Formation and Enforcement (Offer and Acceptance) Handout15-16 (Mich)

8/18/2019 Formation and Enforcement (Offer and Acceptance) Handout15-16 (Mich)

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NATIONAL UNIVERSITY OF SINGAPORE

Law of Contract2015-16

Professor Mindy Chen-Wishart

INTRODUCTION

1. Why do people make contracts?

2. What is contract law for?3. What is a contract?

(i) Promise.

(ii) Agreement.

(iii) Recognition by the law.

4. Competing values in contract law

Values identified with ‘classical’ contract

law: Freedom of contract.

Values identified with ‘modern’ contract

law: Limits on freedom of contract

1. Freedom and autonomy

2. Minimal legal intervention

3. Equality

4. Negotiated contracts

5. The assumed fairness of exchanges

6. Discrete contracts; self-interested

individualism

7. Literal interpretation

1. Worthwhile freedom and autonomy

2. Regulation of contracting

3. Inequality

4. Standard form contracts

5. Unfairness of exchange

6. Relational contracts; co-operation,

trust, altruism

7. Contextual interpretation


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2Chen-Wishart Formation & Enforceability 15-16

8. Certainty of rules

9. General law

8. Broad discretionary standards

9. Specialisation and differentiation

5. Why are contracts enforced? Some competing theories- eg

Promissory and autonomy theories "You should keep your promise.”

"You two have reached consensus.”

Reliance theory "You induced another to rely on your

undertaking to his detriment.”

Efficiency theory

(wealth maximisation)

"Everyone is better off if you keep your

bargain.”

FINDING AGREEMENT

The offer and acceptance approach

Three questions arise:

(i) The commitment question- whether a contract was concluded at

all between the parties?

(ii)The content question- what did the parties contract for?

(iii) The timing question- when were the parties locked into the

contract?

These questions are merged in the traditional ‘mirror image’ approach

(also referred to as the ‘offer and acceptance’ approach): a contract results

from an offer made by one party to another who accepts it.


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1. OFFER

Offer = a manifestation by the offeror (orally, in writing, or by conduct)

of a willingness to be bound by the terms proposed to the offeree (the

addressee), as soon as the offeree signifies acceptance of the terms.

1.1 Objectivity and mistaken offers

The objective test of the parties’ intentions

A party cannot enforce a contract if:

1. S/he knows of the other party’s mistake

Smith v Hughes [1871] 1 LR 6 QB 597

‘oats’ or ‘old oats’?

Facts:

Contract for the sale of oats by pf to df. Df refused to complete on the grounds

that contract had been for old oats, whereas the oats tendered by pf had been new

oats. Sample had been sent to df’s manager who offered 34s. a quarter (a very

high price for new oats, but on the other hand, oats were scarce at that time)

Issue of whether (1) pf had believed that df thought he was buying old oats, or (2)

pf believed df thought that he was buying oats which pf had promised were oldHolding: retrial

Case 1 is a mistake that df must be liable for; in case 2 he is not liable on the

grounds that the parties were at cross-purposes as to the terms of the contract

“on the sale of a specific article, unless there be a warranty making it part of the

bargain that it possesses some particular quality, the purchaser must take the

article he has bought though it does not possess that quality”

“even if the vendor was aware that the purchaser thought that the article

possessed that quality, and would not have entered into the contract unless he had

so thought, still the purchaser is bound, unless the vendor was guilty of somefraud or deceit… no legal obligation on the vendor to inform the purchaser that

he is under a mistake, not induced by the act of the vendor”

Objective test:

“How would a reasonable man in the buyer’s position understand the seller’s

offer?” –to buy old oats or just oats

Hartog v Colin & Shields [1939] 3 All ER 566‘per pound’ or ‘per piece’?


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Df was to sell 30,000 hare skins to pf but mistakenly quoted the price at ‘per

pound’ instead of ‘per piece’. (value was approx. 1/3 of normal price)

Held: for df

Pf not entitled to recover damages because they were clearly aware of the mistake

+ “the way in which Argentine hare skins are bought and sold is generally perpiece”

Pf was trying to take advantage of a known mistake.

Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 3 SLR 405

(Court of Appeal Singapore) at [39]-[40] per Yong Pung How CJ:

‘The existence of any contract must thus be culled from the written correspondence

and contemporaneous conduct of the parties at the material time.

The principles of law relating to the formation of contracts are clear. Indeed the task

of inferring an assent and of extracting the precise moment, if at all there was one, at

which a meeting of the minds between the parties may be said to have been reached is

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, the function of the court is to try as far as practical experience

allows, 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 objective. Thus, the language used by one party, whatever hisreal intention may be, is to be construed in the sense in which it would reasonably be

understood by the other.’

Chwee Kin Keong and Others v landmall.com Pte Ltd [2004] 2 SLR 594

at [1], [102], [103] & [144]

“they were fully conscious that an unfortunate and egregious mistake had indeed been

made by the df”

Pf’s acts (order placed in the ‘dead of night’ with ‘indecent haste’ and the email

exchanges between the pfs) showed that they were ‘clearly anxious to place their

orders before the df took steps to correct the error’.

VK Rajah JC: ‘In the early hours of the morning of 13 January 2003, six friends,

the plaintiffs, placed orders over the Internet for 1,606 sophisticated HP commercial

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

$66.00 on its websites. …

Who bears the risk of such mistakes? …The factors a court should consider in allocating the risk for the mistake include:


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(a) the need to observe the principle of upholding rather than destroying

contracts,

(b) the need to facilitate the transacting of electronic commerce, and

(c) the need to reach commercially sensible solutions while respecting

traditional principles applicable to instances of genuine error or mistake.

It is important that the law be perceived as embodying rationality and fairness while

respecting the commercial imperative of certainty. …

[T]he character of the mistake was such that any reasonable person … would have

had every reason to believe that a manifest error had occurred. The amounts ordered

and the hurried and hasty manner in which the orders were executed are of cardinal

importance. As the Channel News Asia report so succinctly summarised – they saw a

“great opportunity” and “grabbed it”.’

2. S/he has contributed to the other party's ‘mistake’ in making the offer(Scriven Bros v Hindley [1913] 3 KB 564), or

Pf was selling hemp and tow; df only wanted to buy hemp. Df’s manager

already bought the first 47 bales. When the 176 bales of tow were put up, df

bid for it thinking it was hemp (a very high price). Pf did not make a

distinction between the hemp and the tow. When df discovered their mistake

they refused to pay for it.

Held: seller not entitled to recover price of the tow from df

Seller was at fault in creating the mistake in the mind of the buyer

Contrast with Tamplin v. James

Df made a high bid (offer) to buy property from pf in the belief that two .

pieces of garden were included in the sale (based on childhood knowledge)

Had he looked at the plans he would have seen that the gardens were not

included in the description of the sale. Entirely df’s mistake.

