Consideration (Mugger Notes)

Problems of Definition :
Many attempts made to define it, yet still no one definite illustration. Lord Mansfields 2 Approaches towards furnishing Consideration : (i) Evidence of parties intention to be bound (not vital criterion of contract) : If such an intention could be ascertained by other means, such as the presence of writing, consideration was unnecessary. (approach was rejected, thus 2nd Approach) (ii) Moral obligation : Whenever a man is under a moral duty to pay money and subsequently promises to pay, the pre-existing moral duty furnishes consideration for the promise. In Eastwood and Kenyon (1840), Lord Denman pointed out that moral duty approach would lead to the virtual annihilation of consideration. To give a promise was to accept a moral obligation to perform it. The 19th Century proposed the :

(i) Anti-thesis of Benefit and Detriment Approach

P to prove either that he had conferred a benefit upon the D in return for which the Ds promise was given or that he himself had incurred a detriment for which the promise was to compensate. Problems : - Detriment more appropriate to describe tortious situation than contractual one. - Approach assumes promises are binding, which is precisely what it is sought to prove. - Has to be understood in a highly technical sense. This approach was followed by :

(ii) Language of Purchase and Sale

P must show that he has bought Ds promise either by doing some act in return for it, or by offering a counter-promise. Advantages : - Easier to understand. - Corresponds more happily to normal exchange of promises. - Emphasizes commercial character of Common Law contract. Problems : - When attempting to engage in practical application of definition, one will often be thrown back to Benefit-Detriment Analysis.

1. Introduction

Theoretical Definition :
A valuable consideration in the sense of the law, may consist either in same right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. --- [Currie v Misa (1875)] Involves the notion of reciprocity or bargain (mutuality) in a contract. Only agreements supported by Consideration are enforceable. Serves to exclude : Gratuitous promises promises for no return at all. Unrequested detriment eg. decision to buy a car after being promised a sum of money. The doctrine is not applicable to contracts under seal, their enforceability is derived by virtue of their form.

2. Definition
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A. Benefit-Detriment Analysis

Either, that the promisee has conferred a benefit on the promisor in return for which the promisor gave his promise; or That the promisee has himself incurred a detriment for which the promisors promise was to compensate. NB : Normally, both are the same things seen from different points of view. However, situations exist where one without the other can arise. Eg. In Ward v Byham (1956) (BBF 103), promise to pay you for what you were already willing (compelled) to do keep child well looked after and happy no detriment to promisee but (practical) benefit to promisor. Eg. Promise to pay you to give up smoking no benefit to promisor but detriment to promisee (have to give up smoking).

Bolton v Madden
Criticisms : Hazy distinction between factual and legal benefit/detriment. Cf. Williams v Roffey Bros (1990) and Re Selectmove (1995) (BBF 135). Tortious connotations detriment suggests tortious focus on damage in reliance upon undertaking as opposed to contractual focus on agreement. Practically inappropriate to speak of detriment or benefit to only one party as both parties enter into a contract expecting to benefit. Courts sometimes try to fit case facts artificially into benefit-detriment analysis with confusing results.

Dunton v Dunton

B. Purchase and Sale Analysis

An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable. Easier to understand. Corresponds more accurately to the normal exchange of promises. Emphasises the commercial character of the English contract. NB : While Phang has supported the purchase and sale analysis, Treitel has condemned it.

3. General Principles
A. Past Consideration is No Consideration
Where a promise comes after an act and is independent of it.

