1

NATIONALUNIVERSITYOFSINGAPORE

LawofContract
201516
ProfessorMindyChenWishart

INTRODUCTION
1.Whydopeoplemakecontracts?
2.Whatiscontractlawfor?
3.Whatisacontract?
(i)

Promise.

(ii)

Agreement.

(iii) Recognitionbythelaw.
4.Competingvaluesincontractlaw

Values identified with classical contract Values identified with modern contract
law:Freedomofcontract.
law:Limitsonfreedomofcontract
1. Freedomandautonomy

1. Worthwhilefreedomandautonomy

2. Minimallegalintervention

2. Regulationofcontracting

3. Equality

3. Inequality

4. Negotiatedcontracts

4. Standardformcontracts

5. Theassumedfairnessofexchanges

5. Unfairnessofexchange

6. Discrete contracts; selfinterested 6. Relational contracts; cooperation,

individualism
trust,altruism
7. Literalinterpretation

7. Contextualinterpretation

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Chen-Wishart Formation & Enforceability 15-16

8. Certaintyofrules

8. Broaddiscretionarystandards

9. Generallaw

9. Specialisationanddifferentiation

5.Whyarecontractsenforced?Somecompetingtheorieseg

Promissoryandautonomytheories

"Youshouldkeepyourpromise.
"Youtwohavereachedconsensus.

Reliancetheory

"Youinducedanothertorelyonyour
undertakingtohisdetriment.

Efficiencytheory
(wealthmaximisation)

"Everyoneisbetteroffifyoukeepyour
bargain.

FINDINGAGREEMENT
Theofferandacceptanceapproach
Threequestionsarise:

(i) Thecommitmentquestionwhetheracontractwasconcludedat
allbetweentheparties?
(ii)Thecontentquestionwhatdidthepartiescontractfor?
(iii)
Thetimingquestionwhenwerethepartieslockedintothe
contract?
Thesequestionsaremergedinthetraditional mirrorimage approach
(alsoreferredtoastheofferandacceptanceapproach):acontractresults
fromanoffermadebyonepartytoanotherwhoacceptsit.

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Chen-Wishart Formation & Enforceability 15-16

1.OFFER
Offer=amanifestationbytheofferor(orally,inwriting,orbyconduct)
ofawillingnesstobeboundbythetermsproposedtothe offeree (the
addressee),assoonastheoffereesignifiesacceptanceoftheterms.
1.1Objectivityandmistakenoffers
Theobjectivetestofthepartiesintentions
Apartycannotenforceacontractif:
1. S/heknowsoftheotherpartysmistake

SmithvHughes[1871]1LR6QB597
oatsoroldoats?
Facts:
Contractforthesaleofoatsbypftodf.Dfrefusedtocompleteonthegrounds
thatcontracthadbeenforoldoats,whereastheoatstenderedbypfhadbeennew
oats. Samplehadbeensenttodfsmanagerwhooffered34s.aquarter(avery
highpricefornewoats,butontheotherhand,oatswerescarceatthattime)
Issueofwhether(1)pfhadbelievedthatdfthoughthewasbuyingoldoats,or(2)
pfbelieveddfthoughtthathewasbuyingoatswhichpfhadpromisedwereold
Holding:retrial
Case1isamistakethatdfmustbeliablefor;incase2heisnotliableonthe
groundsthatthepartieswereatcrosspurposesastothetermsofthecontract
onthesaleofaspecificarticle,unlesstherebeawarrantymakingitpartofthe
bargain that it possesses some particular quality, the purchaser must take the
articlehehasboughtthoughitdoesnotpossessthatquality
even if the vendor was aware that the purchaser thought that the article
possessedthatquality,andwouldnothaveenteredintothecontractunlesshehad
sothought,stillthepurchaserisbound,unlessthevendorwasguiltyofsome
fraudordeceitnolegalobligationonthevendortoinformthepurchaserthat
heisunderamistake,notinducedbytheactofthevendor
Objectivetest:
Howwouldareasonablemaninthebuyerspositionunderstandthesellers
offer?tobuyoldoatsorjustoats

HartogvColin&Shields[1939]3AllER566
perpoundorperpiece?

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Chen-Wishart Formation & Enforceability 15-16

Dfwastosell30,000hareskinstopfbutmistakenlyquotedthepriceatper
poundinsteadofperpiece.(valuewasapprox.1/3ofnormalprice)
Held:fordf
Pfnotentitledtorecoverdamagesbecausetheywereclearlyawareofthemistake
+thewayinwhichArgentinehareskinsareboughtandsoldisgenerallyper
piece
Pfwastryingtotakeadvantageofaknownmistake.

TribuneInvestmentTrustInc v SoosanTradingCoLtd [2000]3SLR405

(CourtofAppealSingapore)at[39][40]perYongPungHowCJ:
Theexistenceofanycontractmustthusbeculledfromthewrittencorrespondence
andcontemporaneousconductofthepartiesatthematerialtime.
Theprinciplesoflawrelatingtotheformationofcontractsareclear.Indeedthetask
ofinferringanassentandofextractingtheprecisemoment,ifatalltherewasone,at
whichameetingofthemindsbetweenthepartiesmaybesaidtohavebeenreachedis
one of obvious difficulty, particularly in a case where there has been protracted
negotiations and a considerable exchange of written correspondence between the
parties.Nevertheless,thefunctionofthecourtistotryasfaraspracticalexperience
allows, to ensure that the reasonable expectations of honest men are not
disappointed.Tothisend,itisalsotritelawthatthetestofagreementorofinferring
consensusadidemisobjective.Thus,thelanguageusedbyoneparty,whateverhis
realintentionmaybe,istobeconstruedinthesenseinwhichitwouldreasonablybe
understoodbytheother.

ChweeKinKeongandOthersv
landmall.comPteLtd[2004]2SLR594
at[1],[102],[103]&[144]
theywerefullyconsciousthatanunfortunateandegregiousmistakehadindeedbeen
madebythedf
Pfsacts(orderplacedinthedeadofnightwithindecenthasteandtheemail
exchangesbetweenthepfs)showedthattheywereclearlyanxioustoplacetheir
ordersbeforethedftookstepstocorrecttheerror.
VKRajahJC:Intheearlyhoursofthemorningof13January2003,sixfriends,
theplaintiffs,placedordersovertheInternetfor1,606sophisticatedHPcommercial
laser printers. Although the actual price of the laser printer was $3,854,
Digilandmall.com Pte Ltd had on 8 January 2003 mistakenly posted the price at
$66.00onitswebsites.
Whobearstheriskofsuchmistakes?
Thefactorsacourtshouldconsiderinallocatingtheriskforthemistakeinclude:

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Chen-Wishart Formation & Enforceability 15-16

(a) the need to observe the principle of upholding rather than destroying
contracts,
(b)theneedtofacilitatethetransactingofelectroniccommerce,and
(c) the need to reach commercially sensible solutions while respecting
traditionalprinciplesapplicabletoinstancesofgenuineerrorormistake.
Itisimportantthatthelawbeperceivedasembodyingrationalityandfairnesswhile
respectingthecommercialimperativeofcertainty.
[T]hecharacterofthemistakewassuchthatanyreasonablepersonwouldhave
hadeveryreasontobelievethatamanifesterrorhadoccurred.Theamountsordered
andthehurriedandhastymannerinwhichtheorderswereexecutedareofcardinal
importance.AstheChannelNewsAsiareportsosuccinctlysummarisedtheysawa
greatopportunityandgrabbedit.

2. S/hehascontributedtotheotherparty'smistakeinmakingtheoffer
(ScrivenBrosvHindley[1913]3KB564),or
Pfwassellinghempandtow;dfonlywantedtobuyhemp.Dfsmanager
alreadyboughtthefirst47bales.Whenthe176balesoftowwereputup,df
bidforitthinkingitwashemp(averyhighprice).Pfdidnotmakea
distinctionbetweenthehempandthetow.Whendfdiscoveredtheirmistake
theyrefusedtopayforit.
Held:sellernotentitledtorecoverpriceofthetowfromdf
Sellerwasatfaultincreatingthemistakeinthemindofthebuyer
ContrastwithTamplinv.James
Dfmadeahighbid(offer)tobuypropertyfrompfinthebeliefthattwo.
piecesofgardenwereincludedinthesale(basedonchildhoodknowledge)
Hadhelookedattheplanshewouldhaveseenthatthegardenswerenot
includedinthedescriptionofthesale.Entirelydfsmistake.
Held:pfentitledtospecificperformance
Ifamanmakesamistakeofthiskindwithoutanyreasonableexcusehe
oughttobeheldtohisbargain
3. Theagreementwastaintedbylatentambiguity(RafflesvWichelhaus(1864)
2H&C906)
Soambiguousthatthepartiescannothavesaidtohavereachedanagreement
nocontractformed
Judgementforthedf

