1.

FORMATION OF CONTRACT
INTRODUCTION
A contract is a promise, agreement or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty. Contract law facilitates and regulates the practice of voluntarily and mutually undertaking obligations with respect to future behaviours.

FINDING AGREEMENT
The offer and acceptance approach requires the following elements: o Offer a promise to be met by an acceptance o Acceptance another promise that must be in agreement with the offer with respect to the same thing o Certainty & Completeness the agreement must be sufficiently certain and complete o Intention to Create Legal Relations parties must have intended to be involved with the agreement o Consideration supported by an idea of reciprocity

I. OFFER
An offer is a manifestation by the offeror (whether orally, in writing, or by conduct) of a willingness to be bound by the terms proposed to the offeree as soon as the offeree signifies acceptance to the terms. o Proposal of the terms of the exchange o And intimation of the willingness to be bound o Confers power on the offeree to bind the offeror into a contract as soon as the offeree accepts An offer can be invalidated because it was [1] mistakenly made (mistaken offers), [2] not a legal offer (invitations to treat) and [3] no longer a valid offer at the time of the purported acceptance.

1. OBJECTIVITY AND MISTAKEN OFFERS

Determination of an offer is subject to an objective test of the parties intentions and is by how an honest and reasonable person would interpret the conduct of the offeror, thus protecting honest and reasonable expectations.

1A. KNOWS OF THE OTHER PARTYS MISTAKE

Smith v. Hughes (1871) o A agrees to buy oats from a farmer, believed them to be old oats after inspecting a sample. When oats turned out to be new and useless, refused to pay. o HELD: There was no consensus ad idem and hence no contract. Retrial ordered to determine if it were just a mere mistake of fact (contract not voided) or mistakes of terms that was known to the other party (contract void). Hartog v. Colin & Shields (1939) o Seller offered 3000 hare skins at a fixed price per pound when he meant per piece. Buyer accepted the offer and sued for damages when seller refused to sell. o HELD: No contract because in the trade, the price is always per piece and the buyer must have realised and did in fact knows of the mistake in the offer. Tribune Investment Trust Inc v. Soosan Trading Co Ltd (2000) o Yong Pung How CJ: ... the function of the court is ... to ensure that the reasonable expectations of honest men are not disappointed. To this end, it is also trite law that the test of agreement or of inferring consensus ad idem is 1

objective. Thus, the language used by one party, whatever his real intention may be, is to be construed in the sense in which it would reasonably be understood by the other. Chwee Kin Keong and ors v. Digilandmall.com Pte Ltd (2004) o Ds employee mistakenly advertised printer for $66 on website when actual retail price is $3854. The 6 Ps sought to enforce their orders of 1606 printers. o NO CONTRACT: Rejected Ps allegations that they were unaware of Ds mistake. Actual knowledge can be established by inference from circumstantial evidence. Any reasonable person must have known that a manifest error had occurred.

1B. CONTRIBUTED TO THE OTHER PARTYS MISTAKE IN MAKING OFFER

Scriven Bros v. Hindley (1913) o Buyer successfully bid for a lot believing it to contain a hemp when it contained a tow in fact, a different and much cheaper commodity and refused to pay. o HELD: The parties were never ad idem to the subject matter of the proposed sale. The subjective intention was relevant in this case only because of the misleading auction catalogue that induced the bidders mistake, thus no contract. (Deliberate perpertration!)

1C. LATENT AMBIGUITY

Raffles v. Wichelhaus (1864) o Parties contracted to buy and sell goods to arrive ex Peerless from Bombay. Buyer intended the ship arriving in October while seller intended to deliver the goods on the different ship arriving in December. o HELD: There was no consensus ad idem and the contract was aborted by this latest ambiguity.

2. OFFERS AND INVITATIONS TO TREAT

No offer is made when a party communicates his proposed terms unless he also communicates his commitment to be bound on the others acceptance of the terms. A communication may possibly be only a request for or supply of information or an invitation to treat, not an offer.

2A. GENERAL PRINCIPLES

Harvey v. Facey (1893) o P sent D a telegram asking if D will sell them the goods and what was the lowest cash price. D replied with the lowest price and P purported to accept the offer. o HELD: D merely supplied information to Ps and expressed no clear intentions to be bound, no contract. Storer v. Manchester City Council (1974) o Council advertised for the sale of houses, P ascertained the price and sent a formal application of purchase. Council responded with a letter and included an agreement for sale that P signed and returned. o HELD: This was a contract that was concluded (went beyond the stage of Gibson). The letter evinced intention to be bound as soon as S accepted. Gibson v. Manchester City Council (1978) o Council wrote letter informing P of the price at which the council may be prepared to sell the house, but explicitly stated that the letter is not an offer of a mortgage. P filled in formal application and made repairs to the house. o HELD: No contract because P has to make the offer by his formal application. While the council had indicated an intention to accept the offer, it had not completed the acceptance by communicating it back.

2B. DISPLAYS AND ADVERTISEMENTS

Spencer v. Harding (1869 - 1870) o Generally, displays or advertisements for goods for sale are only invitations to treat and not offers. This rule may prevail even when the word offer is used because it may not have been used in its legal sense. o This protects the party placing the advertisement from incurring a liability contract with every single person who is willing to purchase the goods at the stipulated price. (Protecting the freedom from contract!!) Pharmaceutical Society of GB v. Boots Cash Chemists (1952) o D introduced self-service shopping in pharmacies which P claims violates a statute requiring certain drugs to be sold under the supervision of registered pharmacists. o HELD: Display was treated as an invitation to treat. Offer is made when customer picks up the item. Acceptance is when the sale is conducted under the supervision of the pharmacists. No contravention. Fisher v. Bell (1961) o HELD: Displays of a flick-knife in a shop window were not offers to sell the items in contravention of the legislation restricting the sale of offensive weapons, but were merely an invitation to treat. Partridge v. Cittenden (1968) o HELD: Advertisements offering for sale wild life birds contrary to a statute were just an invitation to treat and not an offer. However, courts are prepared to treat displays and advertisements as offers when there are good policy reasons for doing so. o Chapelton v. Barry UDC (1940) HELD: Courts held that the display of deck chairs for hire on the beach with a notice of the charges was an offer, which was accepted when the customers picks up the item. Policy consideration that it would be unfair to leave the claimant without a remedy, thus the need to accelerate the point of contract formation in order to keep out the exclusion clause. o Carlill v. Carbolic Smoke Ball Co. (1893) Manufacturer advertised carbolic smoke ball and offered to pay 100 to anyone who catches influenza after using their smoke balls in a specified manner. To show sincerity, the manufacturer deposited 1,000 into a bank. P contracted influenza and sued for 100. HELD: Offer was made to the whole world at the advertisement stage and accepted when the customer buys and uses the product in the specific manner. Policy consideration does not want to allow traders to make wild claims to sell quack remedies. o Chwee Kin Keong v. Digilandmall.com Pte Ltd (2004) The principle from Carlill v. Carbolic Smoke Ball Co is unlikely to be different with regard to internet websites.

2C. AUTOMATIC MACHINES

Thornton v. Shoe Land Parking Ltd (1971) o HELD: Automatic machines stating chare rates are a standing offer that the motorist accepts by driving in and prompting the machine to issue a ticket. o Therefore, there is an exclusion of liability contained on a notice placed inside the car park since it is not part of the contract and comes to the motorists notice after contract has been made. (same as Chapelton v. Barry UDC)

2D. AUCTIONS
Advertisement merely an invitation to treat Putting up for item for sale also an invitation to treat Bid by the purchaser offer Fall of the hammer acceptance Unilateral contract between the highest bidder and the auctioneer. Main contract between the bidder and the owner.

2E. REQUEST FOR TENDERS

Invitation to tender invitation to treat Person submitting the tenders offer Person inviting the tender accepting one of the offered tender acceptance Courts will use a 2-contract analysis where justice demands it: o Unilateral contract to consider conforming tenders o Main contract with the successful offered tender Blackpool & Fylde Aero Club v. Blackpool Borough Council (1990) o D expressly stated that no tender which is received after the last date and time specified (12pm) shall be admitted for consideration. P posted their bids at 11am that day into the mailbox. The mailbox should be duly emptied at noon each day, but this was not done on that day. D hence did not consider Ps tender and awarded the contract to another party. o HELD: 2-contract analysis. [1] main contract between D and winning tender; [2] unilateral contract to other conforming tender offer when any party submits an adhered tender and BBC has to accept and consider them. D breached [2] by not considering Ps tender. Hiap Huat Pottery (S) Pte Ltd v. TV Media Pte Ltd (1999) o Blackpool was distinguished because in this case, the consideration for the collateral (which is TV Medias obligation to submit HHPs tender to the manager) contract depended on the agreement to lease and could not exist by itself. o HELD: This tender process was not a unilateral offer and was only an invitation to treat. The collateral contract exists only when the main contract has been entered to. It is supplemental to the main contract.