Held: pf entitled to specific performance

“If a man makes a mistake of this kind without any reasonable excuse he

ought to be held to his bargain”

3. The agreement was tainted by latent ambiguity ( Raffles v Wichelhaus (1864)2 H & C 906)

So ambiguous that the parties cannot have said to have reached an agreement-

no contract formed

Judgement for the df


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1.2 Offers and invitations to treat

1.2.1 General principles

Harvey v. Facey (1893)

Pf sent a telegraph to df aski ng to buy a Bumper Hall Pen. Df replied “lowestcash price for BHP $900”. Pf in turn replied “we agree to buy”. Df did not reply.

Held:

No contract. Df’s first reply was merely an answer to pf’s question, and not an

offer. Thus pf’s last telegram was an offer, not an acceptance.

Storer v. Manchester City Council [1974] 1 WLR 1403

• 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 byDf, “I understand you wish to purchase your council house and enclose theagreement for sale. If you will sign the agreement and return it to me I willsend you the agreement signed on behalf of the corporation in exchange.”

• Pf did as instructed

• owever, there was a change of the city council before completion of the saleand the new council did not intend to sell the houses

• Pf suedeld

• ! contract was concluded

• Df"s instructions evinced an intention to be bound by the terms of the

agreement as soon as Pf accepted it #which he did$

•

%ew &ouncil could not halt the sale.

Gibson v. Manchester City Council [1978] 1 WLR] 520

Pf wanted to buy house from town council- involved filling out a detachable form

which asked the council to inform tenant of the price at which the council was

willing to sell the house. Df council replied that they “may be prepared to sell the

house” at a certain price, and asked the df to “complete the…application form”

and send it back in order to make a formal application. Pf completed it and sent it

back but left the purchase price blank. Council underwent a change in political

composition and no longer wanted to sell the house; claimed no contract had beenformed.

Held:

Df wins. The letter sent by the pf was not an offer because it said “may” + told pf

to make a formal application. Thus the council never accepted any offer to

purchase, and no contract was formed.

The general approach to making the distinction between offers and invitations to

treat is qualified by some relatively specific rules or conventions about the status

of communications in particular contexts. These conventions have largely


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replaced the search for the parties’ intentions in many common contracting

situations.

1.2.2 Displays and advertisements

Generally an invitation to negotiate, and not offer. (But not 100%)Ad !an "e an offer in t#e !onte$t of a unilateral !ontra!t.

Pharmaceutical Society of GB v. Boots Cash Chemists [1952] 2 QB 795

Pf brought an action against df for not having a registered pharmacist supervising

the sale of poisons. Pharmacist was simply not at cash desk, but was authorized

by df to prevent the sale of any drug. Pf argued that when the customer takes an

article and puts it in whatever receptacle they are carrying, that constitutes

acceptance, and thus the pharmacist would have no power to refuse the sale. (thus

in infringement of Pharmacy and Poisons Act)

Held:

Df wins.

Goods displayed on the shelf are not offers. The customer, having indicated the

articles which he needs, still must go to the shopkeeper or someone on his behalf,

who would accept that offer.

How convincing are the reasons given by the court?

Do you agree with the following decisions?

Partridge v Cittenden [1968] 1 WLR 1204

Df charged with offence of offering wild birds for sale (Protection of Birds Act 1954)

because he placed an ad for them in the newspaper.

Held: not guilty;

He had not offered the birds for sale; it was simply an invitation to negotiate.

Contrast:

Chapelton v. Barry UDC [1940] 1KB 532

Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256

Df offered in the newspaper a reward of 100l. for anyone who used the smoke

ball product according to instructions and still contracting influenza or cold. Pf

did so in reliance upon the ad and subsequently caught influenza.

Held:

Pf wins. The terms of the ad constituted an offer.

(Other issues:

Existence of consideration- benefit dfs gained as a result of the ads in the sales

produced; detriment of Mrs Carlill by using the smoke ball three times a day for

two weeks

Acceptance must be communicated to the party- not applicable because the terms

of the offer showed that the need for communication had been waived by the df )


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Chen-Wishart Formation & Enforceability 15-16

Lefkowitz v. Great Minneapolis Surplus Stores Inc

Pf put an ad in the newspaper for fur pieces. Df went to buy but was refused

because of a ‘house rule’ that the offer was only intended for women. Sued.

Held:Ad constituted an offer which could not be withdrawn. Did not allow for fur coat

because value was uncertain. Allowed for lapin stole because ad claimed it was

worth “$139.50” less the $1 price.

“while an advertiser has the right at any time before acceptance to modify his offer,

he does not have the right, after acceptance, to impose new or arbitrary conditions

not contained in the published offer”

1.2.3 Online shopping

Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594

(High Court in Singapore) at [93] upheld by the Court of Appeal in [2005] 1

SLR 502.

VK Rajah JC: ‘Basic principles of contract law continue to prevail in contracts made

on the internet. However, not all principles will or can apply in the same manner that

they apply to traditional paper-based and oral contracts. It is important not to forceinto a Procrustean bed principles that have to be modified or discarded when

considering novel aspects of the Internet.’

96…It is incumbent on the web merchant to protect himself, as he has both the means

to do so and knowledge relating to the availability of any product that is being

marketed. As most web merchants have automated software responses, they need to

ensure that such automated responses correctly reflect their intentions from an

objective perspective. Errors may incur wholly unexpected, and sometimes untoward,

consequences as these proceedings so amply demonstrate.’

&le!troni! 'rana!tion A!t (2010)

Formation and validity of contracts

11. —(1) …an offer and the acceptance of an offer may be expressed by

means of electronic communications.

Use of automated message systems for contract formation

15. A contract formed by the interaction of an automated message system


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Chen-Wishart Formation & Enforceability 15-16

and a natural person, or by the interaction of automated message systems, shall

not be denied validity or enforceability solely on the ground that no natural

person reviewed or intervened in each of the individual actions carried out by

the automated message systems or the resulting contract.

Invitation to make offer

14. A proposal to conclude a contract made through one or more electronic

communications which is not addressed to one or more specific parties, but is

generally accessible to parties making use of information systems, including a

proposal that makes use of interactive applications for the placement of orders

through such information systems, is to be considered as an invitation to make

offers, unless it clearly indicates the intention of the party making the proposal

to be bound in case of acceptance.

Error in electronic communications

16. —(1) Where a natural person makes an input error in an electronic

communication exchanged with the automated message system of another

party and the automated message system does not provide the person with an

opportunity to correct the error, that person, or the party on whose behalf that

person was acting, has the right to withdraw the portion of the electronic

communication in which the input error was made.

(2) Subsection (1) shall not apply unless the person, or the party on whose

behalf that person was acting —

(a) notifies the other party of the error as soon as possible after having learned

of the error and indicates that he made an error in the electronic

communication; and

(b) has not used or received any material benefit or value from the goods or

services, if any, received from the other party.

1.2.4 Automatic machines

Thornton v. Shoe Lane Parking Ltd [1971] 2QB 163.

(also under incorporation by notice) exemption clause was found inside

the car park.