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Chen-Wishart Formation & Enforceability 15-16

1.2Offersandinvitationstotreat
1.2.1Generalprinciples
Harveyv.Facey(1893)
Pfsentatelegraphtodfaski ngtobuyaBumperHallPen.Dfrepliedlowest
cashpriceforBHP$900.Pfinturnrepliedweagreetobuy.Dfdidnotreply.
Held:
Nocontract.Dfsfirstreplywasmerelyananswertopfsquestion,andnotan
offer.Thuspfslasttelegramwasanoffer,notanacceptance.
Storerv.ManchesterCityCouncil[1974]1WLR1403

Df sent a brochure advertising the details of a scheme for tenants to buy their
council houses
Pf sent a formal application to buy a house
Df instructed Pf to sign and return an agreement, and he would then send Pf
the agreement signed on behalf of the corporation. This was in a letter sent by
Df, I understand you wish to purchase your council house and enclose the
agreement for sale. If you will sign the agreement and return it to me I will
send you the agreement signed on behalf of the corporation in exchange.
Pf did as instructed
However, there was a change of the city council before completion of the sale
and the new council did not intend to sell the houses
Pf sued
Held
A contract was concluded
Dfs instructions evinced an intention to be bound by the terms of the
agreement as soon as Pf accepted it (which he did)
New Council could not halt the sale.

Gibsonv.ManchesterCityCouncil[1978]1WLR]520
Pfwantedtobuyhousefromtowncouncilinvolvedfillingoutadetachableform
whichaskedthecounciltoinformtenantofthepriceatwhichthecouncilwas
willingtosellthehouse.Dfcouncilrepliedthattheymaybepreparedtosellthe
houseatacertainprice,andaskedthedftocompletetheapplicationform
andsenditbackinordertomakeaformalapplication.Pfcompleteditandsentit
backbutleftthepurchasepriceblank.Councilunderwentachangeinpolitical
compositionandnolongerwantedtosellthehouse;claimednocontracthadbeen
formed.
Held:
Dfwins.Thelettersentbythepfwasnotanofferbecauseitsaidmay+toldpf
to make a formal application. Thus the council never accepted any offer to
purchase,andnocontractwasformed.
Thegeneralapproachtomakingthedistinctionbetweenoffersandinvitationsto
treatisqualifiedbysomerelativelyspecificrulesorconventionsaboutthestatus
of communications in particular contexts. These conventions have largely

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Chen-Wishart Formation & Enforceability 15-16

replaced the search for the parties intentions in many common contracting
situations.
1.2.2Displaysandadvertisements
Generally an invitation to negotiate, and not offer. (But not 100%)
Ads can be an offer in the context of a unilateral contract.
PharmaceuticalSocietyofGBv.BootsCashChemists[1952]2QB795
Pfbroughtanactionagainstdffornothavingaregisteredpharmacistsupervising
thesaleofpoisons.Pharmacistwassimplynotatcashdesk,butwasauthorized
bydftopreventthesaleofanydrug.Pfarguedthatwhenthecustomertakesan
article and puts it in whatever receptacle they are carrying, that constitutes
acceptance,andthusthepharmacistwouldhavenopowertorefusethesale.(thus
ininfringementofPharmacyandPoisonsAct)
Held:
Dfwins.
Goodsdisplayedontheshelfarenotoffers.Thecustomer,havingindicatedthe
articleswhichheneeds,stillmustgototheshopkeeperorsomeoneonhisbehalf,
whowouldacceptthatoffer.
Howconvincingarethereasonsgivenbythecourt?

Doyouagreewiththefollowingdecisions?
PartridgevCittenden[1968]1WLR1204
Dfchargedwithoffenceofofferingwildbirdsforsale(ProtectionofBirdsAct1954)
becauseheplacedanadfortheminthenewspaper.
Held:notguilty;
Hehadnotofferedthebirdsforsale;itwassimplyaninvitationtonegotiate.
Contrast:
Chapeltonv.BarryUDC[1940]1KB532
CarlillvCarbolicSmokeBallCo.[1893]1QB256
Dfofferedinthenewspaperarewardof100l.foranyonewhousedthesmoke
ballproductaccordingtoinstructionsandstillcontractinginfluenzaorcold.Pf
didsoinrelianceupontheadandsubsequentlycaughtinfluenza.
Held:
Pfwins.Thetermsoftheadconstitutedanoffer.
(Otherissues:
Existenceofconsiderationbenefitdfsgainedasaresultoftheadsinthesales
produced;detrimentofMrsCarlillbyusingthesmokeballthreetimesadayfor
twoweeks
Acceptancemustbecommunicatedtothepartynotapplicablebecausetheterms
oftheoffershowedthattheneedforcommunicationhadbeenwaivedbythedf)

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Chen-Wishart Formation & Enforceability 15-16

Lefkowitzv.GreatMinneapolisSurplusStoresInc
Pfputanadinthenewspaperforfurpieces.Dfwenttobuybutwasrefused
becauseofahouserulethattheofferwasonlyintendedforwomen.Sued.
Held:
Adconstitutedanofferwhichcouldnotbewithdrawn.Didnotallowforfurcoat
becausevaluewasuncertain.Allowedforlapinstolebecauseadclaimeditwas
worth$139.50lessthe$1price.
whileanadvertiserhastherightatanytimebeforeacceptancetomodifyhisoffer,
hedoesnothavetheright,afteracceptance,toimposeneworarbitraryconditions
notcontainedinthepublishedoffer

1.2.3Onlineshopping
ChweeKinKeongandOthersvDigilandmall.comPteLtd[2004]2SLR594
(HighCourtinSingapore)at[93]upheldbytheCourtofAppealin[2005]1
SLR502.
VKRajahJC:Basicprinciplesofcontractlawcontinuetoprevailincontractsmade
ontheinternet.However,notallprincipleswillorcanapplyinthesamemannerthat
theyapplytotraditionalpaperbasedandoralcontracts.Itisimportantnottoforce
intoaProcrusteanbedprinciplesthathavetobemodifiedordiscardedwhen
consideringnovelaspectsoftheInternet.
96Itisincumbentonthewebmerchanttoprotecthimself,ashehasboththemeans
to do so and knowledge relating to the availability of any product that is being
marketed.Asmostwebmerchantshaveautomatedsoftwareresponses,theyneedto
ensure that such automated responses correctly reflect their intentions from an
objectiveperspective.Errorsmayincurwhollyunexpected,andsometimesuntoward,
consequencesastheseproceedingssoamplydemonstrate.

Electronic Transactions Act (2010)

Formationandvalidityofcontracts
11.(1)anofferandtheacceptanceofanoffermaybeexpressedby
meansofelectroniccommunications.
Useofautomatedmessagesystemsforcontractformation
15.Acontractformedbytheinteractionofanautomatedmessagesystem

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Chen-Wishart Formation & Enforceability 15-16

andanaturalperson,orbytheinteractionofautomatedmessagesystems,shall
notbedeniedvalidityorenforceabilitysolelyonthegroundthatnonatural
personreviewedorintervenedineachoftheindividualactionscarriedoutby
theautomatedmessagesystemsortheresultingcontract.
Invitationtomakeoffer
14.Aproposaltoconcludeacontractmadethroughoneormoreelectronic
communicationswhichisnotaddressedtooneormorespecificparties,butis
generallyaccessibletopartiesmakinguseofinformationsystems,includinga
proposalthatmakesuseofinteractiveapplicationsfortheplacementoforders
throughsuchinformationsystems,istobeconsideredasaninvitationtomake
offers,unlessitclearlyindicatestheintentionofthepartymakingtheproposal
tobeboundincaseofacceptance.
Errorinelectroniccommunications
16.(1)Whereanaturalpersonmakesaninputerrorinanelectronic
communicationexchangedwiththeautomatedmessagesystemofanother
partyandtheautomatedmessagesystemdoesnotprovidethepersonwithan
opportunitytocorrecttheerror,thatperson,orthepartyonwhosebehalfthat
personwasacting,hastherighttowithdrawtheportionoftheelectronic
communicationinwhichtheinputerrorwasmade.
(2)Subsection(1)shallnotapplyunlesstheperson,orthepartyonwhose
behalfthatpersonwasacting
(a)notifiestheotherpartyoftheerrorassoonaspossibleafterhavinglearned
oftheerrorandindicatesthathemadeanerrorintheelectronic
communication;and
(b)hasnotusedorreceivedanymaterialbenefitorvaluefromthegoodsor
services,ifany,receivedfromtheotherparty.