2F. QUOTES
Mere quotation of a price is not an offer. Neither is a mere inquiry. The Barranduna (1985) o P negotiated a shipping deal with D. D sent a telegram containing details about the costs and the duration of the freight. P failed to pay, D sold the cargo and P alleged breach of contract. o HELD: Telegram was merely a quotation of the freight rate and not an offer. No legal obligation was incurred.

3. TERMINATION OF OFFER
Although a live offer once existed, it has ceased to exist and was dead by the time the offerees attempted acceptance was communicated to him. Hence, the offeree ceased to have the power to bind the offeror with his acceptance. An offer can be terminated by [1] revocation by the offeror, [2] rejection by the offeree, [3] lapse of offer and [4] death of either the offeror or offeree.

3A. REVOCATION BY THE OFFEROR

An offer is only revocable by the offeror if it is communicated to the offeree before the offerees acceptance takes effect. o Henthon v. Fraser (1892) A postal revocation does not take effect on posting (cf. Postal acceptance rule). It must be brought to the mind of the offeree, which would mean the time when it would be reasonable to expect the offeror to have acquired notice of it. o Tenax SS Co Ltd v. The Brimnes (1975) A revocation letter takes effect when it arrives at business premises during the office hour, but not one that arrives near or after the closing hours and is not seen that day. Those will take effect the next morning. o Shuey v. US (1875) An offer made by advertisement in a newspaper can be revoked by a similar advertisement even if some offerees do not see it. 4

Dickinson v. Dodds (1876) D offered to sell property to P and added that offer would stay open till Friday morning. Ds agent told P on Thursday that the offer was revoked. P rushed to inform D of his acceptance but discovered it sold. HELD: D was held to have effectively revoked the offer. A reliable third party acting without the offerors authority can revoke an offer. However the courts will be cautious to conclude as such and the onus is on the offeror to show that it would be unreasonable for the offeree to doubt the accuracy of the information conveyed.

3B. REJECTION BY THE OFFEREE

An offer is terminated as soon as the offeree communicates his rejection of it to the offeror. Fine distinction between a counter-offer (which kills off the original offer by rejecting it) and a request for further information or a clarification of the original offer. Also, conflict with the postal acceptance rule: o If an offeree posts acceptance, changes his mind and informs the offeror about the rejection by a speedier means before the acceptance letter reaches, the parties are still bound by postal acceptance. o If an offeree posts rejection, changes his mind and posts acceptance before his rejection letter arrives, then he can bind the offeror even thought he acceptance letter arrives after the rejection letter.

3C. LAPSE OF OFFER

An offer may lapse on : o The expiry of the period for which the offer is expressed to be open o The expiry of a condition other than time, which is expressly or impliedly contained in the terms of the offer. o The passage of a reasonable period of time where no time limit is imposed. Ramsgate Victoria Hotel Co Ltd v. Montefiore (1866) D offered to buy shares in the company and only informed 5 months later that the shares had been allocated to him. HELD: Offer has lapsed due to the reasonable period of time where no acceptance was given. o What is reasonable depends on the circumstances and context of each case, including the urgency of the matter, the nature of the subject matter, and the practice of the trade and previous mode of communication used.

3D. DEATH OF THE OFFEROR OF OFFEREE

Reynolds v. Atherton (1923) o An offer is terminated by the death of the offeree. Re Irvine (1928) o An acceptance was handed by the offeree to his son but was not posted until his death. o HELD: Still not a valid acceptance as the acceptance was made after the offerees death. Coulthart v. Clemetson (1879) o An offer is also terminated by the death of the offeror. Errington v. Errington (1952) o An offer remains open if the offeror could not have terminated the offer during his lifetime and the performance of the contract does not depend on the offerors personality and can be satisfied out of his estate.

II. ACCEPTANCE
An acceptance is an unequivocal expression of consent to the proposal contained in the offer and has the effect of immediately binding both parties to the contract. The contract cannot be varied after that and neither party can abandon their obligations. A valid acceptance must [1] correspond exactly with the offer, [2] must be given in response to the offer (nexus), [3] be made by an appropriate method and [4] be communicated to the offeror.

1. EXACT CORRESPONDENCE OF ACCEPTANCE WITH THE OFFER

A mirror image approach requires the acceptance to mirror the offer. If a purported acceptance deviates from the terms of offer in any way, then a binding contract is unlikely to have concluded.

1A. COUNTER-OFFER KILLS THE ORIGINAL OFFER

An offeree whose response qualifies the offer may be regarded as having made a counter-offer. A counter-offer terminates the original offer and there no offers exist thereafter for acceptance. However, the offeree retains the power to accept the original offer if: o The original offerors rejection of the counter offer includes a renewed offer on the original terms; o The offerees response was not a counter-offer but merely a request for information/clarification about the availability of better terms. Hyde v. Wrench (1840) D offered to sell his farm for 1000 but P said that he would only pay 950, which was rejected by D. P then agreed to pay 1000 but D also rejected this. HELD: The proposal of 950 amounted to a counter-offer which terminated the original offer and hence P can no longer accept the offer. Stevenson, Jaques & Co v. McLean (1880) P inquired with D for further information about the availability of better terms. D then sold the goods to a third party without responding to P. Hearing nothing; P accepted the original offer by telegram before Ds revocation reached P. HELD: P merely bade an inquiry and request for information and not a counter-offer, and thus could bind D with his subsequent acceptance.

1B. BATTLE OF FORMS

If parties purport to conclude a contract by an exchange of forms containing incompatible terms, then the conventional answer is that it depends on which party fired the last shot. The party who presents his terms last without provoking objection from the recipient who then acts on the contract succeeds in binding the recipient to his terms. o Brogden v. Metropolitan Railway Co (1876-1877) D sent P a draft agreement for the supply of coal. P amended the agreement and returned it to D. Nothing else was done to formalise the agreement. D ordered coal for P, supplied and paid for. HELD: Ps amendment is counter-offer which D accepted by conduct when D placed the order. o Butler v. Ex-Cell-O Corporation (England) Ltd (1979) P quoted the price of goods for D on Ps terms with a price variation clause. D then placed an order using Ds own terms without the price variation clause. P signed and returned the form with Ds terms but attached a letter stating that they were supplying the goods on their original terms. HELD: Ps original offer was met by Ds counter offer, which P accepted when P signed it. The accompanying letter was not a counter-offer, but simply a means of identifying the order. CRITICISM: This conventional approach allows courts to find a contract even though objectively interpreted, no agreement was ever reached. Furthermore, it may not fit what actually happens. Lastly, it may produce unjust results since its a matter of chance which party gets the last shot and the solution will be an all or nothing on one partys terms. 6

2. NEXUS (CASUAL CONNECTION) BETWEEN OFFER AND ACCEPTANCE

A valid acceptance must be made to a known offer. An acceptance is therefore ineffective if done without knowledge of the offer, evident in cases of cross-offers and offers of rewards.

2A. CROSS-OFFERS
Tinn v. Hoffman (1893) o D wrote to P offering to sell him iron. On the same day, P wrote to D offering to buy on the same terms. o HELD: These are simultaneous cross-offers and are made in ignorance with each other. They do not amount to a contract and will not bind the parties unless or until one is further accepted.

2B. REWARDS
A person who performs an act in ignorance that a reward has been offered for it cannot claim a contractual right to the reward since there was no nexus. o R v. Clarke (1927) A reward was offered for information leading to the arrest of certain murderers. D disclosed information without the intention of claiming the award. HELD: D cannot claim the reward later since he had no intention to claim it when he performed the act. There was no nexus between the offer of reward and his acceptance in disclosing information. o Gibbons v. Proctor (1891) HELD: Police officer was allowed to claim a reward. Although he was ignorant of it when he gave information to another fellow officer, he knew of it by the time the information reached the superintendent after passing through other hands. o Williams v. Carwardine (1833) HELD: Allowed the informant to claim cause she must have known of the reward even though she did not act from the desire to receive the reward. Courts are willing to find for meritorious claimants (unlike in R v. Clarke where the claimant was a criminal) because the offeror has received the benefits he promised to pay for, and claimants who perform beneficial acts should also be encouraged and rewarded for doing so.