Roscorla v Thomas (1842) 3 QB 234 (Phang 141)

Facts : Defendant offered a horse for sale. Plaintiff bought horse and Defendant claimed that it was sound and free of vice. Plaintiff later sued for breach of this promise. Held : Court held that : (1) The fact of the sale did not itself imply a warranty that the horse was healthy; and (2) The promise was made after the sale and was unsupported by fresh Consideration ie. Consideration was past.

i)

Exceptions to the Past Consideration Rule

Lampleigh v Brathwait (1615) Hob 105 (Phang 141)

(Significance : Consideration would not be past if the services were originally performed at the Defendants request.) Facts : Defendant asked Plaintiff to do all he could to get a pardon for the Defendants crime of murder. Plaintiff journeyed to London and back repeatedly at his own expense. Defendant later promised him 100 for his
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trouble. Plaintiff sued in assumpsit when Defendant failed to pay. Past Consideration, inter alia was argued by the Defendant. Held : Court held that Plaintiffs services had been procured by the Defendants previous request and hence this was an exception to the Rule of Past Consideration. The revised edition of the test in Lampleigh v Brathwait was adopted in :

Re Caseys Patents, Steward v Casey (1892) 1 Ch 104 (CA, England) (Phang 142)
[Significance : Requirements of New Rule (i) Plaintiffs services rendered at Defendants request; (ii) both parties must have assumed throughout their negotiations that their services would ultimately be paid for; (iii) Services performed by way of business, not as office of friendship, ie. legally enforceable.] Facts : A and B, joint owners of certain patent rights, wrote to C agreeing to give him 1/3 share of the patents for Cs services to them in working the patents. Held : CA, in a restatement of Lampleigh v Brathwait (1615), refused to accept the argument that the Consideration was past. Modern restatement of the exception to the rule of past consideration can be found in the following case :

*Pao On v Lau Yiu Long (1980) AC 614 (Privy Council, HK) (Phang 142)
Lord Scarman noted that : An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. (i) The act must have been done at the promisors request (ie. part of the same transaction). (ii) The parties must have understood that the act was to be remunerated further by a payment or the conferment of some other benefit. (iii) Payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance.

B. Consideration must Move from the Promisee

Consideration from a 3rd party is no consideration Privity of Contract Doctrine eg. I will pay you 10 if A washes my car. NB : I will pay you 10 if you get A to wash my car is good consideration. The joint promisee doctrine is an exception to this principle.

Coulls v Bagots Executor and Trustee Co Ltd (1967) ALR 385 (High Court, Australia) (Phang 149)
Facts : Company given right to quarry land for royalty to be paid to both husband and wife. Husband died and his executors asked if wife should continue to receive royalties even though no consideration for the contract moved from her personally. Held : Husband and wife were joint promisees. The rule should be restated in that consideration must move either from a single promisee, or from one of a number of joint promisees. Thus, since the promise was made to them collectively, hence consideration need not move from them separately as long as it was provided by them as a pair. This case has been criticised by Brian Coote in The Cambridge Law Journal (1978) CLJ 301, where he states that : Reality remains that Plaintiff (wife) had herself provided no Consideration.
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The reasoning goes against the HLs decision in Dunlop (1915) where it is essential to the promisees right to enforce the contract that firstly, he is a party to the contract, and secondly, that Consideration moves from him. However : Consideration in Bilateral Contracts is the promise to pay and not payment itself. Parties to a contract are those who provide Consideration and in the case in question, the wife would not have been excluded as a party because she did not provide the quarry. The wife would still be a party to the contract because her promise to the company would have been her accountability in law had her husband defaulted.

C. Consideration must be Sufficient

Courts will not look at adequacy of consideration, ie. no measure of comparative values. This implies that nominal consideration is sufficient to make a gratuitous promise binding. (Deduce sufficiency of Consideration by analysing situations where there is Legal Insufficiency.) The promise must have been procured by the offer of some return capable of expression in terms of value (ie. natural affection or sentiment is excluded).

Chappell & Co Ltd v Nestle Co Ltd (1960) AC 87, (1959) 2 All ER 701
(Significance : Consideration need not be adequate, but must be sufficient.)

Thomas v Thomas (1842) 2 QB 851 (Phang 154)

(Significance : Consideration need not be adequate, but must be sufficient.) Facts : Plaintiffs husband wished that should she survive him, she should have the use of the house. Upon his death, the Defendant, his executor agreed to allow her the use of the house because of her husbands wishes and on the payment by her of 1 per year as Consideration. Held : Court rejected the 1st reason stating that motive was not the same thing with consideration, but accepted the 2nd ground, refusing to be moved by its inadequacy. Where no detriment to the promisee and no benefit to the promisor exists, no consideration can be present.

