 248). The law in Singapore on this point also
remains unresolved.
When Consideration
is
Not Required: The Exceptions
Contract by Deed
8.44
An exception to the legal requirement of consideration are contracts by deed,

that is, formal documents in writing which have been signed by the parties
before a witness or witnesses, sealed and delivered. A gratuitous promise
made by deed may be enforced (see, eg, Development Bank of Singapore
Ltd v Yeap Teik Leong (1988); Hong Leong Finance Ltd v Tay Keow Neo
(1991)). The rationale for exempting such contracts from the requirement
of consideration is that having gone through such elaborate steps, the party
making the gift would be well aware of what he is doing and would seriously
intend to be legally bound to make the gift.
Promissory Estoppel
(1) Meaning and origin
8.45
An important exception to the rule in Pinnels case, the equitable doctrine

of promissory estoppel prevents a person from going back on his promise
even though the promise is not supported by consideration. The origin of
this doctrine is often traced to Denning Js (as he then was) obiter remarks
234
1/11/13 10:52:31 AM
in Central London Property Trust Ltd v High Trees House Ltd (1947). In
that case, a 99-year lease was granted by the plaintiffs to the defendants
in 1937 for a block of flats at a rent of 2,500 per year. In January 1940,
the plaintiffs agreed to halve the rent as the defendants were encountering
difficulty securing sub-tenants for the flats owing to the war conditions then
prevailing. The defendants thereafter paid the reduced rent. However, the
flats were again fully let by early 1945 and the plaintiffs sought to restore
the rent to 2,500 from mid-1945. Denning J held that the plaintiffs were
entitled to do so as the reduced rent was intended to apply only while the
adverse conditions persisted. More importantly, Denning J observed that if
the plaintiffs had claimed for the full rent for the period prior to 1945, they
would have been estopped from doing so as they could not go back on a
promise that was intended to be binding and which was in fact relied upon
by the defendants as it would have been inequitable for them do so under
the circumstances.
(2) Elements of promissory estoppel
8.46
To successfully invoke the doctrine, all of the following elements must be

present:
a clear and unequivocal promise by the promisor not to insist upon his
original contractual rights;
reliance by the promisee;
such that it is inequitable for the promisor to go back on his promise;

and
the doctrine is invoked as a shield, not a sword.
Each of these elements, as well as the effects of promissory estoppel, will be

considered.
(a) Clear and unequivocal promise
8.47
The promisor must have made a clear and unequivocal promise which is
intended to affect the future conduct of the parties relationship. Obviously,
the clearer the promise, the more likely it is that the promisee will act in
reliance on it and render it inequitable for the promisor to retract his promise.
Whether a promise is sufficiently clear and certain is judged objectively, that
is, it is sufficient if a promisee could reasonably have been so induced in the
circumstances.
235
1/11/13 10:52:31 AM
8.48
Silence or mere inaction would not generally constitute a clear promise as

it lacks certainty. Thus, a mere failure to enforce a contractual obligation
does not amount to a promise to abandon such a right of enforcement.
However, a promise does not have to be express but can be implied by words
or conduct. In Hughes v Metropolitan Railway Company (1877), a landlord
gave his tenant six months notice to repair the premises but thereafter, the
parties commenced negotiations for the sale of the lease to the landlord. The
tenant had indicated that he would not effect the repairs whilst negotiations
continued. And in fact, in the course of negotiations, the landlord raised the
state of disrepair of the premises as a reason for objecting to the tenants
asking price for the lease. Soon after, the negotiations broke down and the
landlord sought to forfeit the lease as the tenant had not carried out the
repairs on the expiry of the original six months notice. It was held that
he could not do so as it could reasonably be inferred from his conduct in
entering into negotiations with the tenant that the notice period would not
run while the negotiations continued and would only continue to run after
the negotiations ended.
(b) Reliance
8.49
The second requirement is that the promisee must have acted in reliance on
the promise. Generally, such reliance is evidenced by the promisees change
of position on the faith of the promise, that is, by doing or omitting to do
something which he would otherwise not have done or omitted to do.
8.50
Is it sufficient for the promisee to merely alter his course of action in