Held: df had not taken reasonable steps to bring the clause to the attention

of the customer. Also the df by default was forced under the terms of the

clause since he had to enter the carpark to see the clause.

Pf wins. Clause did not hold.

1.2.5 Auctions

Advertisement- merely an invitation to treat


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Putting up item for sale- also an invitation to treat

Bid by the purchaser- offer

Fall of the hammer- acceptance

Sale to the highest bidder or ‘without reserve’- two contract analysis:

1. to hold the auction and accept the highest offer

2. the contract for the sale of the item

1.2.6 Request for tenders- Can often be counted as offers

Blackpool & Fylde Aero Club v Blackpool Borough Council [1990] 3 All

ER 25

Df invited tenders for a concession to operate pleasure flights from the local airport.

Invitation stated that “The council do not bind themselves to accept all or any part of

any tender. No tender which is received after the last date and time specified shall be

admitted for consideration”

Date stipulated was March 17 1983 noon. Club submitted on morning of March 17.

Normally checked each day at noon but this time it was not checked until the

following day 18 March. Council refused to consider the club’s tender on the ground

that it was late and concession awarded to another party. Later council discovered that

the club’s bid had in fact been submitted on time but too late to back own.Held: df liable for damages.

Invitation to offer considered, but if a party “submits a conforming tender before

the deadline he is entitled,… [by] contractual right,…that his tender will…be

opened and considered in conjunction with all other conforming tenders or at

least that his tender will be considered if others are.

- Issue not about whether the pf can have the concession, simply about their

right to have their tender considered.

- “Shorrock was…right to contend for no more than a contractual duty toconsider. I think it plain that the council’s invitation to tender was, to this

limited extent, an offer, and the club’s submission of a timely and conforming

tender an acceptance.”

- This particular invitation amounted to an offer to consider tenders submitted

on time. Not for all tenders. Court considered:

o Small number of interested parties addressed only

o Tender procedure was ‘clear, orderly and familiar’

o Outcome was consistend with the ‘assumptions of commercial parties’

o The club was the holder of the concession was therefore might be said

to have had a legitimate expectation of consideration for renewal


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The Queen in Right of Ontario v. Ron Engineering & Construction Eastern Ltd

Bidder discovered shortly after the bids had been opened that it had made a mistake in

formulating its bid. Sought to withdraw from the process and recover the deposit. The

deposit had been paid on the basis that it would be forfeited if the tender waswithdrawn or the tenderer refused to proceed with the contract.

Held: pf not entitled to recover deposit

Contract had been created, one of the terms being that bidders were not entitled to

recover deposit.

Two contract analysis:

1. contract to consider conforming tenders (preliminary contract)

2. contract with the successful tenderer

1.2.7 ‘Quotes’

The Barranduna [1985] 2 Lloyd’s Rep 419

Df sent telegram containing details about cost/duration of freight; merely

quotation and not offer

Merely an invitation to treat if not intending to give rise to binding legal

obligations

1.2.8 Unsolicited goods or services

Regulation 3(1) of the Consumer Protection (Fair Trading) (Opt-Out Practices)

Regulations 2009:

3 (1)Unless and until the consumer expressly acknowledges to the supplier in

writing his intention to accept and pay for the unsolicited goods or services, the

consumer may use, deal with or dispose of the goods or services as if they were an

unconditional gift to him from the supplier.

1.3 Termination of offer

1.3.1 Revocation by the offeror

Must be communicated to the offeree before the offeree’s acceptance

takes effect.

Revocation by a third party: Dickinson v. Dodds [1876] 2 Ch. D 463.

Dodds delivered offer to sell some houses. Before Dickinson accepted,


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another man called to say that the houses had been sold. Pf still tried to

accept the offer.

Held: Revocation of offer does not have to be from offeror; reliable 3 rd

party suffices. Buyer can longer accept.

1.3.2 Rejection by the offeree

1.3.3 Lapse of the offer

1.3.4 Death of the offeror or offeree

1.3.5 Change of circumstances?

Financings Ltd v Stimson 162* 1 +- 114

Dysart Timbers Limited v Roderick William Nielsen 200* / 43 Norwest Holdings Pte Ltd (in liqidation! v New"ort #ining Ltd 2010*

G 144

2. ACCEPTANCE

In bilateral contracts, an acceptance = 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 door is closed on the contract ‘room’; neither partycan get out; neither party can add to or subtract from the contents of the ‘room’.

Inland Revenue Commissioners v Fry [2001] STC 1715

A valid acceptance must:

(i) correspond with the offer,

(ii) be given in response to the offer (there must be a nexus or causal

connection between the acceptance and the offer),

(iii) be made by an appropriate mode, and

(iv) be communicated to the offeror (this fixes the time when the contract

is concluded, the terms are fixed, and withdrawal is impossible).

2.1 Correspondence of acceptance with offer

2.1.1 Counter-offer kills the original offer

Hyde v. Wrench (1840) 3 Beau. 334

Df offered to sell his farm to pf for $1000. Pf offered to buy it for $950 but the df

refused. Pf then wrote and agreed to pay $1000 but df never replied.

Held: No contract. Df wins. Counter-offer equals rejection of initial offer.


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

counteroffer)

Dfs wrote to pfs stating they were willing to sell iron to the pfs and stated that the

offer was open for a period of time. On the last day pfs telegraphed ‘Please wirewhether you would accept forty for delivery over two months, or if not, longest

limit you would give.’ Later that day df sold the iron to a 3 rd party and sent a

telegram to pf to inform. Before they sent the telegram pfs found a buyer for the

iron and sent a telegram to df in which they accepted the offer.

Held: Pf wins.

Pf’s 1st telegram was not a rejection, but a mere inquiry

2.1.2 Battle of formsIn ‘Contract Law: Fulfilling the Reasonable Expectations of Honest Men’

(1997) 113 LQR 433, Lord Steyn, writing extra judicially, explains (at 435):

Each party insists on contracting only on his own standard conditions. In the

meantime the work starts. Payments are made. Often it is a fiction to identify an offer

and acceptance. Yet reason tells us that neither party should be able to withdraw

unilaterally from the transaction. The reasonable expectations of the parties, albeit

that they are still in disagreement about minor details of the transaction, often demand

that the court must recognise that a contract has come into existence. The greater the

evidence of reliance, and the further along the road towards implementation the

transaction is, the greater the prospect that the court will find a contract made and do

its best, in accordance with the reasonable expectations of the parties, to spell out the

terms of the contract.

Brogden v. Metropolitan Railway Co (1876-77) LR 2App Cas 666

Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation (England) Ltd

[1979] 1 WLR 401

Why might the courts have wanted to reach the decisions they did?

Did the decisions flow from the mirror-image (offer-acceptance)

approach?

Pfs were suppliers of a machine. They quoted a price for the machine with

their own terms, including a price variation clause (for an increase in price if

there was an increase in costs). Df’s reply contained an order, subject to their

own terms that did not have the price variation clause and had different

delivery terms, as well as an acknowledgement slip to be signed. Pf left it

blank but wrote back in acknowledgement of the order and the revised


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delivery dates. “We return herewith duly completed your acknowledgement

of order form”.