3. METHODS OF ACCEPTANCE
A valid acceptance must be made in an appropriate way, and the mode of acceptance may be stipulated in the offer. If it is not, any words or conduct that objectively evinces the offerees intention to accept is enough (question of fact).

3A. MODE OF ACCEPTANCE PRESCRIBED

Stipulated modes of acceptance are generally just permissive, not mandatory. o Manchester Diocesan Council for Education v. Commercial and General Investments Ltd (1970) P invited tenders and started that a letter will be sent to the address on the successful tender to inform of acceptance. When P accepted Ds tender, he sent it to Ds surveyor instead of to the address. HELD: Mode of acceptance is not the sole permitted means of acceptance since D was not disadvantaged by having the notification sent to his surveyor. Furthermore, since it was P who made the stipulation, they could waive strict compliance with it anyway.

3B. ACCEPTANCE BY SILENCE

General rule is that acceptance cannot be inferred from the offerees silence. o Felthouse v. Bindley (1862) P offered to buy his nephews horse, adding that if he hears no more about him, he would consider the horse to be his at a price. The nephew did not answer the letter but told D, the auctioneer that the horse had been sold. D mistakenly sold the horse and P sued D for conversion. HELD: Ps offer to buy the horse cannot be accepted by his nephews silence. Justifications: o Silence is generally ambiguous it is often difficult to infer an intention to accept from it. o Acceptance must be communicated to the offeror so that he knows when the contract is formed and binding. o This will prevent an offeror from exploiting the offerees inertia.

4. COMMUNICATION OF ACCEPTANCE
General rule is that the offeree must communicate his acceptance to the offeror. Only at that moment does the offeror know that he is bound by the contract and each party knows that they can safely rely on the existence of the contract. This prevents undue hardship to the offeror who could be bound even without knowing that his offer has been accepted. 3 modes of classification: [1] 2-way instantaneous, [2] 1-way instantaneous and [3] postal (non-instantaneous)

4A. TWO-WAY INSTANTANEOUS

In 2-way instantaneous communications, there is no delay between sending and receiving of the acceptance. Any failure of communication is usually detectable and rectifiable immediately. o Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandsels GmbH (1982) Acceptance takes effect when and where it is actually brought to the attention of the offeror. o Entores v. Miles Far East Corp (1953) Lord Dennings 3 examples: If a face-to-face oral acceptance is drowned out by noise, the offeree must repeat his acceptance once the noise has passed. If the telephone goes dead before the acceptance is completed, the offeree must telephone back to complete his acceptance. If the offeror does not catch the clear and audible words of acceptance but does not bother to ask for the message to be repeated, then the offeror will be at fault to clarify and sort things out. But where neither party is blameworthy, the rule requiring actual communication of acceptance will favour the offeror and there will not be any contract.

4B. ONE-WAY INSTANTANEOUS

The condition of simultaneity is not met (faxes, emails). Although the message arrives almost instantaneously, the recipient is not necessarily at the other end ready to receive the message. Hence, a flexible approach is required. It is likely that the acceptance will take place when a reasonable offeror would access the message, taking account of all the given circumstances. o Tenax SS CO Ltd v. The Brimnes (1975) Issue was when is the revocation of an offer communicated by telex? HELD: If revocation was communicated to the place of business during ordinary business hours, then the revocation was effective when it was received even if it remains unread. o Chwee Kin Keong and ors v. Digilandmall.com Pte Ltd (2004) VK Rajah JC: Basic principles of contract law continue to prevail in contracts made on the internet. However, must consider novel aspects of the Internet and that not all traditional principles can apply. o Corinthian Pharmaceutical Systems v. Lederle Laboratories (1989) Issue was if there was a contract to sell 1000 vials of vaccines at a particular price? HELD: Automated ordering system issuing tracking number does not amount to acceptance. 8

Specht v. Netscape Communications Corp (2001) Did P assent to the License Agreement such that they will be bound by the arbitration clause? HELD: Shrink-wrap agreements generally recognised. Click-wrap licensing is enforceable. Browse-wrap is not enforceable since there is no purpose of assent when one downloads the software without needing to assent.

4C. ACCEPTANCE BY POST

The Postal Acceptance rule o Adams v. Lindsell (1818) Acceptance takes place when offeree posts his acceptance provided it was reasonable to accept by post. o Household Fire & Carriage Accident Insurance Co Ltd v. Grant (1879) Offeror is bound even before he knows of the acceptance, even if its arrival is delayed and even if he never actually received it. This is because the offeror could always specify that the acceptance has to reach him, and the offeror is in the position to make enquiries should the acceptance not reach him. o Byrne v. Van Tienhoven (1880) D sent an offer to sell goods on 1st October. When it arrived on 11th October, P immediately sent an acceptance via post to conclude the contract. However, D sent a letter revoking its offer on 8th October and reached P on 20th October. HELD: Contract was concluded on 11th October since postal acceptance rule does not apply to revocations. Revocations only take place not when it was posted, but when it was received and communicated to the offeree. Hence, the revocation was effective only on 20th October, by which a contract was already in existence. Justifications for the Postal Acceptance rule o The offeree is less likely to detect that his acceptance letter has gone astray as he would assume his letter to arrive to the offeror in the normal course of events. In contrast, the offeror can make enquiries if he does not hear from the offeree. o Once the offeree posts his acceptance he cannot know whether and if his letter was brought to the offerors notice. The offeree will be disadvantaged because [1] the offeror can rely on the existence of a contract while the offeree remains liable to revocation until he knows his acceptance has arrived; and [2] because the timing is left to the offeror, it could give him the incentive to behave badly. o HOWEVER, it is unlikely that there are any true justifications. It is becoming obscured in modern times. Holwell Securities Ltd v. Hughes A contract stipulated that P could accept an option to purchase the property by notice in writing to D within 6 months. Ps solicitors sent out the acceptance to D but it never arrived. HELD: There was no contract because notice in writing was interpreted as requiring D to actually notice the acceptance. What is the relevance of the Postal Acceptance rule today?

5. UNILATERAL CONTRACTS
UNILATERAL CONTRACTS As promise in exchange for Bs act As offer is accepted by Bs performance B is not obliged to perform (it is like a reward) Normally A cannot revoke once B has started performance (unless risk lies with B) BILATERAL CONTRACTS As promise in exchange for Bs counter-promise As offer is accepted by Bs counter-promise B is obliged to perform A can revoke offer any time before Bs acceptance

5A. ACCEPTANCE
Carlill v. Carbolic Smoke Ball Co (1893) o Manufacturer advertised carbolic smoke ball and offered to pay 100 to anyone who catches influenza after using their smoke balls in a specified manner. To show sincerity, the manufacturer deposited 1,000 into a bank. P contracted influenza and sued for 100. o HELD: Whereas bilateral contracts are concluded by the communication of the acceptance, unilateral contracts are concluded by the performance of the stipulated act, and in this case, the contract was concluded when P adhered to their instructions of use, there is no need to communicate this to D.

5B. REVOCATION
The courts will imply an obligation on the part of the offeror not to revoke the offer once the offeree has embarked on the performance since there will be injustice in Bs induced reliance to start performance. o Errington v. Errington (1952) A father promised his son and daughter-in-law that if they paid off the substantial mortgage on the house they were living in, it would be theirs. The couple began to pay off the mortgage. HELD: The fathers executors were not entitled to revoke the offer because the promise was a unilateral contract and the couple had commenced performance. This is applicable provided the performance was not left incomplete or unperformed. o Luxor (Eastborne) Ltd v. Cooper (1941) D promised to pay P a commission if P found buyers for Ds cinemas. P found willing buyers but D refused to proceed with the sale. HELD: There was no unilateral contract in this case and P estate agents were taking a risk in the hope of a substantial remuneration for a comparatively small exertion. o Daulia Ltd v. Four Millbank Nominees Ltd (1978) HELD: An offer can revoke his promise in a unilateral contract before the offeree embarked performance. The offeror however, is not obliged to honour the promise until the other party has fully performed the stipulated act. o Dickson Trading (S) Pte Ltd v. Transmarco Ltd (1989) Dicta of Daulia Ltd v. Four Millbank Nominees Ltd applied locally. There is no universal proposition that unilateral contracts cant be revoked upon the embarking of stipulated performance. o Mobil Oil Australia Ltd v. Lyndel Nominees Pty Ltd (1998) D promised any franchise that achieved a certain result (90% of performance in testing programmes) would be entitled to free renewals. HELD: D was entitled to revoke the offer even if P had commenced on the performance. Even if the offeror had indicated that he will not revoke the offer, it does not prevent him from revoking the offer later on.