reliance on the promise made, or must he also have suffered some detriment
or disadvantage as a result? Some cases suggest that detrimental reliance is
necessary. The rationale is that only where the promisee has suffered such
detriment would it be inequitable for the promisor to go back on his word
(see paras 8.6162).
8.51
The English position does not require detrimental reliance. In W J Alan &
Co Ltd v El Nasr Export and Import Co (1972), Lord Denning rejected the
suggestion that a promisee must adduce evidence of detriment in order to
invoke promissory estoppel; all he needed to demonstrate was that he had,
in reliance on the promise, acted differently from what he otherwise would
have done. Similar observations were made in Socit Italo-Belge pour le
236
1/11/13 10:52:32 AM
Commerce et lIndustrie SA v Palm and Vegetable Oils (Malaysia) Sdn Bhd,

The Post Chaser (1982) by Goff J (as he then was) (at p 27):
To establish such inequity, 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. Take the facts of [the High Trees case] the
representation was by a lessor to the effect that he would be content to
accept a reduced rent. In such a case, although the lessee has benefited
from the reduction in rent, it may well be inequitable for the lessor
to insist on his legal right to the unpaid rent, because the lessee has
conducted his affairs on the basis that he would only have to pay rent at
the lower rate.
8.52
The English position was endorsed by the Singapore High Court in Abdul Jalil
bin Ahmad bin Talib v A Formation Construction Pte Ltd (2006). In that case,
Judith Prakash J commented (at [44]) that the better view is that detriment
of the kind required for the purpose of estoppel by representation is not an
essential requirement and all that is necessary is that the promisee should
have acted in reliance on the promise in such a way as to make it inequitable
to allow the promisor to act inconsistently with it. Under this approach, the
question whether the promisee has suffered any detriment would only be
a factor to be taken into account when considering the last element of the
doctrine, that is, whether it is in fact inequitable for the promisor to retract
his promise in all the circumstances (see para 8.61). When the case went up
on appeal, this point was not challenged and the Court of Appeal (at [48])
chose not to rule on the correctness of Judith Prakash Js approach without
the benefit of arguments (see Abdul Jalil bin Ahmad bin Talib and others v
A Formation Construction Pte Ltd (2007)).
8.53
The issue of detrimental reliance was finally clarified in Lam Chi Kin
David v Deutsche Bank AG (2010) by the Singapore High Court whose
position appears to have been implicitly endorsed by the Court of Appeal
(see Lam Chi Kin David v Deutsche Bank AG (2011)). Of further interest
is the novel approach introduced by the Court of Appeal in Lam Chi Kin
to establish promissory estoppel in the absence of detrimental reliance.
This will be explained in para 8.59 but first, the issue of detrimental reliance
is elucidated.
237
1/11/13 10:52:32 AM
8.54
In Lam Chi Kin, the Singapore High Court, upon a short survey of the
law, noted (at [55][56]) that conflicting views on the requirement of
detriment arose because some courts used the word detriment in a narrow
sense while others used it in a broad sense. The narrow sense was used
in situations where the promisee was put to some trouble in acting (or
relying) upon the promisors promise and thus already suffered a detriment
prior to any indication that the promisor wished to resile from his promise.
For example, the promisee had to incur expenditure of money (see, eg,
Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd (2009))
or time, or was placed in a position of disadvantage such as incurring
legal obligations (see, eg, Fenner v Blake (1900)). The broad sense was
used in situations where the promisee did not suffer any immediate trouble
or disadvantage in acting (or relying) on the promisors promise; instead,
the promisee might have enjoyed a benefit from doing so. Detriment
or disadvantage to the promisee would only arise if the promisor was
permitted to go back on his promise (see, eg, Hughes v Metropolitan Railway
Company (1877) and WJ Alan Co Ltd v El Nasr Export and Import Co
(1972)).
8.55
The facts of Hughes v Metropolitan Railway Company (see para 8.48) may be
used to illustrate the difference. Relying on the landlords implied promise not
to insist on repairs to the leased premises during the period of negotiations
for the sale of the lease, the tenant did not effect the repairs within the
notice period. Was there detrimental reliance? There was no detriment
in the narrow sense of the word the promisee-tenant did not suffer any
detriment in relying on the promise. Instead, the tenant enjoyed the benefit
of not being put to the trouble and expense of effecting repairs, which might
be rendered unnecessary (and wasted) had the negotiations resulted in a
successful sale of the lease. Nevertheless, detriment in the broad sense
existed the tenants reliance on the implied promise to suspend the notice
period for repairs had resulted in a change of the tenants position; the
tenant-promisee would suffer detriment, that is, the prospect of eviction for
failing to effect repairs within the original notice period, if the landlord was
permitted to go back on his word.
8.56
Steven Chong JC (as he then was) rejected a technical approach of dwelling on