Later on costs increased and pf invoked the price variation clause.

Held: Df won.

The acknowledgement was the decisive document. Makes it clear that thecontract was on the buyer’s terms and not the seller’s.

British Road Services Ltd v. Arthur Crutchley & Co Ltd

Battle of forms won by the one who ‘fires the last shot’; puts forward the

latest terms and conditions.

(But in some cases the battle is won by the man who gets the blow in first,

often if seller provides their own terms, and buyer later orders with their own

terms. ‘the buyer ought not to be allowed to take advantage of the differenceunless he draws it specifically to the attention of the seller’)

Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209, [2009]

All ER (D) 208 (Nov)

“an offer to buy containing the purchaser’s terms which is followed by an

acknowledgment of purchase containing the seller’s terms which is followed

by delivery will (other things being equal) result in a contract on the seller’s

terms”

‘It always depends on an assessment of what the parties must objectively be taken to

have intended. But where the facts are no more complicated than that A makes an

offer on its conditions and B accepts that offer on its conditions and, without more,

performance follows, it seems to me that the correct analysis is … the “traditional

offer and acceptance analysis”, ie that there is a contract on B’s conditions…. That

has the great merit of providing a degree of certainty which is both desirable and

necessary in order to promote effective commercial relationships.’

‘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

would dictate. But it is likely that a court will be slow to reach this conclusion…. it

will always be difficult to displace the traditional analysis, in a battle of the forms

case, unless it can be said there was a clear course of dealing between the parties.’

British Steel Corporation v Cleveland Bridge and Engineering Co Ltd

artie involved in negotiation for uly of teel !oonent. artie !oen!ed

erforan!e on agreeent even t#oug# t#ere a only a letter of intent8 and t#e

foral !ontra!t a never !on!luded.

eld9

o !ontra!t "e!aue letter of intent8 a too vague: no agreeent a ade oneential ter, in!luding ri!e


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oever, !lai in un;ut enri!#ent a alloed "e!aue (Goff uantu eruit.

2.2 Nexus (causal connection) between offer and acceptance

2.2.1 Cross-offers

Tinn v. Hoffman (1893) 29 LT 271

2.2.2 Rewards

R v. Clarke (1927) 40 CLR 227

Williams v. Carwardine (1833) 5 C & P 566Gibbons v. Proctor (1891) 4 LT 594

Is it possible to explain the different outcomes in these cases?

2.3 Method of acceptance

2.3.1 Mode of acceptance prescribed

Manchester Diocesan Council for Education v. Commercial and

General Investments Ltd [1970] 1 WLR 242

Acceptance communicated to the offeror by any other mode which is no lessadvantageous to him will conclude the contract.

A.k.a other modes of communication is fine as long as it does not

disadvantage the offeror

If an offeror intends that he shall be bound only if his offer is accepted in some

particular manner, it must be for him to make this clear.

Acceptance by silence

General rule9 ilen!e doe not aount to a!!etan!e ? t#i i to rote!t t#e offeree

fro t#e o"ligation to ta=e oitive te to re;e!t unanted offer.

Felthouse v. Bindley (1862) 11 CBNS 869

Pf (uncle) wanted to buy a horse from his nephew. After negotiations, wrote an

offer in the letter: “If I hear no more about him, I consider the horse mine at $30

15s”. Nephew did not reply. Df auctioneer accidentally sold the same horse at an

auction, even though nephew told him the horse had been sold. Pf brought claim

for conversion which rested upon whether a contract had been concluded from

him and the nephew’s correspondence.

Held: No contract; df wins.


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“Nothing had been done at that time to pass the property out of the nephew and

vest it in the pf” There had been no acceptance binding the nephew.

- (must have some positive act of acceptance)

2.4 Communication of acceptance

Two practical problems arise:

(i) Timing: When there is a time lag between the sending and the receiving of

the acceptance, should the offeror’s revocation or the offeree’s rejection

of the offer which is communicated in the intervening period be effective?

(ii) Failure of communication: Where the acceptance fails to reach the offeror

without either party’s fault, who bears the risk for this

miscommunication?

The answers to these questions have traditionally depended on whether the

method of communicating the acceptance is classified as instantaneous or postal.

2.4.1 Acceptance by post

(i) The postal acceptance rule

Adams v. Lindsell [1818] 1 B and Ald 681

General postal acceptance rule Household Fire & Carriage Accident Insurance Co Ltd v. Grant [1879] 4

Ex.D 216

PA rule applies even if letter goes astray

Byrne v. Van Tienhoven [1880] 5 CPD 344

Offer can only be revoked before offeree’s acceptance is in effect

(ii) Some odd results

The rule that a rejection is only effective when it is communicated to the

offeror can lead to unexpected conclusions when the postal acceptance

rule applies:

• Where an offeree posts his acceptance, then changes his mind and

notifies the offeror of this rejection by a speedier means such as a

telephone, the parties are still bound by the postal acceptance

arriving later.

• Where an offeree posts his rejection, then changes his mind and

posts his acceptance before his rejection letter arrives, he can bind

the offeror although the acceptance letter arrives after the rejection

letter.


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(iii) The postal acceptance rule does not always apply even if the post is used

Holwell Securities Ltd v. Hughes [1974] 1 All ER 161

Pf granted option to purchase land under contract with df, exercisable by notice

in writing to df at ‘any time within six months from the date hereof...’ Pf sent theletter but df never received it.

Issue is whether the option was exercised the moment the letter was sent, even if

the letter went astray and was never received by the df.

Held: df wins; no contract was formed because pf had failed to give the df notice

that they were exercising the option.

Postal rule not always applicable;

- the parties must have contemplated that the postal service would be used

in the acceptance

- parties can contract out of (express/implied) the postal rule thatacceptance takes place upon posting. What happened in Holwell; ruled

that the clause ‘notice in writing’ required notification or communication,

and posting the letter did not constitute ‘notice’

(iv) The justifications for the postal acceptance rule

(iii) How relevant is the postal acceptance today?

Holwell Secrities Ltd v. Hg$es 174* 1 All &- 161

2.4.2 Instantaneous’ or Two-way instantaneous

Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandels GmbH [1982] 1 All ER

293

Same issue as Entores; in the case of communication by telex, the acceptance is

effective when it is communicated to the offeror with the result that the contract is

concluded in the jurisdiction where the offeror is located.

Lord Wilberforce: the rule on instantaneous communications is:

“a sound rule, but not necessarily a universal.Since 1925 the use of telex communication has been greatly expanded, and

there are many variants on it. The senders and recipients may not be the

principals to the contemplated contract. They may the servants or agents

with limited authority. The message may not reach, or be intended to reach,

the designated recipient immediately: messages may be sent out of office

hours, or at night, with the intention, or on the assumption, that they will be

read at a later time. There may be some error or default at the recipient’s end

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. Nouniversal rule can cover all such cases; they must be resolved by reference to


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the intention of the parties by sound business practice and in some cases by a

judgement where the risks should lie….”