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6. ASSESSMENT OF THE OFFER-ACCEPTANCE/MIRROR IMAGE APPROACH 6A. CRITICISMS

Unsuitability o Many common contractual situations do not fit easily into the normal analysis of the mirror image approach. For instance, at sales at the auctions, supermarket purchases, boarding a bus etc. Often, facts are forced to fit uneasily into the marked slots of offer, acceptance and consideration. Inadequacy o Offer and acceptance are necessary but insufficient to establish a formation of contract. Other than these 2 factors, other requirements must be satisfied to form a binding contract. Misleading o The courts are not just looking for, and will sometimes ignore the parties objective intentions because they want to give effect to other factors (certainty, flexibility of manoeuvre, discouraging opportunism, encouraging fair negotiating practices, protecting reliance/part performance and avoiding unfair terms). o These rules of convention may defeat the parties original intention and even create a contract where there is no consensus between the parties.

6B. BENEFITS
Many contracts are naturally susceptible of this analysis. It is thought to be analytically convenient and to provide a degree of certainty of the framework/formula. The framework incorporates considerable flexibility and can be applied to take into account other unarticulated factors. It is a well-established model and has the weight of precedential authority.

7. ALTERNATIVE APPROACH TO FORMATION

Gibson v. Manchester City Council (1978) o Lord Denning proposes that courts ought to look at whether the party have come to an agreement on everything that was material. If they have, then there will be a contract. The courts will then do the gap-filling by resolving contradictory terms and ironing them out. o However, this approach is often criticised for being very uncertain and giving the courts too much discretion in shaping the contents of the contracts.

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III. CERTAINTY & COMPLETENESS

Even if there is sufficient correspondence between offer and acceptance, there is no enforceable contract if the agreement expressly anticipates the need for further agreement (the one more step problem) or impliedly does so because it is vague or silent on material points (the fuzziness problem and gap problem). Courts have to determine which uncertainties are curable and which are incurable. o Curable by a process of judicial construction of the parties intention to fill up the gaps, then will be enforceable. o Incurable where the agreement is unenforceable and is just a mere agreement to agree.

1. CONDITIONAL AGREEMENTS
Conditional agreements are agreements that contemplate a further step being taken (subject to etc). The question is whether the stipulated step: o Is a precondition of the existence of the contract one or both parties retain the power to refrain from taking the stipulated step and prevent contractual formation. o Merely indicates the manner of performance of an already enforceable contract parties expectations are protected even if one refuses to take the next step. A-G v. Humphreys v. Estate (1987) o HELD: There was no contract because the parties have expressly made the agreement conditional on the completion of a formal contract. o If there appears to be an agreement on all essential matters, the courts will enforce the contract [1] on the face of documents, [2] when it is common commercial practice and [3] there are previous course of dealings between parties. Teo Teo Lee v. Ong Swee Lan (2002) o P signed a memorandum termed Offer to Lease which included the term subject to tenancy agreement. o HELD: The memorandum was binding because the clause was only reflective of the parties desire to have a formal document for the sake of regularity. o It is invariably a question of construction whether the execution of a further contract is a condition or a term of the bargain and the mere expression of the parties desire as to how the transaction already agreed should in fact proceed to completion.

2. VAGUENESS AND INCOMPLETENESS

When agreements contain vague words, the question is whether the courts are willing to give them enforceable meanings. Vagueness overlaps with incompleteness since an agreement can be so vague on particular matters it is incomplete. Pro-enforcement policies: o Imprecision in business practice business cycle changes and businesses refrain from insisting on precise terms. o Necessity and difficulty of building in flexibility certain materials are prone to changes, terms need to adapt. o Protecting reliance courts reward the commitment of parties and if performance commenced, reluctant to deny. o Unmeritorious pleas of uncertainty courts will not help parties wriggle their way out using unmeritorious pleas. Usually courts will uphold agreements when parties have indicated sufficient commitment to the contract. Must draw a fine line between construing a contract & making a contract, and upholding a bargain & imposing a bargain on parties.

2A. PREVIOUS DEALING, CUSTOM AND REASONABLENESS

Hillas v. Arcos (1932) o Parties entered into agreement to buy and sell 20,000 standards of softwood goods of fair specification in 1930. The agreement also gave the buyers an option to buy 100,000 standards for delivery in 1931. Sellers sought to escape the option by alleging that no enforceable meaning could be deduced from that phrase. o HELD: Option was binding. This uncertainty can be cured by reference to the parties previous dealings, the custom of timber trade and the standard of reasonableness. Of fair specification will be held to mean a reasonable assortment of timber of the kinds, qualities and sizes taking into account the seasons output. 12

Foley v. Classique Coaches (1934) o P sold land adjoining his petrol station to D on the basis that D would enter another agreement to buy its petrol. D agreed to buy the petrol at a price agreed by the parties in writing and from time to time. o HELD: Courts enforced this agreement as one to buy fuel at reasonable price. This is because D had bought petrol from P for 3 years prior, and to refuse to enforce the agreement would be unfair as it would deprive P of the part of the price of selling the land. G Percy Trentham Ltd v. Archital Luxfer Ltd (1993) o Where there is sufficient intention to be bound (as inferred from the reliance of the parties), then it will be difficult to deny the existence of a contract for vagueness or uncertainty. o The fact that the transaction was executed makes it easier to imply a term resolving an uncertainty or, alternatively, makes it possible to treat a matter not finalised in the negotiations and now inessential. Scammell and Nephew Ltd v. Ouston (1941) o An agreement to sell goods on hire purchase terms was held to be incurable and unenforceable because it is too vague. The courts cannot determine which of the types and varieties were intended. Impossible to discern.

2B. SEVERANCE
If the essential aspects of the transactions are agreed upon, a vague form of word can be severed as meaningless and redundant so that the rest of the agreement can be enforced. o Nicolene Ltd v. Simmonds (1953) The contract contained the words I assume that we are in agreement that the usual conditions of acceptance apply. HELD: Lord Denning cut out this vague phrase because he held that can be rejected without impairing the sense or reasonableness of the contract as a whole.

2C. AGREEMENTS TO (OR NOT TO) NEGOTIATE

Walford v. Miles (1992) o Parties agreed orally that if P provided an assurance from their bank confirming their resources to pay D, then D would [1] break off negotiations with any third party and would not consider/accept a better offer (lock-out) and [2] deal exclusively with P with a view to conclude the deal as soon as possible (lock-in). o HELD: Agreement was too uncertain to be enforceable, but awarded damages to P for misrepresentation to compensate P for his wasted expenses. o Lock-out agreements are only enforceable if there is a time limit. o Lock-in agreements are unenforceable because they are uncertain: They are inconsistent with contract being a self-interested activity. It is unreasonable to impose a duty upon the parties to deal in good faith. (Parties can still take a cooperative view rather than a necessarily adversarial one). Logically, unfair to impose that the deal is compulsory? It is difficult to determine whether a breach occurred. A court cannot be expected to decide subjectively if a proper reason existed for the termination of negotiations. (Seems to contradict the willingness of the courts to enforce an obligation to make best endeavours). It is difficult to quantify damages (but courts have allowed recovery of such losses in Allied Maples). Pitt v. PHH Asset Management Ltd (1993) o Applied Walford v. Miles and affirmed that lock-out agreements are only enforceable if there is a time limit.

2D. WORKABILITY OF ANY AGREED MECHANISM FOR ASCERTAINMENT

The standard of reasonableness cannot be employed to fill gaps where the parties expressly agreed to agree on later. o May and Butcher v. R (1934) D entered into a written agreement with P to sell surplus tentage, explicitly leaving the date and price of the payment to be agreed upon from time to time. HELD: There was no contract. An agreement between 2 parties to entire into an agreement in which a critical part of the contract is left undetermined is no contract at all. 13

However, this broad exclusionary approach has been criticised. If the court is satisfied that the parties intended to be bound, it will strive to find means of giving effect to that intention by filling up that gap. This can be done in 2 ways: o If the parties have agreed to a workable criteria for resolving the matter left unresolved, then when a party fails to agree on that criteria or that designated machinery for ascertainment breaks down, then the courts will step in and apply the formula/standard. o However, they cannot do so if the designated machinery is essential. This means that the contract is incurable (that the parties did not intend to be bound) unless they themselves filled in the gap (not a third party) Sudbrook Trading Estate Ltd v. Eggleton (1983) A lease from P granted the D an option to buy the premises at a price fixed by 2 valuers (one from the P and one from the D). In the absence of an agreement, the price was to be fixed by a neutral umpire. When D sought to exercise option, P claimed contract void for uncertainty. HELD: The machinery for appointing the valuers was not essential to the main purpose to ascertain a fair and reasonable price, and substituted its own machinery in determining the fair value of the premise. Koon Seng Construction Pte Ltd v. Siem Seng Hing and Co (Pte) Ltd (2005) P alleged that, following an exchange of correspondence, a contract was concluded with D to supply steel bars. D contended that there was no valid contract because, inter alia, there was uncertainty to the crucial terms. HELD: Without agreement on essential terms, there was no contract. The main reason was the uncertainty present in the terms regarding the price of steel. Terms such as subject to final confirmation and subject to revisions without further notice caused the alleged contract much ambiguity. A court will not imply a missing term if the facts show that the parties intended to leave open the possibility of backing out if they did not agree on the term or if there is no mechanism for completing it.