the narrow or broad sense of detriment in establishing promissory estoppel.
Instead, the learned judge distilled (at [57]) an overarching principle that ran
238
1/11/13 10:52:32 AM
through the decided cases in which the doctrine of promissory estoppel had
been applied:
The overarching principle is that the doctrine has consistently been
held to apply in circumstances when it was inequitable either in the
narrow or broader sense of detriment for the promisor to resile from
his promise and to enforce his strict legal rights.

Applying the principle to the facts of Lam Chi Kin, the learned judge
concluded that it was not inequitable to allow the promisor to go back on
the promise no detriment was suffered by the promisee in reliance on
the promise to justify preventing the promisor from insisting on their strict
legal rights.
8.57
On appeal, while the Court of Appeal disagreed with the High Courts
conclusion, they appear to have implicitly approved of the identified principle
(see, however, A Phang (general ed), The Law of Contract in Singapore (2012)
at para 04082 where doubt is expressed on whether the Court of Appeal
has embraced the overarching principle). What is clear is that the Court of
Appeals focus of inquiry into the existence of detriment was on establishing
the last element, that is, that it will be inequitable to allow the promisor to
go back on his promise (see [38]). Detriment suffered by the promisee is
therefore relevant towards justifying the inequity of allowing the promisor
to resile from his promise.
8.58
As mentioned, the Singapore Court of Appeal reached a conclusion opposite

to that of the High Court on the facts of Lam Chi Kin. The brief facts are:
Deutsche Bank promised to extend a 48-hour grace period to Lam Chi
Kin (Lam), their private banking client, to respond to a margin call in
the course of complex foreign exchange trades. The grace period, a more
generous time allowance than that permitted under the original contract term
governing the parties, was valuable given the volatility of foreign exchange
rates and the financial impact they would have on Lams investments. The
Court of Appeal found (at [38]) that various actions taken by Lam resulted
in a change of his position: Lam provided additional business to the bank
by obtaining from them a credit line of USD200 million to carry on foreign
exchange trades, placed large cash deposits with the bank as collateral for
the credit line and entered into risky leveraged foreign exchange trades to
the tune of multiple millions of several currencies, something Lam would
not have done if not for the promised grace period. On this basis, the Court
239
1/11/13 10:52:32 AM
of Appeal concluded that Lam relied on the banks promise and thereby
suffered sufficient detriment to make it inequitable to permit the bank to
resile from their promise.
8.59
In an interesting turn, the Court of Appeal went on to introduce a novel

approach to establish promissory estoppel. The Court held that in the
absence of detrimental reliance, Lam could rely on an alternative principle
(a broader principle) to establish promissory estoppel. Chan Sek Keong CJ
(delivering the judgment of the court) said, at [40]:
Furthermore, in our view, even if it is arguable that there was no
detrimental reliance on the facts of this case, we would hold that the
appellant is entitled to succeed in this appeal on the broader principle
set out at V.5.17 of Bower ([33] supra), where it is stated:
However, even adopting such a broad definition of detriment, an
exception may be suggested to the rule that detriment is required. It
is strongly arguable that a representor may be stopped from denying
a representation because it is inequitable for the representor to resile
from it, although the representee has suffered no detriment, where the
representor has obtained an advantage by the reliance of the representee
on the representation, as had been held in relation to constructive trusts,
by reasoning equally applicable to the doctrine of estoppels. [emphasis
in the original]
Emphasising the particular relevance of the broader principle to the facts