Entores v. Miles Far East Corp [1953] 2 QB 327

Pfs in London made an offer by telex, which dfs in Amsterdam accepted, also bytelex. 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

acceptance by telex- Amsterdam; if it was when the telex was received on the

pf’s machine- London)

Held: contract was formed when the communication of the acceptance was

received by the pfs in London

What is the legal position if:

•

a face-to-face oral acceptance is drowned out by a noisy aircraft flyingoverhead?

No contract

• the telephone goes ‘dead’ before the acceptance is completed?

No contract

• the offeror does not catch the clear and audible words of an acceptance or

the printer receiving a telex runs out of ink, but the offeror does not bother

to ask for the message to be repeated?

Yes contract (but if it is not of the fault of the offeror when he doesn’t

receive an acceptance properly, there is no contract, even if the senderreasonably believes it has got home when it has not)

(when by post: different from instantaneous contracts; acceptance is complete as

soon as the letter is put into the post box, and that is the place where the contract

is made)

2.4.3 One-way instantaneous

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

machines, text messaging and emails) that is neither two-way instantaneous norpostal suggest the need for a third category.

Electronic Transactions Act !"1"#

Time and place of despatch and receipt

13.

(2) '#e tie of receipt of an ele!troni! !ouni!ation i t#e tie #en t#e

ele!troni! !ouni!ation "e!oe !aa"le of "eing retrieved "y t#e addreee at

an ele!troni! addre deignated "y t#e addreee.

(3) '#e tie of re!eit of an ele!troni! !ouni!ation at an ele!troni! addre t#at#a not "een deignated "y t#e addreee i t#e tie #en t#e ele!troni!


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!ouni!ation "e!oe !aa"le of "eing retrieved "y t#e addreee at t#at

addre and t#e addreee "e!oe aware t#at t#e ele!troni! !ouni!ation #a

"een ent to t#at addre.

Can we extract a principle to apply in such cases fromTenax SS Co Ltd v. The Brimnes [1975] QB 929?

Where a message is send outside of office hours, acceptance is not considered

communicated until the office re-opens for business, or shortly thereafter

(context: withdrawal of a ship under a charterparty)

2.5 Unilateral contracts

Unilateral Bilateral

A’s promise in exchange for B’s act A’s promise in exchange for B’s

counter-promiseA’s offer accepted by B’s performance A’s offer accepted by B’s counter-

promise

B is not obliged to perform B is obliged to perform

Normally A cannot revoke once B has

started performance (unless risk lies

with B)

A can revoke offer any time before B’s

acceptance

2.5.1 Acceptance

Bilateral contracts are concluded by communication of the acceptance.Unilateral contracts are concluded by the performance of the stipulated act.

Carlill v. Carbolic Smoke Ball Co [1893] 1 QB 256

2.5.2 Revocation

Implied obligation by the offeror not to revoke the offer once the offeree has

embarked on the performance.

Errington v. Errington [1952] 1 KB 290

Dad bought house for son and daughter. Said if they paid off the mortgagethe 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: widow not entitled to an order for possession; Cannot revoke offer

after offeree has entered on performance of the act (as long as they do not

leave it incomplete/unperformed)

Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231 especially at

239, dicta applied locally in Dickson Trading (S) Pte Ltd v Transmarco

Ltd [1989] 2 MLJ 408 at 414


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But no such obligation implied in respect of estate agents: Luxor (Eastborne) Ltd

v. Cooper [1941] AC 108

And see Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd [1998] 205 FCA


21/38



22/38


2.6 Assessment of the offer-acceptance / mirror image approach

The advantages of the offer and acceptance approach

Criticisms of the offer and acceptance approach

Relevance of:(i) Respecting the parties' intentions

(ii) Certainty

(iii) Preserving some room to manoeuvre

(iv) Discouraging opportunism and encouraging fair negotiating

practices

(v) Protecting reliance or part-performance

(vi) Avoidance of unfair terms

2.7 Alternative approach to formation

Lord Denning in Gibson v. Manchester City Council (1978) at 523:

"[i]t is a mistake to think that all contracts can be analysed into the form of offer and

acceptance. I know in some textbooks it has been the custom to do so; but, as I

understand the law, there is no need to look for a strict offer and acceptance. You

should look at the correspondence as a whole and at the conduct of the parties and

see therefrom whether the parties have come to an agreement on everything that was

material” (Emphasis added).

Lord Denning in Butler v Ex-Cell-O Corporation at 404-5): ‘In many of thesecases our traditional analysis of offer, counter-offer, rejection, acceptance and so

forth is out of date.’ The ‘better way’ is for the courts to determine reasonable

compromises on the disputed terms if the parties are agreed on all material terms.

Even where the terms used by the parties were mutually contradictory, it should

be possible for a court to ‘scrap’ the terms and replace them by a ‘reasonable

implication’.

Lord Denning’s approach has not found favour with the House of Lords which

has, affirmed the offer and acceptance approach in Gibson v. Manchester CityCouncil ((1979) at 297).

@n Pro%ection Pte Ltd v T$e Tai Ping &nsrance 'o Ltd 2001* 1 -(-) 7, t#e

ourt of Aeal !ited it# aroval at 16* t#e folloing o"ervation of ord

enning - in Port Sdan 'otton 'o v ovindaswamy '$ettiar ) Sons 172* 2

loydC -e 5 at 109

... @ do not u!# li=e t#e analyi in t#e te$t:"oo= of in>uiring #et#er t#ere a an

offer and a!!etan!e, or a !ounter:offer, and o fort#. @ refer to e$aine t#e #ole

of t#e do!uent in t#e !ae and de!ide fro t#e #et#er t#e artie did rea!# anagreeent uon all aterial ter in u!# !ir!utan!e t#at t#e roer inferen!e i


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t#at t#ey agreed to "e "ound "y t#oe ter fro t#at tie onard.

3. CERTAINTY & COMPLETENESS

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

contract has been properly performed and, if so, how breach should be

remedied. Moreover, the nature and extent of the agreement’s uncertainty

may indicate that the parties have not yet committed to be bound.

Even if there is a 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 the ‘gap’ problem).

The judicial task is to draw the line between uncertainties that are:

• curable, by a process of judicial construction of the parties’ intentions

(the agreement is then enforceable); and

• incurable, where the agreement is unenforceable as a mere ‘agreement

to agree’.

3.1 Vagueness and incompleteness

The pro-enforcement policies

The courts’ essential task is to draw the line between:

• ‘construing’ a contract and ‘making’ a contract;

• upholding a bargain and not imposing a bargain on the parties.

3.1.1 Severance

If essential aspects of the transaction are agreed, a vague form of words can be

severed as meaningless and redundant and the rest of the agreement enforced.