1.2.4Automaticmachines
Thorntonv.ShoeLaneParkingLtd[1971]2QB163.
(alsounderincorporationbynotice)exemptionclausewasfoundinside
thecarpark.
Held:dfhadnottakenreasonablestepstobringtheclausetotheattention
ofthecustomer.Alsothedfbydefaultwasforcedunderthetermsofthe
clausesincehehadtoenterthecarparktoseetheclause.
Pfwins.Clausedidnothold.
1.2.5Auctions
Advertisementmerelyaninvitationtotreat

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Chen-Wishart Formation & Enforceability 15-16

Puttingupitemforsalealsoaninvitationtotreat

Bidbythepurchaseroffer

Fallofthehammeracceptance

Saletothehighestbidderorwithoutreservetwocontractanalysis:
1. toholdtheauctionandacceptthehighestoffer
2. thecontractforthesaleoftheitem
1.2.6RequestfortendersCanoftenbecountedasoffers
Blackpool&FyldeAeroClubvBlackpoolBoroughCouncil[1990]3All
ER25
Dfinvitedtendersforaconcessiontooperatepleasureflightsfromthelocalairport.
InvitationstatedthatThecouncildonotbindthemselvestoacceptalloranypartof
anytender.Notenderwhichisreceivedafterthelastdateandtimespecifiedshallbe
admittedforconsideration
DatestipulatedwasMarch171983noon.ClubsubmittedonmorningofMarch17.
Normallycheckedeachdayatnoonbutthistimeitwasnotcheckeduntilthe
followingday18March.Councilrefusedtoconsidertheclubstenderontheground
thatitwaslateandconcessionawardedtoanotherparty.Latercouncildiscoveredthat
theclubsbidhadinfactbeensubmittedontimebuttoolatetobackown.
Held:dfliablefordamages.
Invitationtoofferconsidered,butifapartysubmitsaconformingtenderbefore
thedeadlineheisentitled,[by]contractualright,thathistenderwillbe
openedandconsideredinconjunctionwithallotherconformingtendersorat
leastthathistenderwillbeconsideredifothersare.

Issuenotaboutwhetherthepfcanhavetheconcession,simplyabouttheir
righttohavetheirtenderconsidered.
Shorrockwasrighttocontendfornomorethanacontractualdutyto
consider.Ithinkitplainthatthecouncilsinvitationtotenderwas,tothis
limitedextent,anoffer,andtheclubssubmissionofatimelyandconforming
tenderanacceptance.
Thisparticularinvitationamountedtoanoffertoconsidertenderssubmitted
ontime.Notforalltenders.Courtconsidered:
o Smallnumberofinterestedpartiesaddressedonly
o Tenderprocedurewasclear,orderlyandfamiliar
o Outcomewasconsistendwiththeassumptionsofcommercialparties
o Theclubwastheholderoftheconcessionwasthereforemightbesaid
tohavehadalegitimateexpectationofconsiderationforrenewal

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Chen-Wishart Formation & Enforceability 15-16

TheQueeninRightofOntariov.RonEngineering&ConstructionEasternLtd
Bidderdiscoveredshortlyafterthebidshadbeenopenedthatithadmadeamistakein
formulatingitsbid.Soughttowithdrawfromtheprocessandrecoverthedeposit.The
deposithadbeenpaidonthebasisthatitwouldbeforfeitedifthetenderwas
withdrawnorthetendererrefusedtoproceedwiththecontract.
Held:pfnotentitledtorecoverdeposit
Contracthadbeencreated,oneofthetermsbeingthatbidderswerenotentitledto
recoverdeposit.
Twocontractanalysis:
1. contracttoconsiderconformingtenders(preliminarycontract)
2. contractwiththesuccessfultenderer

1.2.7Quotes
TheBarranduna[1985]2LloydsRep419
Dfsenttelegramcontainingdetailsaboutcost/durationoffreight;merely
quotationandnotoffer
Merelyaninvitationtotreatifnotintendingtogiverisetobindinglegal
obligations
1.2.8Unsolicitedgoodsorservices
Regulation3(1)oftheConsumerProtection(FairTrading)(OptOutPractices)
Regulations2009:
3(1)Unlessanduntiltheconsumerexpresslyacknowledgestothesupplierin
writinghisintentiontoacceptandpayfortheunsolicitedgoodsorservices,the
consumermayuse,dealwithordisposeofthegoodsorservicesasiftheywerean
unconditionalgifttohimfromthesupplier.

1.3 Termination of offer

1.3.1Revocationbytheofferor
Must be communicated to the offeree before the offerees acceptance
takeseffect.
Revocationbyathirdparty:Dickinsonv.Dodds[1876]2Ch.D463.
Doddsdeliveredoffertosellsomehouses.BeforeDickinsonaccepted,

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Chen-Wishart Formation & Enforceability 15-16

anothermancalledtosaythatthehouseshadbeensold.Pfstilltriedto
accepttheoffer.
Held:Revocationofofferdoesnothavetobefromofferor;reliable3 rd
partysuffices.Buyercanlongeraccept.
1.3.2Rejectionbytheofferee
1.3.3Lapseoftheoffer
1.3.4Deathoftheofferororofferee
1.3.5 Change of circumstances?
Financings Ltd v Stimson [1962] 1 WLR 1184
Dysart Timbers Limited v Roderick William Nielsen [2009] NZSC 43
Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd [2010]
SGHC 144

2.ACCEPTANCE
Inbilateralcontracts,anacceptance=anunequivocalexpressionofconsentto
theproposalcontainedintheofferandhastheeffectofimmediatelybindingboth
partiestothecontract.Thedoorisclosedonthecontractroom;neitherparty
cangetout;neitherpartycanaddtoorsubtractfromthecontentsoftheroom.
InlandRevenueCommissionersvFry[2001]STC1715
Avalidacceptancemust:
(i)
correspondwiththeoffer,
(ii)
begiven inresponse totheoffer(theremustbea nexus orcausal
connectionbetweentheacceptanceandtheoffer),
(iii)
bemadebyanappropriatemode,and
(iv)
becommunicatedtotheofferor(thisfixesthetimewhenthecontract
isconcluded,thetermsarefixed,andwithdrawalisimpossible).
2.1Correspondenceofacceptancewithoffer
2.1.1Counterofferkillstheoriginaloffer
Hydev.Wrench(1840)3Beau.334
Dfofferedtosellhisfarmtopffor$1000.Pfofferedtobuyitfor$950butthedf
refused.Pfthenwroteandagreedtopay$1000butdfneverreplied.
Held:Nocontract.Dfwins.Counterofferequalsrejectionofinitialoffer.

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Chen-Wishart Formation & Enforceability 15-16

Stevenson, Jacques &Co v. McLean [1880] 5 QBD 346 (not

counteroffer)
Dfswrotetopfsstatingtheywerewillingtosellirontothepfsandstatedthatthe
offerwasopenforaperiodoftime.OnthelastdaypfstelegraphedPleasewire
whetheryouwouldacceptfortyfordeliveryovertwomonths,orifnot,longest
limityouwouldgive.Laterthatdaydfsoldtheirontoa3 rd partyandsenta
telegramtopftoinform.Beforetheysentthetelegrampfsfoundabuyerforthe
ironandsentatelegramtodfinwhichtheyacceptedtheoffer.
Held:Pfwins.
Pfs1sttelegramwasnotarejection,butamereinquiry

2.1.2Battleofforms
In Contract Law: Fulfilling the Reasonable Expectations of Honest Men
(1997)113LQR433,LordSteyn,writingextrajudicially,explains(at435):
Each party insists on contracting only on his own standard conditions. In the
meantimetheworkstarts.Paymentsaremade.Oftenitisafictiontoidentifyanoffer
andacceptance.Yetreasontellsusthatneitherpartyshouldbeabletowithdraw
unilaterallyfromthetransaction.Thereasonableexpectationsoftheparties,albeit
thattheyarestillindisagreementaboutminordetailsofthetransaction,oftendemand
thatthecourtmustrecognisethatacontracthascomeintoexistence.Thegreaterthe
evidence of reliance, and the further along the road towards implementation the
transactionis,thegreatertheprospectthatthecourtwillfindacontractmadeanddo
itsbest,inaccordancewiththereasonableexpectationsoftheparties,tospelloutthe
termsofthecontract.