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IV. INTENTION TO CREATE LEGAL RELATIONS

1. THE REQUIREMENT AND ITS JUSTIFICATION
In practice, a contract formation requires that the parties have the intention to create legal relations. This translate into 2 strong presumptions that require clear evidences to rebut: o Parties do not intend to create legal relations in social and domestic agreements. o Parties do intend to create legal relations in commercial agreements. There are 3 policy reasons why these presumptions exist: o Floodgates the concern is to avoid swamping the judicial system with social and domestic disputes. o Promoting market transactions presumption for commercial contracts is consistent with contract laws primary function of facilitating transactions between people who may otherwise not deal with each other. It thus makes sense to use state coercion to enforce an agreement. o Freedom from contract the concern is to limit state intrusion into the private lives of its citizens. o However, it could be possible that these presumptions are out-of-step with modern developments since cases like Balfour v. Balfour concern obsolete traditions, and modern trends favour autonomy and individual choice.

2. FAMILY AND SOCIAL AGREEMENTS

Balfour v. Balfour (1919) o Husband orally promised to pay his wife an allowance of 30/month until she could join him in Ceylon. When they divorced, the husband stopped paying the allowance and the wife sued for payments. o HELD: There was no contract. There was a lack of intention to create legal relations because the agreement was made while they were still living in amity. Further failed on the lack of consideration since love and affection (tangible concepts) were not valid consideration. Jones v. Padavatton (1969) o Mother bought house for daughter to live in and maintain herself from the proceeds of renting out the other rooms. In return, the daughter agreed to study for the Bar exams. 6 years later, daughter still has not yet passed the Bar exams and the mother tried to reclaim possession of the house. o HELD: There was no enforceable contract since [1] there was no intention to create legal relations as the parties were on good terms when arrangement was made and [2] the terms (particularly as to duration) were too vague. Choo Tiong Hin v. Choo Hock Swee (1959) o P brought action against adopted sons to recover the possession of property, damages for trespass and declaration that he was the beneficial owner of a petrol filling station he erected. D argued that there was contract and that they were entitled to equal shares of the property concerned. o HELD: No contract. o CRITICISED: This agreement was not inspired by filial piety giving rise to a domestic arrangement, but was a serious business proposition intended to create legal relations (especially since the sons were adopted at a mature age and it was beneficial to both parties). Fleming v. Beeves (1994) o Parents promise of an allowance while the child is at University normally creates a moral but not legal obligation. Hong Guet Eng v. Wu Wai Hong (2006) o Presumption that in a domestic context, there is no intention to create legal relations. Hadley v. Kemp (1999) o D was a member of a pop group and although he authored all the songs, he shared the income with the rest of the members. When D discontinued the payments, P and others claimed for damages for breach of contract. o HELD: There was no enforceable contract. The relationship between the members of the band was not one of business, but because they loved what they were doing and were a close-knit group of friends. De Cruz Andrea Heidi v. Guangzhou Yuzhitang Health Products Co Ltd (2003) o Fellow actor helped P obtained Slim-10 pills. o HELD: No intention of creating relations, it was all the trappings of a friend doing a favour for another... claim in contract failed at the very first stage of inquiry. 15

3. COMMERCIAL AGREEMENTS
Edwards v. Skyways Ltd (1964) o Courts held that an employers promise to pay a sum to employees made redundant was contractually enforceable even though it was described as ex gratia. Rose and Frank Co v. JR Crompton and Bros Ltd (1925) o P was appointed as Ds sole agents in 1913. The agreement was extended to 1920 but D terminated it without notice in 1919. The agreement read this agreement is not entered into ... as a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courts. o HELD: P did not get damages when D breached this agreement. Letters of Comfort/Letters of Intent o Kleinwort Benson Ltd v. Malaysian Mining Corp Bhd (1989) P agreed with D to make a loan facility available to Ds subsidiary. As part of the agreement, D furnished letters of comfort stating 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 loan facility arrangements. Subsidiary subsequently liquidated and P sought payment for the amount owed. HELD: No claim since these letters of comfort were only statements of present fact and not a contractual promise as to Ds future conduct. NOTE: Legal effect of letters depends on the precise wording used and not on pre-conceived notions.

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V. CONSIDERATION
The basic idea of the consideration requirement is that in order to acquire the right to enforce an undertaking, a party must undertake to give, or actually give, something stipulated by the other as the price for his undertaking. o Chwee Kin Keong v. Digilandmall.com Pte Ltd (2004) VK Rajah JC: The modern approach in contact 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 ... No modern authority was cited to be suggesting an intended commercial transaction of this nature could ever fail for want of consideration. Indeed the time may have come for the common law to shed the pretence of searching for consideration to uphold commercial transactions. The marrow of contractual relationships should be the parties intention to create legal relations.

1. THE BASIC IDEA AND ITS JUSTIFICATION 1A. WHAT IS CONSIDERATION?

It establishes which promises should be legally enforceable and filters out unenforceable ones. o Idea of reciprocity > forms a binding contract (as opposed to gratuitous promises) Functions of consideration o Enforceability depends on content of promise or circumstances in which it was made. o Identifies which are the promises the parties intend to be legally enforceable. o Requirement which ensures that the promisor has deliberately decided to contract, thus preventing parties from accidentally binding themselves into a contractual obligation on impulse.

1B. CHARACTERISTICS OF CONSIDERATION

Benefit or Detriment o The promisee must confer a benefit on the promisor in return for which the promisor gives his promise. o Or the promisee must incur a detriment for which the promisors promise was to compensate. Given in return for promise o Usually given at the request of the promisor. o Promisee is required to prove an exchange of promises or some act or forbearance on his part. o Detrimental actions in reliance of (as opposed to in return for) the promise is not good consideration. Consideration vs. Condition o Distinguishes consideration from the fulfilment of a condition. o I will give you $500 if you break your leg is not a contract because it is a gratuitous promise subject to a condition. Consideration vs. Gift

1C. JUSTIFICATIONS OF CONSIDERATION

Evidence of the existence and seriousness of the undertaking o If someone has given a consideration for a promise, it represents a serious intention to be bound. o CRITICISMS: But consideration is unnecessary if the intention of the parties can be proved in another way. Furthermore, consideration only answers the question of which takings are enforceable, it does not address who can enforce the undertaking and hence, privity issues since 3rd parties can sue. Intuitive justice of exchange o Enforcement bargains reflect the idea of reciprocity. o It distinguishes trading from taking and bargains from exploitation, hence treating the other party were contracting with on an equal basis. Explains the measure of relief 17

Consideration is the value which the promisee valuates the promised performance, hence it explains the extent of liability for the breach of contract. Marks the boundary of appropriate legal environment o Contract law helps people do trading with strangers and with strangers, people do not usually make gifts. Instead, the trade so that both parties will benefit from the exchange.

1D. CRITICISMS OF CONSIDERATIONS

Doctrine is too narrow in scope; does not give effect to gifts and promises o Gifts and promises can evince an intention to be legally bound but the doctrine does not recognise this concept. Doctrine becoming extremely technical, artificial and in some places, internally incoherent Doctrine is divorced from commercial reality o Consideration is not of major significance in modern commercial transactions because people recognise consideration trivially (companies being sold for $1). Difficult to reconcile consideration with other modern theoretical models of contract law o If contract law is based on the promise principle or upon the will of the parties, why insist on consideration to make the promise enforceable? Doctrine too broad and other specific doctrines (duress/intention to create legal intentions) can target with greater precision the laws refusal to give effect to promises.

2. THE REQUIREMENT OF NEXUS 2A. CONSIDERATION MUST MOVE FROM THE CLAIMANT
Claimant seeking to enforce the contract must furnish consideration for the promise of the other party. Does not necessarily benefit the promisor, simply needs to move from the promisee. This creates a privity of contract, and since 3rd party did not provide consideration, he cannot sue.