Nicolene Ltd v. Simmonds [1953] 1QB 543

3.1.! $re%ious dealing& custom& and reasonableness

May and Butcher v. R [1934] 2 KB 17

Hillas v. Arcos (1932) 147 LT 503h

Foley v. Classique Coaches [1934] 2 KB 1

Agreement to agree. Parties had an agreement for supply of petrol ‘at a price to


24/38


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

whether agreement to supply was binding despite failure to reach

agreement on price. Vendors argued that they had relied on the act that the

parties had acted on the basis of the agreement for 3 years. (Plus there

was an arbitration clause if they could not agree on price)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

agreement as to price a reasonable price must be paid, and if the parties

cannot agree as to what is a reasonable price then arbitration must take

place’.

Steyn LJ said in G Percy Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyd’s

Rep 25, 27 that where sufficient intention to be bound can be inferred

from reliance of the parties on the contract, it will be "difficult to submitthat the contract is void for vagueness or uncertainty. Specifically, the fact that

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

finalized in negotiations as inessential”

Scammell and Nephew Ltd v. Ouston [1941] AC 251

Raffles v Wichelhaus (1864)

3.1.3 The workability of any agreed mechanism for ascertainment

Sudbrook Trading Estate Ltd v. Eggleton [1983] 1AC 444

Tan *eow +$oon v Tan *eow Tat 1* 2 -(-) 1

@n a !ontra!t for ale at evaluation, t#e !ourt !an dire!t an in>uiry to

a!ertain t#e ri!e not only #ere t#e artie fail to rovide t#e a!#inery, "ut alo #ere t#e a!#inery rovided #ad "ro=en don9 rovided of !oure

t#at on t#e true !ontru!tion of t#e !ontra!t, t#e agreed a!#inery a u"idiary

to t#e a!ertainent of t#e roer ri!e and a not of t#e een!e of !ontra!t.

'#e >uetion #et#er t#e re!ri"ed a!#inery a off t#e een!e of t#e

!ontra!t i a atter of !ontru!tion.8

3.1.4 Agreements to (or not to) negotiate in good faith

an agreement to negotiate on a particular matter with a view to

reaching agreement (‘lock-in’ agreements)?

An agreement not to negotiate with third parties over a particular

matter. (‘lock-out ’ agreements)


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Walford v. Miles [1992] 1 All ER 453

In ‘Promises to Negotiate in Good Faith’ (2003) 119 LQR 357, 363, Berg

suggests some content for a duty to negotiate in good faith - a party must:

• actively commence negotiations and participate in them;

• consider and put forward options;• not take advantage of the other’s known ignorance; and

• not withdraw from negotiations without giving a truthful reason, which

should not be wholly unreasonable (in the Wednesbury sense

( Associated Provincial Picture Houses v Wednesbury Corp (1948)),

and without giving the other party a reasonable chance to respond.

Petromec Inc v Petroleo Brasileiro SA Petrobras [2006] EWCA Civ 1038

United Group Rail Services v Rail Corporation Of New South Wales [2009]

NSWCA 177 the New South Wales Court of Appeal declined to follow

Walford v Miles. It enforced a clause requiring the parties to ‘meet and

undertake genuine and good faith negotiations with a view to resolving the

dispute or difference’

3.2 Conditional agreements: ‘subject to contract’

A-G v Humphreys Estate [1987] HKLR 427

‘[I]t is invariably a question of construction whether the execution of a further

contract is a condition or a term of the bargain or a mere expression of the

parties’ desire as to how the transaction already agreed should in fact proceed to

completion’

Teo Teo Lee v Ong Swee Lan [2002] 4 SLR 344, at [61]

The question is whether the stipulated step:

• is a precondition of the existence of the contract, so that one or both parties

retain the power to refrain from taking the stipulated step and prevent the

formation of the contract, or

• merely indicates the manner of performance of an already enforceable

contract, so that the parties’ expectations are protected even if one refuses

to take the next step.

Storer v. Manchester CC (as above)

RTS Fle,ible Systems Ltd v #olkerei -lois #ller #.H (2010)

Courts will not impose upon the parties a binding agreement which they have not

reached.


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

existence of a contract, it does not follow ‘from the fact that the work was performed

that the parties must have entered into a contract’.

3.3 Restitutionary award in the absence of a contract BSC v Cleveland [1984] 1 All ER 504; Ball 99 LQR 572

Regalian Properties Plc V London Docklands Development Corporation [1995]

1WLR 212.

4. INTENTION TO CREATE LEGAL RELATIONS

4.1 The requirement and its justification

Two strong presumptions that require clear evidence to rebut:

(i) parties do not intend to create legal relations in social and domestic

agreements; and

(ii) parties do intend to create legal relations in commercial agreements.

4.2 Family and social agreements

Jones v. Padavatton [1969] 1 WLR 328

Fleming v. Beeves [1994] 1 NZLR 385 at 389

Balfour v. Balfour [1919] 2 KB 571

Radmac$er v ranatino 2010* DE 42

T/ v TR 200* 2 -(-) 6

Choo Tiong Hin v Choo Hock Swee [1959] M.L.J. 67

De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and

Others [2003] 4 SLR 682 at [196]-[199]

Hadley v. Kemp [1999] EMLR 589

4.3 Commercial agreements

Edwards v. Skyways Ltd [1964] 1 WLR 349

Rose and Frank Co v. JR Crompton and Bros Ltd (1925)

Letters of Comfort/Letters of Intent

Kleinwort Benson Ltd v Malaysian Mining Corp Bhd [1989] 1 All ER 785

Petrosin Corp Pte Ltd v Clough Engineering Ltd [2005] SGHC 170


27/38


Foen!lature alone doe not a !ontra!t a=e or una=eC. '#e general rule

t#at letter of intent or oe of t#e do!uent do not !ontitute !ontra!t i not

an iuta"le one everyt#ing deend on t#e fa!t at #and.


28/38


5. CONSIDERATION

5.1The policies for and against the enforcement of promises

5.2The basic idea and its justification

5.2 The requirement of nexus

5.2.1 Consideration must move from the claimant

If A makes a contract to give B a car and B will pay C $20,000, can C

sue B for the amount if A performs but not B?

See later section on privity

5.2.2 Consideration must be in return for the promise

Combe v Combe [1951] 2 KB 215

Alliance Bank v Broom (1864) 2 Dr & Sim 289

5.2.3 Past consideration is not good consideration

In re McArdle, Decd [1951] Ch. 669

Pao On v Lau Yiu Long [1980] A.C. 614

Sim Tony v Lim Ah Gee [1995] 2 S.L.R. 466

5.3The requirement of ‘value’

5.3.1 The definitions of valuable consideration

Currie v Misa (1875) LR 10 EX 153:

‘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.’


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5.3.2 Consideration need not be adequate but must be valuable inthe eye of the law

Nominal consideration: Chappell & Co v Nestle [1960] AC 87

Intangible consideration:

White v Bluett (1853) 23 LJ Ex 36

Hamer v Sidway (1891) 124 NY 538

Ward v Byham [1956] 1 WLR 496

5.3.3 Motive is not consideration

Thomas v Thomas (1842) 2 QB 851

5.3.4 Compromise and forbearance to sue

Where X ’s claim is valid in law, his compromise or forbearance is

clearly good consideration for Y ’s reciprocal promise.