Brogdenv.MetropolitanRailwayCo(187677)LR2AppCas666
ButlerMachineToolCoLtd v. ExCellOCorporation(England)Ltd
[1979]1WLR401
Whymightthecourtshavewantedtoreachthedecisionstheydid?
Did the decisions flow from the mirrorimage (offeracceptance)
approach?
Pfsweresuppliersofamachine.Theyquotedapriceforthemachinewith
theirownterms,includingapricevariationclause(foranincreaseinpriceif
therewasanincreaseincosts).Dfsreplycontainedanorder,subjecttotheir
own terms that did not have the price variation clause and had different
deliveryterms,aswellasanacknowledgementsliptobesigned.Pfleftit
blank but wrote back in acknowledgement of the order and the revised

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Chen-Wishart Formation & Enforceability 15-16

deliverydates.Wereturnherewithdulycompletedyouracknowledgement
oforderform.
Lateroncostsincreasedandpfinvokedthepricevariationclause.
Held:Dfwon.
Theacknowledgementwasthedecisivedocument.Makesitclearthatthe
contractwasonthebuyerstermsandnotthesellers.
BritishRoadServicesLtdv.ArthurCrutchley&CoLtd
Battleofformswonbytheonewhofiresthelastshot;putsforwardthe
latesttermsandconditions.
(Butinsomecasesthebattleiswonbythemanwhogetstheblowinfirst,
oftenifsellerprovidestheirownterms,andbuyerlaterorderswiththeirown
terms.thebuyeroughtnottobeallowedtotakeadvantageofthedifference
unlesshedrawsitspecificallytotheattentionoftheseller)
TekdataInterconnectionsLtdvAmphenolLtd[2009]EWCACiv1209,[2009]
AllER(D)208(Nov)
anoffertobuycontainingthepurchaserstermswhichisfollowedbyan
acknowledgmentofpurchasecontainingthesellerstermswhichisfollowed
bydeliverywill(otherthingsbeingequal)resultinacontractonthesellers
terms
Italwaysdependsonanassessmentofwhatthepartiesmustobjectivelybetakento
haveintended.ButwherethefactsarenomorecomplicatedthanthatAmakesan
offeronitsconditionsandBacceptsthatofferonitsconditionsand,withoutmore,
performancefollows,itseemstomethatthecorrectanalysisisthetraditional
offerandacceptanceanalysis,iethatthereisacontractonBsconditions.That
hasthegreatmeritofprovidingadegreeofcertaintywhichisbothdesirableand
necessaryinordertopromoteeffectivecommercialrelationships.
the context of a long term relationship and the conduct of the parties may be
sufficient to displace the result which a traditional offer and acceptance analysis
woulddictate.Butitislikelythatacourtwillbeslowtoreachthisconclusion.it
willalwaysbedifficulttodisplacethetraditionalanalysis,inabattleoftheforms
case,unlessitcanbesaidtherewasaclearcourseofdealingbetweentheparties.

British Steel Corporation v Cleveland Bridge and Engineering Co Ltd

Parties involved in negotiations for supply of steel components. Parties commenced
performance on agreement even though there was only a letter of intent and the
formal contract was never concluded.
Held:
No contract because letter of intent was too vague- no agreement was made on
essential terms, including price

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Chen-Wishart Formation & Enforceability 15-16

However, claim in unjust enrichment was allowed because (Goff J): Both parties
confidently expected a formal contract to eventuate, but because the completed
performance of the work is not referable to any contract the terms of which can
be ascertained, the law will impose an obligation to pay a reasonable sum for such
work as has been done based on restitution and quantum meruit.

2.2Nexus(causalconnection)betweenofferandacceptance
2.2.1Crossoffers
Tinnv.Hoffman(1893)29LT271
2.2.2Rewards
Rv.Clarke(1927)40CLR227
Williamsv.Carwardine(1833)5C&P566
Gibbonsv.Proctor(1891)4LT594
Isitpossibletoexplainthedifferentoutcomesinthesecases?
2.3

Methodofacceptance

2.3.1Modeofacceptanceprescribed
ManchesterDiocesanCouncilforEducationv.Commercialand
GeneralInvestmentsLtd[1970]1WLR242
Acceptancecommunicatedtotheofferorbyanyothermodewhichisnoless
advantageoustohimwillconcludethecontract.
A.k.aothermodesofcommunicationisfineaslongasitdoesnot
disadvantagetheofferor
Ifanofferorintendsthatheshallbeboundonlyifhisofferisacceptedinsome
particularmanner,itmustbeforhimtomakethisclear.
Acceptancebysilence
General rule: silence does not amount to acceptance this is to protect the offeree
from the obligation to take positive steps to reject unwanted offers.
Felthousev.Bindley(1862)11CBNS869
Pf(uncle)wantedtobuyahorsefromhisnephew.Afternegotiations,wrotean
offerintheletter:IfIhearnomoreabouthim,Iconsiderthehorsemineat$30
15s.Nephewdidnotreply.Dfauctioneeraccidentallysoldthesamehorseatan
auction,eventhoughnephewtoldhimthehorsehadbeensold.Pfbroughtclaim
forconversionwhichresteduponwhetheracontracthadbeenconcludedfrom
himandthenephewscorrespondence.
Held:Nocontract;dfwins.

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Chen-Wishart Formation & Enforceability 15-16

Nothinghadbeendoneatthattimetopassthepropertyoutofthenephewand
vestitinthepfTherehadbeennoacceptancebindingthenephew.
(musthavesomepositiveactofacceptance)
2.4Communicationofacceptance
Twopracticalproblemsarise:
(i) Timing:Whenthereisatimelagbetweenthesendingandthereceivingof
theacceptance,shouldtheofferorsrevocationortheoffereesrejection
oftheofferwhichiscommunicatedintheinterveningperiodbeeffective?
(ii)

Failureofcommunication:Wheretheacceptancefailstoreachtheofferor
without either partys fault, who bears the risk for this
miscommunication?

The answers to these questions have traditionally depended on whether the

methodofcommunicatingtheacceptanceisclassifiedasinstantaneousorpostal.

2.4.1Acceptancebypost
(i)
Thepostalacceptancerule
Adamsv.Lindsell[1818]1BandAld681
Generalpostalacceptancerule
HouseholdFire&CarriageAccidentInsuranceCoLtdv.Grant[1879]4
Ex.D216
PAruleapplieseveniflettergoesastray
Byrnev.VanTienhoven[1880]5CPD344
Offercanonlyberevokedbeforeoffereesacceptanceisineffect
(ii)

Someoddresults
Therulethatarejectionisonlyeffectivewhenitiscommunicatedtothe
offerorcanleadtounexpectedconclusionswhenthepostalacceptance
ruleapplies:
Whereanoffereepostshisacceptance,thenchangeshismindand
notifiestheofferorofthisrejectionbyaspeediermeanssuchasa
telephone, the parties are still bound by the postal acceptance
arrivinglater.
Where an offeree posts his rejection, then changes his mind and
postshisacceptancebeforehisrejectionletterarrives,hecanbind
theofferoralthoughtheacceptanceletterarrivesaftertherejection
letter.

17
Chen-Wishart Formation & Enforceability 15-16

(iii)

Thepostalacceptanceruledoesnotalwaysapplyevenifthepostisused
HolwellSecuritiesLtdv.Hughes[1974]1AllER161
Pfgrantedoptiontopurchaselandundercontractwithdf,exercisablebynotice
inwritingtodfatanytimewithinsixmonthsfromthedatehereof...Pfsentthe
letterbutdfneverreceivedit.
Issueiswhethertheoptionwasexercisedthemomenttheletterwassent,evenif
theletterwentastrayandwasneverreceivedbythedf.
Held:dfwins;nocontractwasformedbecausepfhadfailedtogivethedfnotice
thattheywereexercisingtheoption.
Postalrulenotalwaysapplicable;
thepartiesmusthavecontemplatedthatthepostalservicewouldbeused
intheacceptance
parties can contract out of (express/implied) the postal rule that
acceptancetakesplaceuponposting.Whathappenedin Holwell;ruled
thattheclausenoticeinwritingrequirednotificationorcommunication,
andpostingtheletterdidnotconstitutenotice
(iv)
Thejustificationsforthepostalacceptancerule
(iii)Howrelevantisthepostalacceptancetoday?
Holwell Securities Ltd v. Hughes [1974] 1 All ER 161

2.4.2InstantaneousorTwowayinstantaneous
BrinkibonLtdv.StahagStahlundStahlwarenhandelsGmbH[1982]1AllER
293
SameissueasEntores;inthecaseofcommunicationbytelex,theacceptanceis
effectivewhenitiscommunicatedtotheofferorwiththeresultthatthecontractis
concludedinthejurisdictionwheretheofferorislocated.
LordWilberforce:theruleoninstantaneouscommunicationsis:
asoundrule,butnotnecessarilyauniversal.
Since1925theuseoftelexcommunicationhasbeengreatlyexpanded,and
therearemanyvariantsonit. Thesendersandrecipientsmaynotbethe
principalstothecontemplatedcontract. Theymaytheservantsoragents
withlimitedauthority.Themessagemaynotreach,orbeintendedtoreach,
thedesignatedrecipient immediately: messagesmaybe sentoutof office
hours,oratnight,withtheintention,orontheassumption,thattheywillbe
readatalatertime.Theremaybesomeerrorordefaultattherecipientsend
which prevents receipt at the time contemplated and believed in by the
sender. The message may have been sent and/or sent through machines
operated by third persons. And many other variations may occur. No
universalrulecancoverallsuchcases;theymustberesolvedbyreferenceto

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Chen-Wishart Formation & Enforceability 15-16

theintentionofthepartiesbysoundbusinesspracticeandinsomecasesbya
judgementwheretherisksshouldlie.