2B. CONSIDERATION MUST BE IN RETURN FOR THE PROMISE

Combe v. Combe (1951) o The husband promises to pay his wife 100 a year on their divorce. The wife sought to enforce the promise on the basis that she gave consideration for it by not applying for maintenance. o HELD: The alleged consideration was a result of the promise, not made in return for the promise. The husband had not requested her to do it. Alliance Bank v. Broom (1864) o D was heavily indebted to P bank and promised to provide bank with security to cover his indebtedness. D failed to provide the security and P decided to sue to recover the money. o HELD: The bank provided consideration by refraining to take proceedings against D for his indebtedness. This forbearance was held to be at the implied request of the D. The courts implied consideration in Alliance Bank v. Broom because it is a commercial case and banks are more likely to institute proceedings than the wife in Combe v. Combe.

2C. PAST CONSIDERATION IS NOT GOOD CONSIDERATION

Since consideration must be given in response to the promise, it cannot logically cover something that was given or done before the promise was made. Consideration may be past because [1] it was pre-dates the promise given or [2] it already buys a reciprocal promise and cannot be used to buy additional promises from the same promisor. In re McArdle, Decd (1951) o HELD: Although the promise was made in consideration of your carrying out certain work. Consideration was past because the work was completed before the promise was made, it was not something yet to be performed. 18

Pao On v. Lau Yiu Long (1980) exception to the rule o The parties agreed to exchange shares in their companies. P agreed not to sell 60% of the shares it received for a year to avoid triggering a fall in the value. In exchange, D agreed to buy back the shares at $2.50/ea. When P realised that that they could be compelled to sell it for that price even if the shares increase in value, they refused to assent unless D agreed to an indemnity for guarantee. The share values eventually fell sharply and D refused to acknowledge either arrangement. o HELD: Promise not to sell was a valid consideration. It is an exception to the past consideration rule. Ps act of not selling the shares must be performed at Ds request. The parties clearly understood that P was to be rewarded for the act (compensated by indemnity to protect against the drop in share price). Ds eventual promise would have been enforceable if it was made at the time of the act. o All 3 conditions are fulfilled, satisfies the doctrine of implied assumpsit. Sim Tony v. Lim Ah Gee (1995) o HELD: Ps introductions of D to the third party were made previously and considered past consideration. The promise to give a share of the commission to the appellant was not enforceable because he failed to provide a fresh consideration for it.

3. THE REQUIREMENT OF VALUE 3A. DEFINITION OF VALUABLE CONSIDERATION

Currie v. Misa (1875) o A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.

3B. POLICES SUPPORTING/OPPOSING ENFORCEMENT OF PROMISES

PROS: o o o o o o CONS: o o o

Recognises performance actually bargained for when there is technical obstacle to qualifying as consideration. Recognises subjectivity of values & respecting parties intention (nominal consideration like chocolate wrappers). Protecting the promisees reliance Prevents the promisors unjust enrichment at the promisees expense. Encourages finality in dispute resolution (promisee can either compromise his claim, or forbear from claiming) Imposes responsibility otherwise regarded as just. Gifts and other transactions in the private domain should not attract legal liabilities. Wholly one-sided bargains. Extorted promises (e.g. in exchange of performing an existing duty)

3C. CONSIDERATION NEED NOT BE ADEQUATE, BUT VALUABLE IN THE EYE OF THE LAW
Chappel & Co v. Nestle (1960) o D offered to supply gramophone records of a musical work to anyone sending in a postal order together with 3 chocolate wrappers. o HELD: Chocolate wrappers constituted valid consideration since it had value in Ds marketing strategy. o Promise is enforceable as long as something valuable in the eye of the law has been given for it. The value need not be equivalent.

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3D. INTANGIBLE BENEFITS ARE GENERALLY INSUFFICIENT CONSIDERATION

White v. Bluett (1853) o Father lent money to son and promised to release him from liability under a promissory note on condition that he stopped complaining about his fathers distribution of the estate. Fathers executor claimed loan after his death. o HELD: The sons promise to not annoy his father with complaints was of no value in the eyes of the law. It was held to be insufficient as the promise was incapable of being expressed in terms of value. The abstinence from doing what he had no right to do is no consideration. o CRITICISED: The father did receive a practical benefit from the lack of annoyance and the son did incur a detriment by not complaining. Hamer v. Sidway (1891) o A nephew promised to refrain from drinking liquor, using tobacco, swearing and playing cards or billiards for money until he was 21. In return, the uncle would pay him $5000 upon his turning 21. o HELD: The abstinence is good consideration because the nephew has the legal right to do so. The rights he abandoned were a forbearance suffered by him. Ward v. Byham (1956) o Mother agreed to care for the child and keep the child happy for fathers promise of allowance per week. When she remarried, he refused payment. o HELD: There was consideration provided, it was a benefit for the father to have the child being looked after. A unilateral contract, the mother performed and hence is entitled to enforce the promise. Lipkin Gorman v. Karpnale Ltd (1991) o Solicitor stole from his firms client and lost the money gambling at a club. Club argued that it gave valid consideration in the form of gaming chips that the solicitors bought in exchange for money. o HELD: No consideration since the chips were worthless and invaluable in themselves. They were merely convenient mechanism for facilitating gambling.

3E. MOTIVE AND OTHER VALUELESS CONSIDERATION IN LAW

Thomas v. Thomas (1842) o Deceased gave wife a house and the executors allowed the widow to have the house if she paid 1/annum rent and maintenance. When one of the executors died, she was ejected and sued. Executors argued that there was no consideration because the promise to let the house was in fulfilment of the deceaseds wishes only. o HELD: Although the deceaseds desire was the motive for the consideration, the widows promise to pay rent were of value in the eye of the law and constituted good consideration.

3F. COMPROMISE AND FORBEARANCE TO SUE

Where As claim is valid in law, his compromise/forbearance is clearly good consideration for Bs reciprocal promise. Wade v. Simeon (1846) o Where A knows his claim is invalid, compromising/forbearing from suing on it is not valid consideration. Cook v. Wright (1861) o Where As claim is clearly invalid in law but was made in good faith and on reasonable grounds (A does not know of its invalidity), then there is consideration for forbearing to sue on it. Haigh v. Brooks (1839) o Where As claim is doubtful in law, his compromise or forbearance is still good consideration.

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4. PRE-EXISTING DUTIES
Did the party give good consideration by promising to do what he was already bound to do? o Pre-existing duty imposed by public law = invalid consideration o Pre-existing duty imposed by contract with 3rd party = valid consideration o Pre-existing duty imposed by existing contract with promisor Same for more = invalid consideration (with the exception of Williams v. Roffey Bros) Less for the same = invalid consideration

4A. PRE-EXISTING DUTIES IMPOSED BY PUBLIC LAW

Generally, promise to perform existing public duty is no consideration for a reciprocal promise. This is because there is a risk of bribery, extortion and corruption in public institutions. It undesirable to give public officials the incentives in return for the performance of their existing legal duties. o Glasbrook Bros. V. Glamorgan C.C. (1925) exception to the rule P applied for police protection in the immediate aftermath of the settlement of a national coal strike. Although the police felt it was unnecessary, they signed a contract with P for additional garrison of policemen. P refused to reward the police for their additional services. HELD: There was consideration for the reward as the P had requested something over and above what the police needed to do as imposed by public law.

4B. PRE-EXISTING DUTIES OWED TO A THIRD PARTY

If A promises something to B that was already part of a pre-existing duty owed to a third party, that promise is binding. There is valid consideration because by accepting the 2nd promise, the promisee opens himself to 2 possible actions for breach of contract, hence there is a new detriment to him in this sense. Even if by performing the act, the promisee may have incurred no extra detriment but the promisor has gained a benefit. o Shadwell v. Shadwell (1860) The uncle promises to pay his nephew 150/year for getting married to the girl. However, the uncle failed to honour his promise in full during his lifetime and the nephew brought an action against the executors. HELD: The nephew provided valid consideration by marrying the girl, even though he was already contractually bound to marry her. Benefit to the uncle was that the marriage was an object of interest to a near relative. o Pao On v. Lau Yiu Long (1980) HELD: The mere promise of performing a duty owed to a 3rd party is good consideration. In this case, P agreed separately with the 3rd party not to sell their shares that might depress its value.

