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8/18/2019 Formation and Enforcement (Offer and Acceptance) Handout15-16 (Mich)
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1
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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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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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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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
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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.! $re%ious dealing& custom& and reasonableness
May and Butcher v. R [1934] 2 KB 17
Hillas v. Arcos (1932) 147 LT 503h
Foley v. Classique Coaches [1934] 2 KB 1
Agreement to agree. Parties had an agreement for supply of petrol ‘at a price to
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be agreed by the parties in writing and from time to time’. Issue of
whether agreement to supply was binding despite failure to reach
agreement on price. Vendors argued that they had relied on the act that the
parties had acted on the basis of the agreement for 3 years. (Plus there
was an arbitration clause if they could not agree on price)Held: agreement was binding ‘in order to give effect to what both parties
intended the Court is justified in implying that in the absence of
agreement as to price a reasonable price must be paid, and if the parties
cannot agree as to what is a reasonable price then arbitration must take
place’.
Steyn LJ said in G Percy Trentham Ltd v. Archital Luxfer Ltd [1993] 1 Lloyd’s
Rep 25, 27 that where sufficient intention to be bound can be inferred
from reliance of the parties on the contract, it will be "difficult to submitthat the contract is void for vagueness or uncertainty. Specifically, the fact that
the transaction is executed makes it easier to imply a term resolving any
uncertainty, or, alternatively, it may make it possible to treat a matter not
finalized in negotiations as inessential”
Scammell and Nephew Ltd v. Ouston [1941] AC 251
Raffles v Wichelhaus (1864)
3.1.3 The workability of any agreed mechanism for ascertainment
Sudbrook Trading Estate Ltd v. Eggleton [1983] 1AC 444
Tan *eow +$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
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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.
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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).
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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
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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).
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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
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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
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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
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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)….
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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