Where X ’s claim is doubtful in law, his compromise or forbearance is

still good consideration ( Haigh v Brooks).

The same applies if X ’s claim is clearly invalid in law but made in

good faith and on reasonable grounds (Cook v Wright (1861) at 569).


30/38


If X knows that his claim is invalid , compromising or forbearing from

suing on it is not valid consideration. Wade v Simeon (1846): ‘

5.4 Pre-existing duties

5.4.1. Pre-existing duties imposed by public law

Glasbrook Bros. v Glamorgan C.C. [1925] A.C. 270

Ward v Byham

5.4.2. Pre-existing duties owed to a third party

Shadwell v Shadwell (1860) 9 CB (NS) 159

Pao On v Lau Yiu Long [1980] A.C. 614

5.4.3. Pre-existing duties owed to the other party

5.4.3.1. ‘The same for more’

Stilk v Myrick (1809) 2 Camp. 317

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 Q.B.1

-ttrill v0 Dresdner +leinwort Ltd 2013* &+A iv 34, 2013* 3 All

&- 607, 5*

Sea-Land Service Inc v Cheong Fook Chee Vincent [1994] 3 SLR 631

Bob Teo Seng Kee v Arianecorp Limited [2008] SGHC 81

Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1

SLR 853, [30]: The combined effect of ‘ practical benefit’ and the

“well-established proposition that consideration must be sufficient but

need not be adequate… is that…it will, absent exceptional

circumstances, be all too easy to locate some element of consideration

between contracting parties. This would render the requirement of

consideration otiose or redundant, at least for the most part.”

Brian Coote ‘Consideration and Benefit in Fact and in Law (1990) 3 JCL 23

JW Carter, Andrew Phang and Jill Poole ‘Reactions to Williams v Roffey’ (1995) 8

JCL 248

M Chen-Wishart, “A Bird in the Hand: Consideration and One-Sided Contract

Modifications” in Contract Formation and Parties, AS Burrows and E Peel

(eds) (OUP, 2010),

5.4.3.2. ‘Less for the same’: part performance

Foakes v Beer (1884) 9 App. Cas. 605

In re Selectmove [1995] 1 WLR 474

D & C Builders v Rees [1966] 2 QB 617 Lord Denning MR held, at p

625: “Where there has been a true accord, under which the creditor


31/38


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.”

6. PROMISSORY ESTOPPEL

Hughes v Metropolitan Railway Company (1877) 2 App. Cas. 439 per Lord

Cairns LC:

‘…if parties who have entered into definite and distinct terms involving certain legal

results…afterwards by their own act or with their own consent enter upon a course of

negotiation 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 otherwise 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] 1 K.B.

130

The requirements of promissory estoppel

A. Promissory estoppel B. Consideration

(1) Clear promise Clear promise

(2) Reliance (or change of position) bypromisee; need not be requested but must be

foreseeable by or known to promisor.

Promisee must have given consideration which may consist of requested reliance.

Promise enforceable without reliance.

(3) Inequitable to resile: by reference to (1),

(2) above and subsequent events.

Irrelevant short of vitiating factors (see

Part II) with high thresholds.

(4) Suspensory and not extinctive: ie not

necessarily given full expectation; the

promisor can resume his original rights on

Enforcement of full expectation (ie can be

extinctive).


32/38


giving reasonable notice to the extent that the

promisee can resume his original position.

(5) Shield not sword : only operates as a

defence to enforce promises to accept less.

Cannot create or add new rights.

**Is reform desirable to

allow the creation or

addition of new rights?

Shield and sword: can operate as defence

to enforce promises to accept less and to

create or add new rights.

6.1 Clear promise

Wood$ose -' Ltd v Nigerian Prodce Ltd 172* A 741

6.2 Reliance: change of position

Must the representee have acted on the promise, and if so, to what extent?

The Post Chaser [1982] 1 All E.R. 19, 25-27

Alan v El Nasr [1972] 2 WLR 800

-bdl 1alil bin -$mad bin Talib and ot$ers v - Formation 'onstrction Pte

Ltd 2006* 4 - 77

Lam '$i +in David v Detsc$e .ank - 2010* 2 - 6, 55*

teven #ong


33/38


6.3 Inequitable to go back on the promise

D & C Builders v Rees [1966] 2 QB 617

6.4 The extent of enforcement: suspensory or extinctive?

Ajayi v Briscoe [1964] 1 W.L.R. 1326 per Lord Hodson:‘The principle … is that 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 (1) that the other

party has altered his position, (2) that 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, (3) the promise only becomes final

and irrevocable if the promisee cannot resume his position.’

6.5 Only operates defensively: ‘shield not a sword’

can enforce promises of the ‘same for less’ type;

• cannot enforce promises of the ‘more for the same’ type; and,

• cannot create new legal rights independent of the parties’ pre-existing legal

relationship.

Combe v Combe [1951] 2 K.B. 215

Long Foo Yit & Anor v Mobil Oil Singapore Pte Ltd [1997] SGHC 323

at [50] (High Court in Singapore) per Judith Prakash J:

‘The requirements for obtaining relief under this doctrine are that there must be a

legal relationship giving rise to certain rights and duties between the parties; a

promise or representation by one party that he will not enforce against the other his

strict legal rights arising out of that relationship; an intention on the part of the first

party that the other will rely on the representation; reliance by the latter party; and,

finally that it is inequitable for the first party to go back on his promise.’

'rabb v -rn D0'0 17* # 17, rorietary etoel

-malgamated &nvestment v Te,as 'ommerce &nt0 .ank 11* 3 All &- 577

The court explained the nature of an estoppel by convention.

"If parties to a contract, by their course of dealing, put a particular

interpretation on the terms of it -- on the faith of which each of them -- to the

knowledge of the other -- acts and conducts their mutual affairs -- they are

bound by that interpretation just as much as if they had written it down as

being a variation of the contract."

Lord Denning MR describes all kinds of estoppels in terms of:

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


34/38


transaction proceed on the basis of an underlying assumption – either of fact

or of law – whether due to misrepresentation or mistake makes no difference

– on which they have conducted the dealings between them – neither of them

will be allowed to go back on that assumption when it would be unfair or

unjust to allow him to do so. If one of them does seek to go back on it, the

courts will give the other such remedy as the equity of the case demands."

(U.S.) Restatement, Second, Contracts, s.90: ‘(1) A promise which the

promisor should reasonably expect to induce action or forbearance on the part

of the promise … and which does induce such action or forbearance is binding

if injustice can be avoided only by enforcement of the promise. The remedy

granted for breach may be limited as justice requires … .’

Walton’s Stores v Maher (1988) 164 C.L.R. 387

Baird Textile Holdings Ltd v Marks and Spencer Plc [2002] 1 All ER

(Comm) 737

7. CONSIDERATION: AN ASSESSMENT

Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1 SLR 853 at

[28]-[30] (High Court in Singapore) per Andrew Phang Boon Leong J: ‘As a

matter of general observation, it should be noted that the doctrine of consideration

itself, although long established, has come under increasing fire – especially in

recent years.