4C. PRE-EXISTING DUTIES OWED TO THE OTHER PARTY

4C.1 The Same For More: Pre-existing contractual duty owed to the other party o Stilk v. Myrick (1809) general rule D agreed to pay P a seaman to work a voyage. 2 of the 11 seamen deserted during the voyage and D was unable to find replacements. D agreed to share the deserters wages with the remaining seamen if they would work the ship back to London. D refused to pay afterwards. HELD: Ps claim failed because the crew gave no consideration for the promise of the extra pay since they were already bound to complete the journey and did not promise to do anything extra for the extra pay. EVALUATION: The seamen were not asked to do more work, if they had to do more than what they were obliged to do, then it is beyond the existing contractual requirements. This case required a legal benefit, whereas in Williams v. Roffey Bros, a practical benefit would suffice. o Williams v. Roffey Bros & Nicholls (Contractors) Ltd (1991) exception to the rule D sub-contracted P to do carpentry works for 27 flats. P finished 9 flats but was at risk of not completing the rest due to financial difficulties. D realised this and mindful of liability to the main employer, D promised to pay P extra for timely completion. P completed 8 more flats and D refused to pay. 21

HELD: There was a binding promise. Although there was already a pre-existing contractual agreement to complete the works, the promisor agrees to pay more and derived a practical benefit. This doctrine requires: [1] A to be in a valid contract with B *2+ At some stage before A has completed the obligations, B has doubts about As ability to. [3] B promises A additional payment for A to complete his remaining obligations on time. [4] B obtains a practical benefit or obviates a disbenefit. *5+ Bs promise was not given as a result of economic duress or fraud. [6] Only then, will the benefit to B become valid consideration and promise is legally binding. o Sea-Land Service Inc v. Cheong Fook Chee Vincent (1994) D was retrenched by P and during the last month, P told D that he was entitled to an enhanced severance package. However D only received a normal severance package on his final pay check. HELD: Ds last month of employment did not constitute a practical benefit for the P for the limited exception under Williams v. Roffey Bros to apply. There was also no request by D that P should complete his last month of employment in return for the enhanced benefits. o Antons Trawling Co Ltd v. Smith (2003) D employed P and orally promised to pay P a percentage of the catch. D subsequently orally agreed to pay P 10% of the additional fishing quotas allocated to D. HELD: P did not contribute to the increased quota (did not do more than his pre-existing contractual structure) and hence did not provide consideration for the additional share. o Bob Teo Seng Kee v. Arianecorp Limited (2008) P claimed specific performance of an agreement to transfer 300k of shares of a company for $300,000 on certain terms. P had paid $250,000 and was ready to pay the remaining $50,000 when D refused to release the inventory and write off the debts of the company as requested. D claimed that there was no consideration for the release of the inventory and writing off debts. HELD: Yes, there was a practical benefit from the payment of $300,000 that D in fact used as part of its cash flow. Affirmed Chwee Kin Keong v. Digilandmall.com that modern law requires little consideration. 4C.2 Less For The Same: Part performance o Foakes v. Beer (1884) P owes D money and it was agreed in writing that if P made a down payment and gave the balance in instalments, D would not make further legal proceedings to claim the interest of the debt. When P finally finished paying, D decided to claim interest from him. HELD: A promise to accept part performance is unenforceable because there is no consideration. The promisor does not receive any benefit in simply getting prompt payment and already has a contractually enforceable promise for the whole performance. A lesser sum is not satisfaction for a debt. o In re Selectmove (1995) Selectmove owed money and agreed to pay by instalments but fell-back, resulting in a compulsory winding-up order. Company pleased that by accepting instalments, the Revenue agency gained practical benefits by recovering more from the company rather than putting the company into liquidating. HELD: There is no practical benefit in less for the same because if D promises to discharge Ps debt in the hopes of getting a lesser amount and P does not even pay that, then D will be in a worse position than if it had not bothered to salvage the situation at all. o D & C Builders v. Rees (1966) D owes P 482 for building works, but knowing that P were in desperate financial straits, eventually responded to Ps several requests for payments by offering 300 in full settlement or nothing. P accepted as they had no choice and sued for balance. HELD: The purported settlement did not bar P from recovering the balance of the debt as per pre-existing contractual agreement. Part payment is not valid consideration and settling for a lesser sum does not bind the creditor to the agreement. Where there has been true accord under which the creditor voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts upon that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the balance. 22

Collier v. P & M J Wright (Holdings) Ltd (2008) Court applied promissory estoppel to override Foakes v. Beer. P and his 2 former business partners owe D money and each serviced his share individually. When the 2 partners ceased paying, D told P to continue paying his share while D would chase the other 2 debtors. After P finished paying his one-third of the debt, D demanded that P pay the balance. HELD: As P provided no consideration for Ds promise, he has to rely on promissory estoppel. If [1] the debtor offers to pay part only of the amount he owes, [2] the creditor voluntarily accepts that offer and [3] in reliance on the creditors acceptance the debtor pays the part of the amount he owes in full, the creditor will by virtue of the doctrine of promissory estoppel, be bound to accept the part payment as full and final satisfaction of the whole debt. For him to resile will be inequitable to the debtor.

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VI. PROMISSORY ESTOPPEL

PROMISSORY ESTOPPEL Clear Promise Promisee acted in reliance; need not be requested but must be foreseeable or known to promisor. Need not be detrimental as shown in High Trees Inequitable to resile inequitable for promisor to renege on promise. Implies that the promisee has been made worse-off. Suspensory and not extinctive: not necessarily given full expectation; the promisor can resume his original rights on giving reasonable notice to the extent that the promisee can resume his original position. Shield not sword: only operates as a defence to enforce promises to accept less. Cannot create or add new rights. CONSIDERATION Clear Promise Promisee must have given consideration which may consist of requested reliance. Promise is enforceable even without reliance. Irrelevant unless there are vitiating factor.

REQUIREMENTS

EFFECTS

Enforcement of full expectation (can be extinctive)

RESTRICTIONS

Shield and sword: can operate as defence to enforce promises to accept less and to create or add new rights.

Promissory estoppel comes to play when the apparent agreement between the parties or a promise made by one of them is ineffective due to the lack of consideration. Hughes v. Metropolitan Railway Company (1877) o If parties enter upon a course of negotiations which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. Central London Property Trust Ltd v. High Trees House Ltd (1947) o During the outbreak of war and evacuation of people from London, D could not sublet enough flats to generate the rent payable to P. P agreed to halve the rent. When the property market returned to normal, the flats were full let at the end of the war, P requested for original payment but D refused. o HELD: P can demand the entire rent from the date of notice in 1945. If P had sought to claim the rent prior to that, he would have been estopped since it was inequitable for D to resume original position then. Long Foo Yit and anor v. Mobil Oil Singapore Pte Ltd (1997) o Court held that promissory estoppel can be used where the apparent agreement between the parties is ineffective due to the lack of consideration. o Requirements for obtaining relief include: A legal relationship giving rise to certain rights and duties between the parties. Promise/representation by promising party that he wont enforce against the other his strict legal rights. An intention on the part of the promising party that the other will rely on that promise/representation. Reliance on the latter party. It is inequitable for the promising party to go back on his promise. Abdul Jalil bin Ahmad bin Talib and ors v. A Formation Construction Pte Ltd (2006) o Original trustees leased properties to D, and delays in temporary occupation permits led to delays in rent payments. Negotiations resulted in a compromise agreement but no written agreement was done to wave rental arrears. P new trustees claimed for arrears owed. o HELD: In accepting the compromise offered by the original sole trustee, D gave up any rights it may have had to make a claim for damages for breach on the part of the trustee, and this was held to be valid consideration. o Even if there were no consideration, P would be stopped of equity from making their claims because D paid all the money required by the sole trustee in the manner and at the times agreed and it would be inequitable to allow P to go back on the offer. Furthermore, D had incurred expenses in completing works on one of the properties.

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Tee Soon Kay v. AG (2007) o Police officers trying to revert back to the Pension scheme after opting for the CPF scheme. o HELD: Respondents would be allowed to invoke the doctrine of promissory estoppel as a defence but it is unnecessary since the appellants did not claim that the agreement lacks consideration. The court did not rule on whether it is necessarily that promissory estoppel can only be used as a defence and not as a claim.

1. CLEAR PROMISE
Hughes v. Metropolitan Railway Company (1877) o P landlord gave notice to D tenant requiring D to carry out repairs within 6 months. D asked if P wanted to purchase Ds interest in the premises and suggested that repairs be deferred pending negotiations. When negotiations broke down, P tried to forfeit the lease stating Ds failure to repair within the original timeframe. o HELD: D granted relief against forfeiture because Ps conduct provided D with an implied promise/representation to suspend the time during the course of negotiations. Allowing P to enforce original rights will be inequitable.