Entoresv.MilesFarEastCorp[1953]2QB327
PfsinLondonmadeanofferbytelex,whichdfsinAmsterdamaccepted,alsoby
telex. Pfs applied for leave to serve notice of a writ. Entitlement to do so
depended on where the contract was made. (If it was when dfs sent their
acceptancebytelexAmsterdam;ifitwaswhenthetelexwasreceivedonthe
pfsmachineLondon)
Held: contract was formed when the communication of the acceptance was
receivedbythepfsinLondon
Whatisthelegalpositionif:
afacetofaceoralacceptanceisdrownedoutbyanoisyaircraftflying
overhead?
Nocontract
thetelephonegoesdeadbeforetheacceptanceiscompleted?
Nocontract
theofferordoesnotcatchtheclearandaudiblewordsofanacceptanceor
theprinterreceivingatelexrunsoutofink,buttheofferordoesnotbother
toaskforthemessagetoberepeated?
Yescontract(butifitisnotofthefaultoftheofferorwhenhedoesnt
receiveanacceptanceproperly,thereisnocontract,evenifthesender
reasonablybelievesithasgothomewhenithasnot)
(whenbypost:differentfrominstantaneouscontracts;acceptanceiscompleteas
soonastheletterisputintothepostbox,andthatistheplacewherethecontract
ismade)
2.4.3Onewayinstantaneous

Widespread use of new means of communication (e.g. faxes, pagers, answer

machines,textmessagingandemails)thatisneithertwowayinstantaneousnor
postalsuggesttheneedforathirdcategory.
Electronic Transactions Act (2010)
Time and place of despatch and receipt
13.
(2) The time of receipt of an electronic communication is the time when the
electronic communication becomes capable of being retrieved by the addressee at
an electronic address designated by the addressee.
(3) The time of receipt of an electronic communication at an electronic address that
has not been designated by the addressee is the time when the electronic

19
Chen-Wishart Formation & Enforceability 15-16

communication becomes capable of being retrieved by the addressee at that

address and the addressee becomes aware that the electronic communication has
been sent to that address.
Canweextractaprincipletoapplyinsuchcasesfrom
TenaxSSCoLtdv.TheBrimnes[1975]QB929?
Whereamessageissendoutsideofofficehours,acceptanceisnotconsidered
communicateduntiltheofficereopensforbusiness,orshortlythereafter
(context:withdrawalofashipunderacharterparty)
2.5Unilateralcontracts
Unilateral
AspromiseinexchangeforBsact
AsofferacceptedbyBsperformance
Bisnotobligedtoperform
NormallyAcannotrevokeonceBhas
started performance (unless risk lies
withB)

Bilateral
As promise in exchange for Bs
counterpromise
As offer accepted by Bs counter
promise
Bisobligedtoperform
AcanrevokeofferanytimebeforeBs
acceptance

2.5.1Acceptance
Bilateralcontractsareconcludedbycommunicationoftheacceptance.
Unilateralcontractsareconcludedbytheperformanceofthestipulatedact.
Carlillv.CarbolicSmokeBallCo[1893]1QB256

2.5.2Revocation
Impliedobligationbytheofferornottorevoketheofferoncetheoffereehas
embarkedontheperformance.
Erringtonv.Errington[1952]1KB290
Dadboughthouseforsonanddaughter.Saidiftheypaidoffthemortgage
the house would belong to them. The couple began paying off the
mortgage but Dad died before it was done and left the house to the
widow.
Held:widownotentitledtoanorderforpossession;Cannotrevokeoffer
afteroffereehasenteredonperformanceoftheact(aslongastheydonot
leaveitincomplete/unperformed)
DauliaLtd v FourMillbankNomineesLtd [1978]Ch231especiallyat
239,dictaappliedlocallyinDicksonTrading(S)PteLtdvTransmarco
Ltd[1989]2MLJ408at414

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Chen-Wishart Formation & Enforceability 15-16

Butnosuchobligationimpliedinrespectofestateagents:Luxor(Eastborne)Ltd
v.Cooper[1941]AC108
AndseeMobilOilAustraliaLtdvLyndelNomineesPtyLtd[1998]205FCA

21
Chen-Wishart Formation & Enforceability 15-16

22
Chen-Wishart Formation & Enforceability 15-16

2.6Assessmentoftheofferacceptance/mirrorimageapproach
Theadvantagesoftheofferandacceptanceapproach
Criticismsoftheofferandacceptanceapproach
Relevanceof:
(i)
Respectingtheparties'intentions
(ii)
Certainty
(iii)
Preservingsomeroomtomanoeuvre
(iv)
Discouraging opportunism and encouraging fair negotiating
practices
(v)
Protectingrelianceorpartperformance
(vi)
Avoidanceofunfairterms
2.7Alternativeapproachtoformation
LordDenninginGibsonv.ManchesterCityCouncil(1978)at523:
"[i]tisamistaketothinkthatallcontractscanbeanalysedintotheformofofferand
acceptance.Iknowinsometextbooksithasbeenthecustomtodoso;but,asI
understandthelaw,thereisnoneedtolookforastrictofferandacceptance.You
shouldlookatthecorrespondenceasawholeandattheconductofthepartiesand
seetherefromwhetherthepartieshavecometoanagreementoneverythingthatwas
material(Emphasisadded).

LordDenningin ButlervExCellOCorporation at4045):Inmanyofthese

casesourtraditionalanalysisofoffer,counteroffer,rejection,acceptanceandso
forthisoutofdate.Thebetterwayisforthecourtstodeterminereasonable
compromisesonthedisputedtermsifthepartiesareagreedonallmaterialterms.
Evenwherethetermsusedbythepartiesweremutuallycontradictory,itshould
bepossibleforacourttoscrapthetermsandreplacethembyareasonable
implication.
LordDenningsapproachhasnotfoundfavourwiththeHouseofLordswhich
has,affirmedtheofferandacceptanceapproachin Gibson v. ManchesterCity
Council((1979)at297).
In Projection Pte Ltd v The Tai Ping Insurance Co Ltd [2001] 1 SLR(R) 798, the
Court of Appeal cited with approval at [16] the following observation of Lord
Denning MR in Port Sudan Cotton Co v Govindaswamy Chettiar & Sons [1972] 2
Lloyds Rep 5 at 10:
... I do not much like the analysis in the text-books of inquiring whether there was an
offer and acceptance, or a counter-offer, and so forth. I prefer to examine the whole
of the documents in the case and decide from them whether the parties did reach an
agreement upon all material terms in such circumstances that the proper inference is

23
Chen-Wishart Formation & Enforceability 15-16

that they agreed to be bound by those terms from that time onwards.

3.CERTAINTY&COMPLETENESS

Certainty on the material contract terms is necessary to determine whether a

contracthasbeenproperlyperformedand,ifso,howbreachshouldbe
remedied.Moreover,thenatureandextentoftheagreementsuncertainty
mayindicatethatthepartieshavenotyetcommittedtobebound.
Evenifthereisasufficientcorrespondencebetweenofferandacceptance,there
isnoenforceablecontractiftheagreement:
expresslyanticipatestheneedforfurtheragreement(theonemorestepproblem)
or
impliedlydoessobecauseitisvagueorsilentonmaterialpoints(thefuzziness
problemandthegapproblem).
Thejudicialtaskistodrawthelinebetweenuncertaintiesthatare:
curable,byaprocessofjudicialconstructionofthepartiesintentions
(theagreementisthenenforceable);and
incurable,wheretheagreementisunenforceableasamereagreement
toagree.

3.1Vaguenessandincompleteness
Theproenforcementpolicies
Thecourtsessentialtaskistodrawthelinebetween:
construingacontractandmakingacontract;
upholdingabargainandnotimposingabargainontheparties.