of Lam Chi Kin, Chan CJ stated, at [40]:
We are of the view that this principle is particularly relevant in the
context of private banking where if banks and financial intermediaries
engaged in the business of wealth management cannot be trusted with
their words, they should not allowed to be in this business. The courts
should not allow a bank to claim that my word is not my bond, and
should be sufficiently astute to find inequity, and where it is possible to
do so within legal limits, to hold the promisor to his word in a case,
such as the present, where the respondent has obtained an advantage
from his promise at the expense of the promisee.
Applied to the facts, the court found that the banks promise of a grace period
enabled them to attract and induce Lam to use their wealth management
services. Since the bank had benefitted considerably as a result of Lams
240
1/11/13 10:52:32 AM
reliance on their promise, the court concluded that it was inequitable for the
bank to resile from their promise.
8.60
Various observations on the novel approach are pertinent. First, the status
of the broader principle is unclear the Court had already decided
the case on the detriment analysis and the novel approach would likely
be obiter. However, the language used by the Court (in [40] reproduced
above and the summary of findings in [48]) seems to suggest that it could
be an alternative ratio decidendi. This remains to be clarified by the Court
of Appeal. Second, the focus of the broader principle is on the attainment
of an advantage (or benefit) by the promisor as a result of the promisees
reliance on the promise and whether this circumstance makes it
inequitable for the promisor to resile from his promise. This is in stark
contrast to the traditional focus on whether the promisee had suffered a
detriment as a result of his reliance on the promise. Traditionally, promissory
estoppel is used to protect the promisee from disadvantage in relying on
the promisors promise and not to prevent the promisors advantage as a
result of such reliance. Third, the broader approach raises a number of
interesting questions: What sort of advantage will trigger the operation
of promissory estoppel? Will it result in greater availability of the doctrine
constrained only by the need to link the promisors enjoyment of advantage
to the resulting inequity if the promisor is to go back on his promise?
It may be fair to say that a promisor would enjoy an advantage or benefit
in not insisting on his original contractual rights in most, if not all,
voluntary contract modification scenarios. Indeed, academics have
commented, inter alia, that the Court of Appeals novel approach is likely
to further dilute the role played by the doctrine of consideration (see, eg,
Yeo Tiong Min, The Future of Promissory Estoppel in Singapore Law
Fifth Yong Pung How Professorship of Law Lecture, Singapore Management
University, 16 May 2012).
(c) Inequitable to go back on promise
8.61
Consistent with promissory estoppel being an equitable doctrine, an essential

element is that it must be inequitable for the promisor to go back on his
word. Inequity or injustice is a broad concept and overlaps substantially with
the concept of detrimental reliance (see para 8.50 onwards above). Where
a promisor makes a promise upon which the promisee relies and suffers
detriment as a result, these facts would render it inequitable to allow the
241
1/11/13 10:52:33 AM
promisor to recede on his word. Notably, in The Post Chaser (see para 8.51)
although the court held that detriment was not necessary, it nonetheless
held that it was not inequitable for the promisor to recede on his promise
because the lapse of two days between the time of the promisees reliance
and the time at which the promisor retracted his promise was too short
to have caused any prejudice to the promisee. Thus, even if one accepts as
correct the English position that detriment is unnecessary, detriment remains
an important factor in the general assessment of whether it is just and
equitable to permit the promisor to go back on his word, a point implicitly
acknowledged by the Singapore High Court in Lam Chi Kin. Additionally,
the Court of Appeal in Lam Chi Kin signalled that it is pertinent, in the
absence of detriment, to examine if the promisor has obtained an advantage
or benefit as a result of the promisees reliance to decide if such inequity is
made out.
8.62
Ultimately, the issue of inequity must be determined by taking into account