7.1 Replace consideration completely with a test of intention

The doctrine of consideration filters out one-sided transactions. Should they beenforced? See Melvin Eisenberg ‘The World of Contract and the World of Gift’

(1997) 85 California Law Review 821

Chwee Kin Keong and Others v Digilandmall.com Pte Ltd [2004] 2 SLR 594 at

[139] (High Court in Singapore) per VK Rajah JC: ‘The modern approach in

contract law requires very little to find the existence of consideration. Indeed, in

difficult cases, the courts in several common law jurisdictions have gone to

extraordinary lengths to conjure up consideration. … No modern authority was

cited to me suggesting an intended commercial transaction of this nature could


35/38


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.

7.2 Replace consideration in contract modifications with a test of

intention

In Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23, at [93] Baragwanath J of

the New Zealand Court of Appeal said that: “[t]he importance of consideration is

as a valuable signal that the parties intend to be bound by their agreement, rather

than an end in itself.”

Teat v Willcocks 2013* /A 162

7.3 Replace consideration with vitiating factors: duress, undue

influence, unconscionable bargains

In Gay Choon Ing v Loh Sze Ti Terence Peter [2009] SGCA 3,

(See Chen-Wishart “Consideration and Serious Intention” [2009] SJLS 434)

Andrew Phang Boon Leong JA of the Singapore Court of Appeal ultimately

concludes that pragmatism demands the maintenance of the status quo for the time

being. However, he raises the spectre of its replacement with the doctrines of

economic duress, undue influence, unconscionability and promissory estoppel.

Possible alternatives

The alternatives stated

111. It is axiomatic, in our view, that if the doctrine of consideration is indeed

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

estoppel…and the doctrine of economic duress….

112. Indeed, given the at least possible linkages between economic duress on

the one hand and undue influence and unconscionability on the other…there is

no reason in principle why undue influence and unconscionability ought not

also to be potential alternatives (although unconscionability is still a fledgling

doctrine in the Commonwealth law of contract)….


36/38


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

influence and unconscionability appear to be more clearly suited not only to

modern commercial circumstances but also (more importantly) to situations

where there has been possible ‘extortion’. There is also the proposal of the UK

Committee to the effect that consideration is merely evidence of a seriousintention to contract, with the result that it should not be required where the

promise itself is in writing.

The difficulties

114. We pause to observe, if only in the briefest of fashions, that the possible

alternatives to the doctrine of consideration set out so very cursorily in the

preceding paragraphs are themselves subject to their own specific difficulties.

For example, the fledgling nature of the doctrine of unconscionability….The

doctrine of undue influence, however, has been relatively well established in

the landscape of the common law of contract, although the doctrine of

economic duress (being of very recent origin by common law standards…

stands somewhere in the ‘middle’ (being not without difficulties of its own).

115. On the other hand, the doctrine of promissory estoppel still contains

pockets of controversy. One issue that arises is whether it can be used as a

‘sword’ (ie, as a cause of action in and of itself) or merely as a ‘shield’ ( ie,

merely as a defence, which (it should be noted) applies (depending on the

precise facts) equally to plaintiffs and defendants alike)….. To take another

example, the role of the concept of detriment may still need further

elaboration…. Finally, the issue as to whether or not the doctrine of

promissory estoppel is only suspensory in operation may also require further

consideration…..

116 Indeed, even in the context of proprietary estoppel, the law has not been

static (see, for example, the very recent House of Lords decision of Cobbe v

Yeoman’s Row Management Ltd [2008] 1 WLR 1752). Finally, the UK

Committee’s proposal to the effect that consideration should not be required

where the promise concerned is in writing is also not free from difficulties….

All this having been said, it is almost inevitable that no doctrine is immune

from its own specific difficulties although, from a relative perspective, the


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

difficulties.

A pragmatic approach?

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) and because there is….such a dearth of cases on the doctrine itself, it

would appear that any proposed reform of the doctrine is much ado about

nothing. Indeed, the doctrine of consideration is (notwithstanding the

numerous critiques of it) nevertheless still (as also noted) an established part

of not only the Singapore landscape in particular but also the common law

landscape in general. Not surprisingly, it is a standard topic in all the contract

textbooks. In short, it cannot be ignored. However, because the doctrine of

consideration does contain certain basic weaknesses which have been pointed

out, in extenso, in the relevant legal literature, it almost certainly needs to be

reformed. The basic difficulties and alternatives have been set out briefly

above but will need to be considered in much greater detail when the issue

next comes squarely before this court. One major difficulty lies in the fact that

a legal mechanism must be maintained that will enable the courts to

effectively and practically ascertain which promises ought to be enforceable.

Hence, even if the doctrine of consideration is abolished, an alternative (or

alternatives) must take its place. There then arises the question as to whether

or not the alternatives themselves are sufficiently well established in order that

they might furnish the requisite legal guidance to the courts. In this regard, it is

significant to note that the various alternatives briefly mentioned above are

(apart from the requirement of writing) already a part of Singapore law .

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

availability of both (a somewhat dilute) doctrine of consideration as well

as the alternative doctrines canvassed above) may well be the most

practical solution inasmuch as it will afford the courts a range of legal

options to achieve a just and fair result in the case concerned . However,

problems of theoretical coherence may remain and are certainly intellectually

challenging (as the many perceptive pieces and even books and monographs

clearly demonstrate). Nevertheless, given the long pedigree of the doctrine, the

fact that no single doctrine is wholly devoid of difficulties, and (moreimportantly) the need for a legal mechanism to ascertain which promises the


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courts will enforce, the ‘theoretical untidiness’ may well be acceptable in the

light of the existing practical advantages….. However, this is obviously a

provisional view only as the issue of reform was not before the court in the

present appeal.

7.4 Replace consideration with an enlarged doctrine of promissory

estoppel

7.5 Consideration signifies any ‘good reason for enforcement’

Atiyah in 2ssays in 'ontract (larendon re, 16) 17, at 11?29

+#en t#e !ourt found a uffi!ient reaon for enfor!ing a roie t#ey

enfor!ed it and #en t#ey found t#at for one reaon or anot#er it a

undeira"le to enfor!e a roie, t#ey did not enfor!e it. @t ee #ig#ly

ro"a"le t#at #en t#e !ourt firt ued t#e ord F!oniderationC t#ey

eant no ore t#an t#at t#ere a a FreaonC for t#e enfor!eent of a

roie.

7.6 Retain bargain consideration whilst recognizing other good

reasons (each with its own remedy and vitiating factors)

Further reading: Chen-Wishart “In Defence of Consideration” (2013)

Oxford Commonwealth Law Journal, 209-238

Formation and Enforcement (Offer and Acceptance) Handout15-16 (Mich)

Documents

Transcript of Formation and Enforcement (Offer and Acceptance) Handout15-16 (Mich)