White v Bluett (1853) 23 LJ Ex 36 (Phang 153)

(Significance : Consideration must be something capable of expression in terms of value.) Facts : Parent made a promise to induce his son to refrain from boring him with complaints. Held : Court was of the opinion that the return to the promisor must have been something capable of expression in terms of value and held that the essential elements of a bargain (ie. benefit or detriment) are lacking. NB : Decision was criticised on 2 fronts : (i) Practical Benefit to father was ignored. (ii) Son did act to his own detriment in refraining from complaining. Nugatory promises with terms left entirely to the discretion of the promisor do not constitute sufficient consideration, eg. I will pay you if I feel like it. Forbearance can be good consideration if it is expressly/impliedly requested by the other party otherwise it is only unrequested detriment. NB : Sufficiency is more clearly defined when opposed to the concept of legal insufficiency where 3 main contexts can arise :

i)

Where a Public Duty is imposed upon the promisee by Law

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The promise is incurring no extra detriment and the promisor is gaining no extra benefit than he is legally entitled to. This is generally not valid consideration unless something extra (over and above the legal requirements of the promisee) is done. In the light of the 2nd context, this position is taken probably as a policy decision so as not to encourage corruption and extortion.

Ward v Byham (1956) 2 All ER 318 (CA, England) (Phang 162)

Facts : Man turned mother of his child out of his house. She asked for the child and he agreed to pay 1 a week to the childs maintenance provided that she could prove that the child was well looked after and happy, and that the child could choose whether she wanted to live with her. After the mother remarried, he stopped payment. She sued for breach of contract. He pleaded absence of Consideration since the mother of an illegitimate child was bound to maintain it and she was therefore doing no more than her statutory duty. Held : She had provided good consideration since by having to meet his requirements, she was doing more than her statutory duty. Denning LJ went further saying that a promise to perform an existing duty should still be regarded as good consideration since it is a benefit to whom the promise is given.

*Glassbrook Brothers v Glamorgan County Council (1925) AC 270 (House of Lords) (Phang 161)
Facts : Police believed it sufficient to provide a mobile force to protect a coal mine during a strike. Manager requested for a stationary guard and agreed to pay for it. Police sued when they were not paid, and manager pleaded lack of consideration. Held : HL narrowly held (3 to 2) that, while the police were required to provide protection, they could choose the form and type of protection necessary. Since the manager had requested something over and above what the police had thought necessary, there was consideration for the reward.

Harris v Sheffield United Football Club Ltd (1988) QB 77 (CA, England) (Phang 162)
Facts : Defendant argued that based on the preceding case, they were not obliged to pay for the large police presence on match days because this was necessary given the size and behaviour of the crowd. Held : CA distinguished Glassbrook Brothers (1925) on grounds that in that case, neither party (manager nor police), could call off the strike while in the present case, Defendants had voluntarily chosen to fix match days when a large crowd could attend such as on Saturday afternoons and it was this action of the Defendants that necessitated the large police force and therefore, the police were entitled to be paid. NB : The desire to prevent corruption and extortion could be better dealt with in the emerging Doctrine of Economic Duress. This greatly reduces the rationale behind insufficiency of consideration in this context.
ii)

Where the Promisee owes an Existing Contractual Duty to 3rd Party

Performance or promise to perform such a duty is valid consideration. By accepting the 2nd promise, the promisee opens himself to 2 possible actions for breach of contract and thus, there is a new detriment to him. By performing the act, the promisee may have incurred no extra detriment, but the promisor has gained a benefit.