3.1.1Severance
Ifessentialaspectsofthetransactionareagreed,avagueformofwordscanbe
severedasmeaninglessandredundantandtherestoftheagreementenforced.
NicoleneLtdv.Simmonds[1953]1QB543
3.1.2 Previous dealing, custom, and reasonableness
MayandButcherv.R[1934]2KB17
Hillasv.Arcos(1932)147LT503h
Foleyv.ClassiqueCoaches[1934]2KB1
Agreementtoagree.Partieshadanagreementforsupplyofpetrolatapriceto

24
Chen-Wishart Formation & Enforceability 15-16

be agreed by the parties in writing and from time to time. Issue of

whether agreement to supply was binding despite failure to reach
agreementonprice.Vendorsarguedthattheyhadreliedontheactthatthe
partieshad actedonthebasisoftheagreementfor3years. (Plusthere
wasanarbitrationclauseiftheycouldnotagreeonprice)
Held: agreement was binding in order to give effect to what both parties
intended the Court is justified in implying that in the absence of
agreementastopriceareasonablepricemustbepaid,andiftheparties
cannotagreeastowhatisareasonablepricethenarbitrationmusttake
place.
SteynLJsaidinGPercyTrenthamLtdv.ArchitalLuxferLtd[1993]1Lloyds
Rep25,27thatwheresufficient intentiontobeboundcanbeinferred
fromrelianceoftheparties onthecontract,itwillbe "difficulttosubmit
thatthecontractisvoidforvaguenessoruncertainty.Specifically,thefactthat
the transaction is executed makes it easier to imply a term resolving any
uncertainty, or, alternatively, it may make it possible to treat a matter not
finalizedinnegotiationsasinessential

ScammellandNephewLtdv.Ouston[1941]AC251

RafflesvWichelhaus(1864)
3.1.3Theworkabilityofanyagreedmechanismforascertainment
SudbrookTradingEstateLtdv.Eggleton[1983]1AC444
Tan Yeow Khoon v Tan Yeow Tat [1998] 2 SLR(R) 19
In a contract for sale at evaluation, the court can direct an inquiry to
ascertain the price not only where the parties fail to provide the machinery,
but also where the machinery provided had broken down: provided of course
that on the true construction of the contract, the agreed machinery was subsidiary
to the ascertainment of the proper price and was not of the essence of contract.
The question whether the prescribed machinery was off the essence of the
contract is a matter of construction.

3.1.4Agreementsto(ornotto)negotiateingoodfaith
an agreement to negotiate on a particular matter with a view to
reachingagreement(lockinagreements)?
An agreement not to negotiate with third parties over a particular
matter.(lockoutagreements)

25
Chen-Wishart Formation & Enforceability 15-16

Walfordv.Miles[1992]1AllER453
InPromisestoNegotiateinGoodFaith(2003)119 LQR 357,363,Berg
suggestssomecontentforadutytonegotiateingoodfaithapartymust:
activelycommencenegotiationsandparticipateinthem;
considerandputforwardoptions;
nottakeadvantageoftheothersknownignorance;and
notwithdrawfromnegotiationswithoutgivingatruthfulreason,which
should not be wholly unreasonable (in the Wednesbury sense
(Associated Provincial Picture Houses v WednesburyCorp (1948)),
andwithoutgivingtheotherpartyareasonablechancetorespond.
PetromecIncvPetroleoBrasileiroSAPetrobras[2006]EWCACiv1038
UnitedGroupRailServicesvRailCorporationOfNewSouthWales[2009]
NSWCA177theNewSouthWalesCourtofAppealdeclinedtofollow
WalfordvMiles.Itenforcedaclauserequiringthepartiestomeetand
undertakegenuineandgoodfaithnegotiationswithaviewtoresolvingthe
disputeordifference
3.2Conditionalagreements:subjecttocontract
AGvHumphreysEstate[1987]HKLR427
[I]tisinvariablyaquestionofconstructionwhethertheexecutionofafurther
contractisaconditionoratermofthebargainoramereexpressionofthe
partiesdesireastohowthetransactionalreadyagreedshouldinfactproceedto
completion
TeoTeoLeevOngSweeLan[2002]4SLR344,at[61]
Thequestioniswhetherthestipulatedstep:
isapreconditionoftheexistenceofthecontract,sothatoneorbothparties
retainthepowertorefrainfromtakingthestipulatedstepandpreventthe
formationofthecontract,or
merely indicates the manner of performance of an already enforceable
contract,sothatthepartiesexpectationsareprotectedevenifonerefuses
totakethenextstep.
Storerv.ManchesterCC(asabove)
RTS Flexible Systems Ltd v Molkerei Alois Muller GMBH (2010)
Courtswillnotimposeuponthepartiesabindingagreementwhichtheyhavenot
reached.

26
Chen-Wishart Formation & Enforceability 15-16

Although performance is a very relevant factor pointing in the direction of the

existenceofacontract,itdoesnotfollowfromthefactthattheworkwasperformed
thatthepartiesmusthaveenteredintoacontract.

3.3Restitutionaryawardintheabsenceofacontract
BSCvCleveland[1984]1AllER504;Ball99LQR572
RegalianPropertiesPlcVLondonDocklandsDevelopmentCorporation [1995]
1WLR212.

4. INTENTIONTOCREATELEGALRELATIONS
4.1Therequirementanditsjustification
Twostrongpresumptionsthatrequireclearevidencetorebut:
(i)
partiesdonotintendtocreatelegalrelationsin socialanddomestic
agreements;and
(ii)
partiesdointendtocreatelegalrelationsincommercialagreements.

4.2Familyandsocialagreements
Jonesv.Padavatton[1969]1WLR328
Flemingv.Beeves[1994]1NZLR385at389
Balfourv.Balfour[1919]2KB571
Radmacher v Granatino [2010] UKSC 42
TQ v TR [2009] 2 SLR(R) 96
ChooTiongHinvChooHockSwee[1959]M.L.J.67
DeCruzAndreaHeidivGuangzhouYuzhitangHealthProductsCoLtdand
Others[2003]4SLR682at[196][199]
Hadleyv.Kemp[1999]EMLR589
4.3Commercialagreements
Edwardsv.SkywaysLtd[1964]1WLR349
RoseandFrankCov.JRCromptonandBrosLtd(1925)
LettersofComfort/LettersofIntent
KleinwortBensonLtdvMalaysianMiningCorpBhd[1989]1AllER785
PetrosinCorpPteLtdvCloughEngineeringLtd[2005]SGHC170

27
Chen-Wishart Formation & Enforceability 15-16

Nomenclature alone does not a contract make or unmake. The general rule
that letters of intent or some of the documents do not constitute contracts is not
an immutable one; everything depends on the facts at hand.

28
Chen-Wishart Formation & Enforceability 15-16

5.CONSIDERATION

5.1Thepoliciesforandagainsttheenforcementofpromises

5.2Thebasicideaanditsjustification

5.2Therequirementofnexus
5.2.1 Considerationmustmovefromtheclaimant
IfAmakesacontracttogiveBacarandBwillpayC$20,000,canC
sueBfortheamountifAperformsbutnotB?
Seelatersectiononprivity
5.2.2 Considerationmustbeinreturnforthepromise
CombevCombe[1951]2KB215
AllianceBankvBroom(1864)2Dr&Sim289
5.2.3 Pastconsiderationisnotgoodconsideration
InreMcArdle,Decd[1951]Ch.669
PaoOnvLauYiuLong[1980]A.C.614
SimTonyvLimAhGee[1995]2S.L.R.466

5.3Therequirementofvalue
5.3.1Thedefinitionsofvaluableconsideration
CurrievMisa(1875)LR10EX153:
avaluableconsideration,inthesenseofthelaw,mayconsisteitherin
someright,interest,profitorbenefittooneparty,orsomeforbearance,
detriment,lossorresponsibilitygiven,sufferedorundertakenbythe
other.

29
Chen-Wishart Formation & Enforceability 15-16

5.3.2Considerationneednotbeadequatebutmustbevaluablein
theeyeofthelaw
Nominalconsideration:Chappell&CovNestle[1960]AC87
Intangibleconsideration:
WhitevBluett(1853)23LJEx36
HamervSidway(1891)124NY538
WardvByham[1956]1WLR496
5.3.3Motiveisnotconsideration
ThomasvThomas(1842)2QB851
5.3.4Compromiseandforbearancetosue
Where Xsclaimis valid inlaw,his compromiseorforbearanceis
clearlygoodconsiderationforYsreciprocalpromise.
WhereXsclaimisdoubtfulinlaw,hiscompromiseorforbearanceis
stillgoodconsideration(HaighvBrooks).
Thesameappliesif Xsclaimis clearlyinvalid inlawbutmadein
goodfaithandonreasonablegrounds(CookvWright(1861)at569).

30
Chen-Wishart Formation & Enforceability 15-16

IfXknowsthathisclaimisinvalid,compromisingorforbearingfrom
suingonitisnotvalidconsideration.WadevSimeon(1846):

5.4Preexistingduties
5.4.1. Preexistingdutiesimposedbypubliclaw
GlasbrookBros.vGlamorganC.C.[1925]A.C.270
WardvByham
5.4.2. Preexistingdutiesowedtoathirdparty
ShadwellvShadwell(1860)9CB(NS)159
PaoOnvLauYiuLong[1980]A.C.614

5.4.3.1.