all the relevant circumstances. Any factor that could tip the balance one way
or the other must be considered. D&C Builders v Rees (1966) is a useful
illustration. The defendant owed the plaintiffs 482 but offered, through
his wife, to pay 300 in full settlement of the account, stating in effect that
the plaintiffs would get nothing if they did not accept the lesser sum. The
plaintiffs were then on the verge of bankruptcy and the defendants wife was
well aware of that fact. For lack of a real option, the plaintiffs accepted the
payment but subsequently brought an action to recover the balance of the
debt. Lord Denning held that it was not inequitable for the plaintiffs to resile
from their promise as the defendant had improperly procured the plaintiffs
agreement by taking advantage of their weak financial position.
(d) Shield, not sword
8.63
The principle of promissory estoppel is often metaphorically described as one

which acts only as a shield but not as a sword. This means that the principle
may only be invoked to defend or resist a claim, but it cannot be used to create
a new cause of action where none existed before. In Combe v Combe (1951)
(see para 8.10), the plaintiff could not enforce her ex-husbands promise as
she had not furnished consideration for the promise and thus no contract
existed between them in the first place. The court also rejected her further
argument that the defendant was estopped from breaking his promise since
242
1/11/13 10:52:33 AM
to do otherwise would amount to creating a contractual relation between

them when none existed before.
8.64
One may question why the doctrine of promissory estoppel is limited to

operate only as a shield but not as a sword. If the rationale is to protect
reasonable reliance placed on a promise, why should such protection be
allowed only by way of a defence but not as a cause of action? Some other
jurisdictions such as Australia have allowed the doctrine to be used as a
sword. Neither Singapore nor English courts have thus far adopted this
bold approach.
(3) Effect of promissory estoppel: Suspensive or extinctive?
8.65
A number of cases suggest that promissory estoppel merely suspends the

enforcement of an obligation such that it may be revived by the promisor
upon giving due notice to the promisee. This is observed in the High Trees
case (see para 8.45), where the court held that it was possible to restore
payment of the full rent for the future and in the Hughes case (see para
8.48), where the tenants obligation to repair is not lost but is resurrected
upon the giving of notice and more time. What constitutes sufficient notice
in each case would depend on its particular facts. An express notice is
not necessary and precise time need not be specified for it to take effect.
Generally, it would suffice if the promisor has by his conduct made clear his
intention to withdraw his concession and the promisee is given a reasonable
time to make the necessary adjustments thereafter.
8.66
It should be noted, however, that in the High Trees case, the court was
prepared only to allow a restoration of the landlords rights to future rental
at the full rate. Lord Denning was of the view that the landlords would not
have been able to recover the full rent for the war years. This indicates that
the payment obligations falling within the duration of the suspension were
actually extinguished. This is inconsistent with the view that promissory
estoppel is suspensory in nature.
8.67
Perhaps a better view is to determine the effects of the doctrine by reference

to the nature, intent and circumstances of the promise made. In exceptional
circumstances, an obligation may be extinguished because the reliance
placed on the promisors assurance makes it impossible for the promisee to
243
1/11/13 10:52:33 AM
perform his original obligation or highly inequitable for him to do so (see

GH Treitel, Contract: In General, in A Burrows (ed), English Private Law
(Oxford: OUP, 2nd ed, 2007, at [8.54]).
8.68
In cases such as High Trees, which involved periodic payments, a distinction

may have to be drawn between the payments which accrued before the
notice and those accruing thereafter. Where it is not possible to recover the
former payments, the right to these payments is therefore extinguished; but
the general right to future payments is merely suspended and may be revived
upon reasonable notice. The suspensory effect is justifiable by the fact that
the promises were given in response to acute and temporary circumstances
and thus it is likely that the said promises were only intended to be binding
while the extenuating circumstances lasted. In the case of one-off payments,
where a creditor accepts a lesser sum in satisfaction of a larger debt, the
effect of promissory estoppel should ultimately depend on whether the
creditors intention (objectively determined) is to forgive the entire debt or
merely to allow the debtor more time to pay.
Intention
8.69
to
Create Legal Relations
Even where an agreement is supported by consideration, it is not necessarily