Shadwell v Shadwell (1860) 9 CBNS 159 (Phang 194)

Facts : Plaintiff, who was already engaged to marry, received a letter from his uncle stating that upon his marriage, his uncle would provide him with an annual sum until his earnings rose above a certain level. Plaintiffs earning capacity never rose above that level, and the uncle did not always pay the annual sum. After uncles death, Plaintiff sued to recover the money from his uncles executors. Defendants pleaded that there was no consideration as the Plaintiff was already bound to marry (Contractual duty to 3rd party).
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Held : There was detriment to the Plaintiff in that he could have made financial reliance on the uncles promise, as the uncle had intended and there was benefit to the uncle in that the marriage was an object of interest with a near relative.

*New Zealand Shipping Co v AM Satterthwaite & Co, The Eurymedon (1975) AC 154 (PC) (Phang 196)
Facts : Suffice it to say here that the Plaintiff offered to exempt liability for damage to goods if the Defendant would unload Plaintiffs goods from ship, which the Defendant was already bound to do. Held : The Defendants act of unloading the ship was good consideration. NB : This point was followed in the PC case of *Pao On v Lau Yiu Long (1980) and has in turn been followed locally in SSAB Oxelosund AB v Xendral Trading Pte Ltd (1992) 1 SLR (HC, Singapore) (Phang 196).

iii)

Where the Promisee owes an Existing Contractual Duty to the Same Party
This is actually a variation of an existing contract. Variation of an existing contract must be supported by fresh consideration.

NB : Normally, variations of contracts are supported by new consideration eg. Contract to supply apples. Supplier now says that he has no apples, but promises to supply oranges for a higher price. This context deals with situations where there is no change in the required act or where there is payment of a lesser sum in settlement of a debt. Historically, this does not provide valid consideration. This can take the form of 2 situations : Firstly, either where the promisor agrees to Pay

More for the Same Act :

*Stilk v Myrick (1809) 2 Camp 317 (Phang 163)

Facts : A sailor sued on the Captains promise that the crew would receive extra pay if they worked the ship back to port even though they were short-handed by the desertion of 2 crew members. Held : The crew had given no consideration for the promise of extra pay. They were already bound to complete the journey, and they did not promise to do anything extra for the extra pay. As such, the promise was not binding. In the earlier case of Harris v Watson (1791) Peake 102 (Phang 163), Lord Kenyon rejected a similar claim because it savoured of blackmail, but in the instant case, the Court preferred to base his decision on the lack of consideration for the Captains promise. Secondly, where the promisor agrees to Take

Less than what is Due.

*Foakes v Beer (1884) 9 App Cas 605 (House of Lords) (Phang 167) (BBF 731)
Facts : Respondent had obtained judgment against the appellant for a sum of money and the parties agreed in writing that if the appellant made a down payment at once and gave the balance by installments, the respondent would not make further legal proceedings to claim interest on the debt. The appellant pleaded the agreement, and the Respondent replied that it was unsupported by consideration. Held : Court was of the opinion that it could not reject the entrenched rule in Pinnels Case (1602) 5 Co Rep 117a (Phang 166), and therefore gave judgment for the Respondent, agreeing that a lesser sum could not be satisfaction for a debt.
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Lord Blackburn prepared a dissenting judgment, pointing out the practical benefits in commerce of receiving prompt payment of a lesser sum as opposed to delayed payment of the whole debt, but acquiesced in view of his colleagues opinion. NB : cf. Williams v Roffey Bros : Practical Benefit Job done on time

The rule in Foakes v Beer (1884) (aka Pinnels Case) seeks to protect creditors by allowing them to go back on promises to accept less than what is due. Debtors can circumvent this rule by : Undertaking a deed under seal (ie. no consideration required) Varying performance in some way to provide nominal consideration. The rule does not apply to : Unliquidated claims A compromise or forbearance to sue reached by both parties consensually. These 2 decisions have been criticised by academics : The courts failed to recognise practical/factual benefits to the ship Captain in Stilk v Myrick (1809) and to creditors in Foakes v Beer (1884). The modern Doctrine of Economic Duress is a better tool than Consideration in dealing with improper pressure. If the suit in Stilk v Myrick (1809) was rejected because of economic duress instead of lack of consideration, it would not give rise to an across the board ruling that a promise to pay more for the same act is unenforceable. The rule that a lesser sum cannot be satisfaction for a debt derived from Foakes v Beer (1884) was reached not by a desire of the House of Lords to implement such a rule, but by their Lordships reluctant opinion that they could not reject Pinnels Case (1602).