5.4.3. Preexistingdutiesowedtotheotherparty
Thesameformore
StilkvMyrick(1809)2Camp.317
WilliamsvRoffeyBros&Nicholls(Contractors)Ltd[1991]1Q.B.1
Attrill v. Dresdner Kleinwort Ltd [2013] EWCA Civ 394, [2013] 3 All
ER 607, [95]
SeaLandServiceIncvCheongFookCheeVincent[1994]3SLR631
BobTeoSengKeevArianecorpLimited[2008]SGHC81
SunnyMetal&EngineeringPteLtdvNgKhimMingEric[2007]1
SLR853,[30]:Thecombinedeffectofpracticalbenefitandthe
wellestablishedpropositionthatconsiderationmustbesufficientbut
neednotbeadequateisthatitwill,absentexceptional
circumstances,bealltooeasytolocatesomeelementofconsideration
betweencontractingparties.Thiswouldrendertherequirementof
considerationotioseorredundant,atleastforthemostpart.
BrianCooteConsiderationandBenefitinFactandinLaw(1990)3JCL23
JWCarter,AndrewPhangandJillPooleReactionstoWilliamsvRoffey(1995)8
JCL248
MChenWishart,ABirdintheHand:ConsiderationandOneSidedContract
ModificationsinContractFormationandParties,ASBurrowsandEPeel
(eds)(OUP,2010),

5.4.3.2.

Lessforthesame:partperformance
FoakesvBeer(1884)9App.Cas.605
InreSelectmove[1995]1WLR474
D&CBuildersvRees[1966]2QB617LordDenningMRheld,atp
625:Wheretherehasbeenatrueaccord,underwhichthecreditor

31
Chen-Wishart Formation & Enforceability 15-16

voluntarilyagreestoacceptalessersuminsatisfaction,andthedebtor
actsuponthataccordbypayingthelessersumandthecreditoraccepts
it, then it is inequitable for the creditor afterwards to insist on the
balance.

6.

PROMISSORYESTOPPEL
HughesvMetropolitanRailwayCompany(1877)2App.Cas.439perLord
CairnsLC:
ifpartieswhohaveenteredintodefiniteanddistincttermsinvolvingcertainlegal
resultsafterwardsbytheirownactorwiththeirownconsententeruponacourseof
negotiationwhichhastheeffectofleadingoneofthepartiestosupposethatthestrict
rightsarisingunderthecontractwillnotbeenforced,orwillbekeptinsuspense,or
heldinabeyance,thepersonwhootherwisemighthaveenforcedthoserightswillnot
beallowedtoenforcethemwhereitwouldbeinequitablehavingregardtothe
dealingswhichhavethustakenplacebetweentheparties.

CentralLondonPropertyTrustLtdvHighTreesHouseLtd[1947]1K.B.
130

Therequirementsofpromissoryestoppel
A.Promissoryestoppel

B.Consideration

(1)Clearpromise

Clearpromise

(2)Reliance(orchangeofposition)by
promisee;neednotberequestedbutmustbe
foreseeablebyorknowntopromisor.

Promiseemusthavegivenconsideration
whichmayconsistofrequestedreliance.
Promiseenforceablewithoutreliance.

(3)Inequitabletoresile:byreferenceto(1),
(2)aboveandsubsequentevents.

Irrelevantshortofvitiatingfactors(see
PartII)withhighthresholds.

(4)Suspensoryandnotextinctive:ienot
necessarilygivenfullexpectation;the
promisorcanresumehisoriginalrightson

Enforcementoffullexpectation(iecanbe
extinctive).

32
Chen-Wishart Formation & Enforceability 15-16

givingreasonablenoticetotheextentthatthe
promiseecanresumehisoriginalposition.
(5)Shieldnotsword:onlyoperatesasa
defencetoenforcepromisestoacceptless.
Cannotcreateoraddnewrights.

Shieldandsword:canoperateasdefence
toenforcepromisestoacceptlessandto
createoraddnewrights.

**Is reform desirable to

allow the creation or
addition of new rights?
6.1Clearpromise
Woodhouse AC Ltd v Nigerian Produce Ltd [1972] AC 741
6.2Reliance:changeofposition
Musttherepresenteehaveactedonthepromise,andifso,towhatextent?
ThePostChaser[1982]1AllE.R.19,2527
AlanvElNasr[1972]2WLR800
Abdul Jalil bin Ahmad bin Talib and others v A Formation Construction Pte
Ltd [2006] 4 SLR 778
Lam Chi Kin David v Deutsche Bank AG [2010] 2 SLR 896, [55]
Steven Chong JC explained that detriment may be understood to include:
(i)
expenditure of time and money;
(ii)
incurring any liability
(iii)
change of position, and
(iv)
the deprivation of a benefit.
Collier v Wright [2007] EWCA Civ 1329 the Court of Appeal applied
promissoryestoppeltooverride FoakesvBeer.ArdenLJreformulatedthe
promissoryestoppeldoctrineasfollows[42]:
[I]f (1) a debtor offers to pay part only of the amount he owes; (2) the
creditorvoluntarilyacceptsthatoffer,and(3)inrelianceonthecreditors
acceptance the debtor pays that part of the amount he owes in full, the
creditorwill,byvirtueofthedoctrineofpromissoryestoppel,beboundto
acceptthatsuminfullandfinalsatisfactionofthewholedebt.Forhimto
resilewillofitselfbeinequitable.Inaddition,inthesecircumstances,the
promissoryestoppelhastheeffectofextinguishingthecreditorsrighttothe
balanceofthedebt.Toasignificantdegreeitachievesinpracticaltermsthe
recommendationoftheLawRevisionCommitteechairedbyLordWright
MRin1937.

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Chen-Wishart Formation & Enforceability 15-16

6.3Inequitabletogobackonthepromise
D&CBuildersvRees[1966]2QB617
6.4Theextentofenforcement:suspensoryorextinctive?
AjayivBriscoe[1964]1W.L.R.1326perLordHodson:
The principle is that when one party to a contract in the absence of fresh
considerationagreesnottoenforcehisrightsanequitywillberaisedinfavourofthe
otherparty. Thisequityis,however,subjecttothequalifications(1)thattheother
partyhasalteredhisposition,(2)thatthepromisorcanresilefromhispromiseon
givingreasonablenotice,whichneednotbeformalnotice,givingthepromiseea
reasonableopportunityofresuminghisposition,(3)thepromiseonlybecomesfinal
andirrevocableifthepromiseecannotresumehisposition.

6.5Onlyoperatesdefensively:shieldnotasword
canenforcepromisesofthesameforlesstype;

cannotenforcepromisesofthemoreforthesametype;and,

cannotcreatenewlegalrightsindependentofthepartiespreexistinglegal
relationship.
CombevCombe[1951]2K.B.215
LongFooYit&AnorvMobilOilSingaporePteLtd[1997]SGHC323
at[50](HighCourtinSingapore)perJudithPrakashJ:
Therequirementsforobtainingreliefunderthisdoctrinearethattheremustbea
legal relationship giving rise to certain rights and duties between the parties; a
promiseorrepresentationbyonepartythathewillnotenforceagainsttheotherhis
strictlegalrightsarisingoutofthatrelationship;anintentiononthepartofthefirst
partythattheotherwillrelyontherepresentation;reliancebythelatterparty;and,
finallythatitisinequitableforthefirstpartytogobackonhispromise.

Crabb v Arun D.C. [1979] Ch 179, proprietary estoppel

Amalgamated Investment v Texas Commerce Int. Bank [1981] 3 All ER 577
Thecourtexplainedthenatureofanestoppelbyconvention.
"If parties to a contract, by their course of dealing, put a particular
interpretationonthetermsofitonthefaithofwhicheachofthemtothe
knowledgeoftheotheractsandconductstheirmutualaffairstheyare
boundbythatinterpretationjustasmuchasiftheyhadwrittenitdownas
beingavariationofthecontract."

LordDenningMRdescribesallkindsofestoppelsintermsof:
"one general principle shorn of limitations. When the parties to a

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Chen-Wishart Formation & Enforceability 15-16

transactionproceedonthebasisofanunderlyingassumptioneitheroffact
oroflawwhetherduetomisrepresentationormistakemakesnodifference
onwhichtheyhaveconductedthedealingsbetweenthemneitherofthem
willbeallowedtogobackonthatassumptionwhenitwouldbeunfairor
unjusttoallowhimtodoso.Ifoneofthemdoesseektogobackonit,the
courtswillgivetheothersuchremedyastheequityofthecasedemands."

(U.S.)Restatement,Second,Contracts,s.90:(1)Apromisewhichthe
promisorshouldreasonablyexpecttoinduceactionorforbearanceonthepart
ofthepromiseandwhichdoesinducesuchactionorforbearanceisbinding
ifinjusticecanbeavoidedonlybyenforcementofthepromise.Theremedy
grantedforbreachmaybelimitedasjusticerequires.

WaltonsStoresvMaher(1988)164C.L.R.387
Baird Textile Holdings Ltd v Marks and Spencer Plc [2002] 1 All ER
(Comm)737

7.