enforceable unless the parties intended the agreement to be legally binding.
Whether the parties to an agreement did intend to create legally binding
relations is a question to be determined by the facts of the case on an
objective basis. The parties are said to have the intention to create legal
relations if an objective view of the relevant facts suggests that such an
intention exists, even if one of the parties should assert the contrary. In
Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd (2010), the
Singapore High Court reiterated this principle, stating the rationale and
highlighting an implication of (or exception to) the objective approach.
Belinda Ang J observed (at [34]) thus:
in finding an intention to enter into legal relations, ... the law is
predominantly concerned with the objective intentions of a party, and
not his subjective or actual intention. Specifically, the objective
approach determines a partys intentions by looking at all of his words
and conduct directed towards his counterparty from the perspective of
a reasonable person versed in business. The obvious rationale for the
objective approach is to enable parties to deal in reliance with each
244
1/11/13 10:52:33 AM
others manifest intentions. It follows from this rationale that there is

an exception to the objective approach where a partys actual intention
differs from his apparent intention, and this is actually known to his
counterparty.
8.70
Generally, the agreements are analysed under two broad categories:

agreements made in social and domestic contexts and agreements arising
in business and commercial contexts.
Social
and
8.71
For social or domestic arrangement, there is a presumption that the parties

do not intend the agreement to be legally binding. In Balfour v Balfour
(1919), the defendant husband who was leaving for an overseas assignment
promised to pay his wife, the plaintiff, a monthly sum of 30 until she joined
him overseas. The defendant later failed to honour his promise and the
plaintiff sued for breach of contract. The court held that the agreement was
motivated mainly by the parties natural love and affection for each other
and not the intention to create legal obligations and thus the plaintiff s claim
failed. Atkin LJ was also of the view that the courts should not interfere
with domestic agreements because the parties do not usually intend such
agreements to have legal consequences and that to do so would unduly
overload the judicial system.
8.72
In Jones v Padavatton (1969), a mothers agreement to maintain her adult

daughter on the condition that the latter studied to become an advocate
was also held not to be enforceable as it was merely an informal family
arrangement where each party depended on the others good faith for the
performance of the promises.
8.73
However, the presumption against contractual intent can be rebutted by

clear evidence of the parties intention to create legal obligations. In Merritt
v Merritt (1970), a husband who had deserted his wife agreed to pay her a
monthly maintenance of 40 and to transfer the house to her when she had
fully repaid the outstanding mortgage as well as other expenses related to the
house. At the wifes insistence, the husband wrote the agreement on a piece
of paper and signed against it. The court held that in these circumstances, the
presumption against creating legal relations did not apply and the agreement
Domestic Agreements
245
1/11/13 10:52:34 AM
was binding. Unlike the facts of Balfour v Balfour, where the couple were
living in amity at the time of the agreement, the couple in Merritt v Merritt
was estranged when the agreement was made. As such, they were clearly
making a serious bargain and not merely relying on the others affection and
good faith for the fulfilment of the promises.
8.74
As the issue of contractual intent is a question of fact, all the surrounding

facts of a case are relevant in considering whether the presumption against
contractual intent has been displaced. It is not possible to list all the relevant
factors but cases have shown that two factors are of particular significance.
The first is the certainty of the terms of the agreement. The more certain
the terms, the more likely that the parties would have carefully considered
the content and effects of the agreement. Conversely, vague and imprecise
terms are likely to be construed as evidence of lack of contractual intent.
The second factor is the actual reliance placed on the agreement; evidence of
such reliance will tend to suggest that the parties intended the agreement to
be binding. Both factors were present in Merritt v Merritt; the court found
that the agreement was written with sufficient certainty and that the wife
had acted in reliance on the husbands promises in settling the mortgage
loan and other related expenses.
Business
and
Commercial Agreements
8.75
Where business and commercial agreements are concerned, the presumption