This historical position has been challenged by the Courts :

*Williams v Roffey Bros & Nicholls (Contractors) Ltd (1990) 1 QB 1 (CA, England) (Phang 164)
Facts : Plaintiff sub-contracted to do the carpentry in the Defendants refurbishment of 27 flats for 20,000. After completing 9 flats and receiving 16,200, the Plaintiff found himself in financial difficulties due to his underestimation of costs and faulty supervision of workers. Afraid that the Plaintiff would default, the Defendants agreed to pay him a further 10,300 at the rate of 575 per flat as each flat was completed. After finishing a further 8 flats, the Plaintiff stopped work and sued the Defendants who had only paid 1,500 more. Held : CA held that barring economic duress or fraud, where the promisor agrees to pay more for the same act and derives a practical benefit, this is valid consideration. Russell LJ opined that the practical benefits gained by the Defendants were the [retention] of the services of the Plaintiff and the [replacement] of a haphazard method of payment. The other 2 judges concurred with Glidewell LJs proposition that : If A has entered into a contract with B to do work for, or to supply goods or services to B in return for payment by B; and At some stage before A has completely performed his obligations under the contract, B has reason to doubt whether A will, or will be able to complete his side of the bargain; and B thereupon promises A an additional payment in return for As promise to perform his contractual obligations on time; and As a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and Bs promise is not given as a result of economic duress or fraud on the part of A; then The benefit to B is capable of being consideration for Bs promise, so that the promise will be legally binding. Quare : How to reconcile Willams v Roffey Bros with Stilk v Myrick?

NB : Glidewell LJ insisted that their decision does not contravene the principle in Stilk v Myrick, but merely refines and limits the application of that principle, in that a factual/practical benefit is recognised as good consideration. The principle may prove to be very difficult to apply in practice because where the promisee does not solicit the promise, it may be only gratuitous, while if he over eagerly requests for the promise, it might be construed as economic duress. An attempt to extend the ruling in Williams v Roffey Bros (1990) to include a promise to take less than what was due was defeated in the following case.

*Re Selectmove Ltd (1995) 1 WLR 474 (CA, England) (Phang 141-142, 168)
Facts : Appellant Company owned Inland Revenue money. Director met with Respondents representative and proposed to settle debt by installments and make future payments on time. Representative said he would have to check with his superiors first. Company started paying up installments, but still fell back in proposed schedule. Respondent made a winding-up order. Company pleaded that Respondent had accepted installment payment offered by the Company and that following Williams v Roffey Bros (1990), the Respondent had gained practical benefits which served as consideration for the agreement to settle by installments. CA held that silence on the part of the respondents representative did not constitute acceptance of the installment settlement offer. Furthermore, an application of the principal of practical benefit in Williams v Roffey Bros (1990) in this case would run directly contrary to the principle in Foakes v Beer (1884) where it is clear that the House of Lords decided that a practical benefit of that nature is not good consideration (Requirement of prompt payment of lesser sum in settlement of debt). CA held that it was bound by the Principle of stare decisis and therefore had to follow Foakes v Beer (1884) and dismiss the appeal. NB : This decision has been criticised by academics for being incongruent with the principle in Williams v Roffey Bros (1990), if the Courts allowed a promise to pay more, why could they not accept a promise to take less? Locally, the principle in Williams v Roffey Bros (1990) has been considered in the following case :