2. RELIANCE: CHANGE OF POSITION

Promisee must have relied on the promise/representation. This is conventionally understood to be detrimental reliance because if the promise is revoked, the promisee would be worse off than if it had never been made. Hence it would be inequitable for the promisor to resile from the promise (as per Hughes v. Metropolitan Railway Company). But as seen in Central London Property Trust v. High Trees House, reliance need not be detrimental. Ds reliance on Ps promise in that case was not necessarily detrimental since it did not make D any worse-off. o The Post Chaser (1982) It is not necessary to show detriment. The promisee may have benefitted from the representation and yet it may be inequitable, at least without reasonable notice, for the promisor to enforce his legal rights. To establish reliance: Promisee has committed himself to a course of action he would not otherwise have adopted. Promisee would be prejudiced if the promisor were to resile from the promise. The nub of this is the promisees inability to resume his original position due to the reliance.

3. INEQUITABLE TO GO BACK ON THE PROMISE

Inequity is an independent requirement (though often overlapping with Reliance) and other factors are also relevant. o The time-lag before the promisor asserts his original right and the degree of prejudice caused to the promisee. o The circumstances surrounding the giving of the promise/representation. D & C Builders v. Rees (1966) o D owes P 482 for building works, but knowing that P were in desperate financial straits, eventually responded to Ps several requests for payments by offering 300 in full settlement or nothing. P accepted as they had no choice and sued for balance. o HELD: Court rejected the plea for promissory estoppel because [1] it was not inequitable for P to ask D of the 482 since it was the original sum hey owed, and *2+ D acted badly having known of Ps financial difficulties and used their awkward situation to intimidate them.

4. THE EXTENT OF ENFORCEMENT: SUSPENSORY OR EXTINCTIVE?

Promissory estoppel is suspensory and not extinctive of the promisors rights. The promisor may still, on giving reasonable due notice, assert his original rights. An example of the suspensory effect is in Central London Property v. High Trees, although the rent that cannot be claimed back is also evident of the partial extinguishing of the promisors rights. However, promissory estoppel may extinguish part or all of the promisors existing rights if the promisee cannot resume his original position (as per Hughes v. Metropolitan Railway Company). Promissory estoppel can therefore extinguish the promisors rights to the extent necessary to avoid prejudice to the promisee.

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Emmanuel Ayodeji Ajayi v. Briscoe (1964) When one party to a contract, in the absence of fresh consideration, agrees not to enforce his rights, an equity will be raised in favour of the other party. This equity is, however, subject to the qualifications that [1] the other party has altered his position, [2] the promisor can resile from his promise on giving reasonable notice, which need not be formal notice, giving the promisee a reasonable opportunity of resuming his position and [3] the promise only becomes final and irrevocable if the promisee cannot resume his position. Birmingham & District Land Co. v. LNWE (1888) It is not equitable to forfeit the promise to forbear if the persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time. The promise can only be revoked only if the parties were in the same position as they were before. QBE Insurance (International) Ltd v. Winterthur Insurance (Far East) Pte Ltd (2005) Employer was covered by the 2 insurance companies. When one of his employees got injured in the course of employment, they claimed from both insurers. D attempted to establish correspondence with P but P remained silent. D then assumed that P had assumed full responsibility for the claim. When P asked D to contribute 50%, D claimed that they had acted on Ps silence to their detriment. HELD: P was estopped from claiming the 50% because when there was a duty to speak, silence would amount to a representation. D had then detrimentally relied on this representation by not seeking to resist the claim or repudiate the insurance policy. (Extinguishing of the right to claim!) Royal Bank of Scotland v. Ludlum (2008) Once D had altered his position (by borrowing money off friends and family in an attempt to reduce the overdraft) in response to the Ps undertaking that it will not commence enforcement before the end of the three month period, P cannot then revoke its promise and is estopped from claiming.

5. ONLY OPERATES DEFENSIVELY: SHIELD NOT A SWORD

Can enforce promises of the same for less type after agreeing to accept less for the same act, it becomes inequitable for the promisee if the promisor wants to enforce the original rights, hence can apply it. Cannot enforce promises of the more for the same type. Cannot create new legal rights independent of the parties pre-existing legal relationship. o Combe v. Combe (1951) The husband promises to pay his wife 100 a year on their divorce. The wife sought to enforce the promise on the basis that she gave consideration for it by not applying for maintenance. HELD: The wife attempted to use promissory estoppel to enforce her legal rights to claim payments from her husband. This was using estoppel as a sword and her claim failed. o Waltons Stones v. Maher (1988) D entered into negotiations to lease land to P for a major construction project. Ps solicitors told Ds solicitors that they believe that the approval will be forthcoming and that they will let *them+ know tomorrow if any amendments are not agreed to. Believing that the negotiations will be successful, D started demolishing the buildings on his land. P has second thoughts and after 2 months when D demolished a substantial amount, P informed D of their intention to withdraw from the project. HELD: The court found a binding contract because P was estopped from denying the existence of one. The argument that the parties had no pre-existing legal relationship was rejected. Hence the court allowed that promissory estoppel can act as a sword. (CONTROVERSIAL!) However, the basis for promissory estoppel is different from that of consideration enforcement rests on the reliance on the assumption that a contract will be concluded and relied on this to his detriment.

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6. RECENT DEVELOPMENTS 6A. RELIANCE AS UNJUST ENRICHMENT (RESTITUTION)

Yeomans Row Management Ltd v. James Cobbe (2008) o When a property developer had reached an oral agreement subject to contract in principle with a property owner to buy its property and expended substantial amount of time and money in obtaining planning permission pursuant to the agreement but the owner subsequently refused to proceed on the agreed terms and entire into a binding contract, the developer is entitled to quantum meruit payment for his services in obtaining the planning permission. The owner was unjustly enriched because it had obtained the value of the developers services without having to pay for them.

6B. RELIANCE IN PART PAYMENT AS CONSIDERATION

Collier v. P & M J Wright (Holdings) Ltd (2007) o Court applied promissory estoppel to override Foakes v. Beer. P and his 2 former business partners owe D money and each serviced his share individually. When the 2 partners ceased paying, D told P to continue paying his share while D would chase the other 2 debtors. After P finished paying his one-third of the debt, D demanded that P pay the balance. o HELD: As P provided no consideration for Ds promise, he has to rely on promissory estoppel. o If [1] the debtor offers to pay part only of the amount he owes, [2] the creditor voluntarily accepts that offer and [3] in reliance on the creditors acceptance the debtor pays the part of the amount he owes in full, the creditor will by virtue of the doctrine of promissory estoppel, be bound to accept the part payment as full and final satisfaction of the whole debt. For him to resile will be inequitable to the debtor. o Thus, in these circumstances, the promissory estoppel has the effect of extinguishing the creditors right to the balance of the debt.

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VII. CONSIDERATION: AN ASSESSMENT

Sunny Metal & Engineering Pte Ltd v. Ng Khim Ming Eric (2007) o Andrew Phang J: ... the doctrine of consideration itself, although long established, has come under increasing fire especially in recent years. o Considered the criticisms laid out in Chwee Kin Keong v. Digilandmall.com Pte Ltd by VK Rajah JC. The inherent inconsistency in the doctrine of consideration, the different approaches in same for more and less for the same situations perhaps require the abolition or reform of the doctrine. o The decision in Williams v. Roffey Bros has liberalised the scope of consideration so much until it is now redundant. It is not difficult for the courts to find consideration wherever they wish to. Antons Trawling Co Ltd v. Smith (2003) o The importance of consideration is as a valuable signal that the parties intend to be bound by their agreement, rather than an end in itself. Gay Choon Ing v. Loh Sze Ti Terence Peter (2009) o Although Andrew Phang JA ultimately concludes that pragmatism demands the maintenance of the status quo of the doctrine of consideration for the time being, he raises the spectre of its replacement with doctrines of economic duress, undue influence, unconscionability and promissory estoppel.

1. REPLACE CONSIDERATION COMPLETELY WITH A TEST OF INTENTION

2. REPLACE CONSIDERATION IN CONTRACT MODIFICATIONS WITH A TEST OF INTENTION

3. CONSIDERATION SIGNIFIES ANY GOOD REASON FOR ENFORCEMENT

4. RETAIN BARGAIN CONSIDERATION WHILE RECOGNISING OTHER GOOD REASONS FOR ENFORCEMENT VIA DEEDS AND PROMISSORY ESTOPPEL

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