is that the parties intend to create legally enforceable obligations. The burden
of rebutting the presumption is a heavy one and lies on the party who asserts
the absence of contractual intent.
8.76
It is not uncommon for parties to expressly state in their agreement that they
have no intention to create legal relations. Where this is done in clear terms,
the presumption is effectively rebutted. In Rose & Frank Co v J R Crompton
& Bros Ltd (1923), the parties included the following clause (commonly
known as an honour clause) in their agreement:
This arrangement is not entered into as a legal or formal agreement, and
shall not be subject to legal jurisdiction in the Law Courts but is only
a definite expression of and record of the purpose and intention of the
parties concerned to which they each honourably pledge themselves.
246
1/11/13 10:52:34 AM
The court held that the arrangement was not enforceable as a contract as it
was clear from the honour clause that they did not intend the agreement to
have any legal consequence.
8.77
The issue of contractual intention frequently arises in relation to a letter

of comfort. Typically, such letters are issued by a parent company or a
substantial shareholder to encourage a financial institution to extend a loan
facility to its subsidiary or investee company. The precise legal effect of a
comfort letter depends on the intention of the parties as evidenced by the
surrounding circumstances and the text of the letter.
8.78
In Kleinwort Benson Ltd v Malaysia Mining Corp Bhd (1989), the defendant
parent company issued a comfort letter which contained the statement that
It is our policy to ensure that the business of [our subsidiary] is at all times
in a position to meet its liabilities to you under the above arrangements.
Upon examining the wording of the letter, the English Court of Appeal held
that the statement did not amount to a contractual promise. In contrast, the
Australian Supreme Court upheld a letter of comfort containing a similarly
worded statement as having contractual force in Banque Brussels Lambert
SA v Australian National Industries Ltd (1989). In the latter case, Rogers
CJ disapproved of the English courts approach in attempting to resolve a
commercial dispute with excessive emphasis on the text of a document.
Rogers CJ also took the view that generally commercial agreements which
resulted from hard bargaining should be given significant weight and not be
lightly reduced to a merely honourable engagement except in the clearest
of circumstances.
8.79
Significantly, the Singapore High Court has declined to give legal effect to
a letter of comfort in the case of Hongkong and Shanghai Bank Corporation
Ltd v Jurong Engineering Ltd (2000). Though the court acknowledged that
the letter of comfort should, as a commercial document, be presumed to
have legal effect, it nonetheless held that the presumption was displaced by
two important considerations. First, the evidence showed that the parties did
not seriously place any reliance on the comfort letter; and secondly, the text
of the letter was not sufficiently certain to support the creation of binding
obligations. This decision suggests that our courts may be more inclined
towards a restrictive approach in interpreting letters of comfort, such that
247
1/11/13 10:52:34 AM
documents of this nature are unlikely to be given contractual force except

where there is irrefutable evidence of such intention.
Conclusion
8.80
The reader should realise by now that much uncertainty still surrounds the
concept of consideration and in particular, the necessity for such a concept.
Though consideration is unlikely to be abandoned, its role in contract law
has been considerably whittled down.
8.81
A traditional argument in favour of consideration is that it is good evidence

of the contracting parties intention to create legal relations. This has been
challenged on the basis that where other circumstantial evidence evinces
such intention, there is no reason why agreements should be denied legal
validity simply for lack of consideration. Indeed, it is often the need to give
effect to the parties intention in such situations that prompted judges to
invent consideration. In Chwee Kin Keong and others v Digilandmall.com
Pte Ltd (2004), V K Rajah JC (as he then was) observed at [139], obiter, in
the Singapore High Court thus:
The modern approach in contract law requires very little to find the
existence of consideration. Indeed, in difficult cases, the courts in several
common law jurisdictions have gone to extraordinary lengths to conjure
up consideration. (See for example the approach in Williams v Roffey
Bros & Nicholls (Contractor) Ltd ).
The learned judge went on to suggest (at [139]), obiter, that:

Indeed, the time may have come for the common law to shed the
pretence of searching for consideration to uphold commercial contracts.
The marrow of contractual relationships should be the parties intention
to create a legal relationship.
8.82
Perhaps the fate of the doctrine of consideration lies more tellingly in the
comments of the Singapore Court of Appeal (comprising Judges of Appeal
Chao Hick Tin, Andrew Phang Boon Leong and VK Rajah) in Gay Choon
Ing v Loh Sze Ti Terence Peter and another appeal (2009). Andrew Phang JA
(delivering the judgment of the court) observed, at [117], that the doctrine
of consideration has survived much criticism and remains an established
part of Singapore and the common law; albeit reform is still necessary as
248
1/11/13 10:52:34 AM
theoretical incoherence and practical difficulties in application exist. On

controversies surrounding the determination of which contractual promises
to enforce, the court opined (at [118]), obiter, that having available a range
of legal options a diluted doctrine of consideration and alternative
doctrines such as promissory estoppel, economic duress, undue influence
and unconscionability is the most practical approach towards achieving
a fair and just result in any given case. The learned judge proffered this
provisional view upon noting that, currently, no one doctrine is itself free
of difficulties.
249
1/11/13 10:52:35 AM
1/11/13 10:52:35 AM

08 BizLaw2ed

Caricato da

Informazioni sul documento

Descrizione originale:

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

08 BizLaw2ed

Caricato da

Copyright:

Formati disponibili

Chapter 8

Consideration and Intention to

Consideration Must be Requested for by the Promisor

Consideration Must Not be Past

Consideration Must Move from the Promisee

Consideration Must be Sufficient

Principles of Singapore Business Law

Intention to Create Legal Relations

Social and Domestic Agreements

Business and Commercial Agreements

Chapter 8: Consideration and Intention to Create Legal Relations

In Chapter 7, we considered the circumstances in which the law would

Is the law on these legal requirements and exceptions coherent and

The general rule is that a promise is only enforceable if it is supported by

So what exactly is consideration? Consideration is defined as something

Principles of Singapore Business Law

some forbearance, detriment, loss, or responsibility given, suffered, or

In return for As promise: B provides consideration in the form of either

In return for Bs promise: A provides consideration either by conferring

Several observations can be made from the above example:

In return for a promise, a promisee may often have conferred a benefit

In any one agreement, a party may be both a promisor and a promisee

Figure 8.1 Two sets of promises in an agreement

Chapter 8: Consideration and Intention to Create Legal Relations

Consideration may also be defined as the price for purchasing a promise.

Consideration must be distinguished from a condition to which a promise is

The definition of consideration is also significant in other ways (see Figure

a benefit or detriment must have been requested by the promisor in order

Principles of Singapore Business Law

past consideration is no consideration; and

Second, consideration is defined as something that has value in the eyes of

Value in eyes of law

Figure 8.2 Significance of the definition of consideration

Chapter 8: Consideration and Intention to Create Legal Relations

Consideration Must Not

An act done prior to and independently of a promise cannot be regarded as

Past consideration must be distinguished from executed consideration. To

Typically, executed consideration is also the acceptance of an offer in a

Executed consideration is therefore an act or forbearance undertaken in

Principles of Singapore Business Law

the act was done at the promisors request;

This decision is often regarded as an exception to the rule that past

Pao Ons decision a true exception?

Chapter 8: Consideration and Intention to Create Legal Relations

Consideration Must Move

Figure 8.3 Consideration moving from promisee to third party

As mentioned, consideration must be sufficient but need not be adequate.

Principles of Singapore Business Law

Sometimes, a grossly inadequate consideration may indicate that the promisor

Intangibles and Moral Obligations

Would natural love and affection, as well as other motives of a purely

Would the promisees promise of an act which he is already under a moral

Chapter 8: Consideration and Intention to Create Legal Relations

Forbearance and Compromise

Where a person promises not to enforce an invalid claim and it is shown

Principles of Singapore Business Law

Existing Public or Legal Duty

In general, where A makes a promise to B in consideration for Bs promise

Existing Contractual Duty

The performance of, or the promise to perform, an existing contractual

Chapter 8: Consideration and Intention to Create Legal Relations

(2) Owed to the promisor

What if the alleged consideration lies in the performance, or a promise