CONSIDERATION:ANASSESSMENT
SunnyMetal&EngineeringPteLtdvNgKhimMingEric[2007]1SLR853at
[28][30](HighCourtinSingapore) per AndrewPhangBoonLeongJ:Asa
matterofgeneralobservation,itshouldbenotedthatthedoctrineofconsideration
itself,althoughlongestablished,hascomeunderincreasingfireespeciallyin
recentyears.

7.1 Replaceconsiderationcompletelywithatestofintention
Thedoctrineofconsiderationfiltersoutonesidedtransactions.Shouldtheybe
enforced?SeeMelvinEisenbergTheWorldofContractandtheWorldofGift
(1997)85CaliforniaLawReview821
ChweeKinKeongandOthersvDigilandmall.comPteLtd[2004]2SLR594at
[139](HighCourtinSingapore) per VKRajahJC:Themodernapproachin
contractlawrequiresverylittletofindtheexistenceofconsideration.Indeed,in
difficult cases, the courts in several common law jurisdictions have gone to
extraordinarylengthstoconjureupconsideration.Nomodernauthoritywas
citedtomesuggestinganintended commercialtransactionofthisnature could

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Chen-Wishart Formation & Enforceability 15-16

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
commercialtransactions.Themarrowofcontractualrelationshipsshouldbethe
partiesintentiontocreatelegalrelations.
7.2 Replaceconsiderationincontractmodificationswithatestof
intention
InAntonsTrawlingCoLtdvSmith[2003]2NZLR23,at[93]BaragwanathJof
theNewZealandCourtofAppealsaidthat:[t]heimportanceofconsiderationis
asavaluablesignalthatthepartiesintendtobeboundbytheiragreement,rather
thananendinitself.
Teat v Willcocks [2013] NZCA 162
7.3 Replaceconsiderationwithvitiatingfactors:duress,undue
influence,unconscionablebargains
InGayChoonIngvLohSzeTiTerencePeter[2009]SGCA3,
(SeeChenWishartConsiderationandSeriousIntention[2009]SJLS434)
Andrew Phang Boon Leong JA of the Singapore Court of Appeal ultimately
concludesthatpragmatismdemandsthemaintenanceofthestatusquoforthetime
being. However,heraisesthespectreofitsreplacementwiththedoctrinesof
economicduress,undueinfluence,unconscionabilityandpromissoryestoppel.

Possiblealternatives
Thealternativesstated
111.Itisaxiomatic,inourview,thatifthedoctrineofconsiderationisindeed
abolished (whether judicially or legislatively), the function it has hitherto
performed must be fulfilled by alternative doctrines. There have been a
number of suggestions[these] include the doctrine of promissory
estoppelandthedoctrineofeconomicduress.

112.Indeed,giventheatleastpossiblelinkagesbetweeneconomicduresson
theonehandandundueinfluenceandunconscionabilityontheotherthereis
noreasoninprinciplewhyundueinfluenceandunconscionabilityoughtnot
alsotobepotentialalternatives(althoughunconscionabilityisstillafledgling
doctrineintheCommonwealthlawofcontract).

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Chen-Wishart Formation & Enforceability 15-16

113. On a more general level, the doctrines of economic duress, undue

influenceandunconscionabilityappeartobemoreclearlysuitednotonlyto
moderncommercialcircumstancesbutalso(moreimportantly)tosituations
wheretherehasbeenpossibleextortion.ThereisalsotheproposaloftheUK
Committeetotheeffectthatconsiderationismerelyevidenceofaserious
intentiontocontract,withtheresultthatitshouldnotberequiredwherethe
promiseitselfisinwriting.

Thedifficulties
114.Wepausetoobserve,ifonlyinthebriefestoffashions,thatthepossible
alternativestothedoctrineofconsiderationsetoutsoverycursorilyinthe
precedingparagraphsarethemselvessubjecttotheirownspecificdifficulties.
Forexample,thefledglingnatureofthedoctrineofunconscionability.The
doctrineofundueinfluence,however,hasbeenrelativelywellestablishedin
the landscape of the common law of contract, although the doctrine of
economicduress (beingofveryrecentoriginbycommonlaw standards
standssomewhereinthemiddle(beingnotwithoutdifficultiesofitsown).

115. Ontheotherhand,thedoctrineofpromissoryestoppelstillcontains
pocketsofcontroversy.Oneissuethatarisesiswhetheritcanbeusedasa
sword(ie,asacauseofactioninandofitself)ormerelyasashield(ie,
merelyasadefence,which(itshouldbenoted)applies(dependingonthe
precisefacts)equallytoplaintiffsanddefendantsalike)..Totakeanother
example, the role of the concept of detriment may still need further
elaboration. Finally, the issue as to whether or not the doctrine of
promissoryestoppelisonlysuspensoryinoperationmayalsorequirefurther
consideration..

116Indeed,eveninthecontextofproprietaryestoppel,thelawhasnotbeen
static(see,forexample,theveryrecentHouseofLordsdecisionofCobbev
Yeomans Row Management Ltd [2008] 1 WLR 1752). Finally, the UK
Committeesproposaltotheeffectthatconsiderationshouldnotberequired
wherethepromiseconcernedisinwritingisalsonotfreefromdifficulties.
Allthishavingbeensaid,itisalmostinevitablethatnodoctrineisimmune
fromitsownspecificdifficulties although,fromarelativeperspective,the

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Chen-Wishart Formation & Enforceability 15-16

courts would be wise to utilise only those doctrines with relatively fewer
difficulties.

Apragmaticapproach?
117. Because so much academic ink has been spilt on the doctrine of
consideration over so very many decades (with no concrete action being
taken)andbecausethereis.suchadearthofcasesonthedoctrineitself,it
wouldappearthatanyproposedreformofthedoctrineismuchadoabout
nothing. Indeed, the doctrine of consideration is (notwithstanding the
numerouscritiquesofit)neverthelessstill(asalsonoted)anestablishedpart
ofnotonlytheSingaporelandscapeinparticularbutalsothecommonlaw
landscapeingeneral.Notsurprisingly,itisastandardtopicinallthecontract
textbooks.Inshort,itcannotbeignored.However,becausethedoctrineof
considerationdoescontaincertainbasicweaknesseswhichhavebeenpointed
out,inextenso,intherelevantlegalliterature,italmostcertainlyneedstobe
reformed. The basic difficulties and alternatives have been set out briefly
abovebutwillneedtobeconsideredinmuchgreaterdetailwhentheissue
nextcomessquarelybeforethiscourt.Onemajordifficultyliesinthefactthat
a legal mechanism must be maintained that will enable the courts to
effectivelyandpracticallyascertainwhichpromisesoughttobeenforceable.
Hence,evenifthedoctrineofconsiderationisabolished,analternative(or
alternatives)musttakeitsplace.Therethenarisesthequestionastowhether
ornotthealternativesthemselvesaresufficientlywellestablishedinorderthat
theymightfurnishtherequisitelegalguidancetothecourts.Inthisregard,itis
significanttonotethatthevariousalternativesbrieflymentionedabove are
(apartfromtherequirementofwriting)alreadyapartofSingaporelaw.

118. In the circumstances, maintenance of the status quo (viz, the

availabilityofboth(asomewhatdilute)doctrineofconsiderationaswell
as the alternative doctrines canvassed above) may well be the most
practical solutioninasmuchasitwillaffordthecourts arangeoflegal
options toachieveajustandfairresultinthecaseconcerned.However,
problemsoftheoreticalcoherencemayremainandarecertainlyintellectually
challenging(asthemanyperceptivepiecesandevenbooksandmonographs
clearlydemonstrate).Nevertheless,giventhelongpedigreeofthedoctrine,the
fact that no single doctrine is wholly devoid of difficulties, and (more
importantly)theneedforalegalmechanismtoascertainwhichpromisesthe

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Chen-Wishart Formation & Enforceability 15-16

courtswillenforce,thetheoreticaluntidinessmaywellbeacceptableinthe
light of the existing practical advantages.. However, this is obviously a
provisionalviewonlyastheissueofreformwasnotbeforethecourtinthe
presentappeal.

7.4 Replaceconsiderationwithanenlargeddoctrineofpromissory
estoppel

7.5 Considerationsignifiesanygoodreasonforenforcement
Atiyahin Essays in Contract (Clarendon Press, 1986) 179, at 18182:
When the courts found a sufficient reason for enforcing a promise they
enforced it; and when they found that for one reason or another it was
undesirable to enforce a promise, they did not enforce it. It seems highly
probable that when the courts first used the word consideration they
meant no more than that there was a reason for the enforcement of a
promise.
7.6 Retainbargainconsiderationwhilstrecognizingothergood
reasons(eachwithitsownremedyandvitiatingfactors)
Furtherreading:ChenWishartInDefenceofConsideration(2013)
OxfordCommonwealthLawJournal,209238