*Sea-Land Service Inc v Cheong Fook Chee Vincent (1994) 3 SLR 631 (CA, Singapore)
Facts : The Respondent was retrenched from the employment of the Appellants. With 1 months service left, he was given a letter stating that he was entitled to receive an enhanced severance pay but when he received his last pay, he was told that there was an error and he was entitled only to the normal severance pay. Respondent took out proceedings for a declaration that he was entitled to the enhanced pay and received judgment. Appellants pleaded that there was no consideration for the promise of enhanced pay in the letter. Respondent replied that the Appellants had gained a practical benefit inter alia, from his last month of employment, and that under the principle in Williams v Roffey Bros (1990) constituted valid consideration. Held : CA held that for the limited exception under Williams v Roffey Bros (1990) to apply, the Appellants must have at least obtained a factual or a practical benefit from the Respondents performance of his existing contractual duties, and that his last month of employment, inter alia, did not constitute a practical benefit to the Appellants. Appeal allowed.

iv)

Exceptions to the Rule in Foakes v Beer (Pinnels Case)

Where a new element that varies the contract is introduced.

Pinnels Case (1602) 5 Co Rep 117a (Phang 166)

Held : Court held that a debt could not be discharged by mere partial performance of the obligation, but through the introduction at the creditors request of a new element such as the tender of a different chattel or part payment at a fresh place or at an earlier date would provide good consideration. Where there is a Composition with Creditors. This appears to run contrary to the rule in Pinnels Case but 2 solutions have been advanced in the following 2 cases :

Boothbey v Sowden (1812) 3 Camp 175 (Phang 190)

Lord Ellenborough suggested that there was consideration in that each individual creditor agreed to forgo part of his debt on the hypothesis that all the other creditors would do the same. NB : This argument has been rejected because while it suffices to support the argument between the creditors themselves, the debtor cannot seek to rely upon it as he had furnished no consideration himself towards the agreement.

Woods v Robarts (1818) 1 Stark 417 (Phang 190)

Lord Tenterden suggested that no creditor would be allowed to circumvent the composition agreement because this would be a fraud upon all the parties concerned, including the debtor.

Where there is Payment by a 3rd Party.

Hirachand Punamchand v Temple (1911) 2 KB 330 (CA, England) (Phang 191)

Facts : The debtors father wrote to the Plaintiffs offering to settle his sons debt with payment of a lesser amount and enclosed a cheque. Plaintiffs cashed the cheque and later wrote again asking for the balance of the debt to be paid. When this was refused, they sued. Held : Court held that by cashing the cheque, the Plaintiffs had implicitly accepted the offer of the debtors father, and by analogy of a composition with creditors, the Court adopted that reasoning, dismissing the appeal because it would be a fraud upon the father.

By the operation of Promissory or Equitable Estoppel.

4. The Doctrine of Promissory Estoppel

The promisor will not be allowed to go back on his concession if it will be inequitable for him to do so even though there is no consideration for it. The decision in the following case was the germination upon which the Doctrine of Promissory Estoppel was to develop with the cases below :

*Hughes v Metropolitan Railway Co (1877) 2 App Cas 605 (House of Lords) (Phang 175)
Facts : Landlord gave tenant 6 months notice to repair premises otherwise lease could be forfeited. Negotiations subsequently started for sale of reversion but broke down later. On expiry of original notice to repair, landlord brought an action of ejection. Held : HL held that the opening of the negotiations amounted to an implied promise that for that duration, the landlord would not enforce the notice. The tenant had relied on this promise, which would lead to inequity if allowed to resile and the landlord would be temporarily estopped from enforcing it. The 6 months allowed for repairs were to run from the start of the failure of negotiations. Lord Cairns LC said : if parties who have entered into definite and distinct terms involving certain legal results certain penalties or legal forfeiture 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
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allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. NB : The rule in Jorden v Money (1854) 5 HL Cas 185 (HL) (Phang 175) that estoppel could only operate on a misrepresentation of existing fact was followed only 4 years before the above case (in Citizens Bank of Louisiana v First National Bank of New Orleans (1873) LR 6 HL 352 (HL) (Phang 176) and Hughes (1877) seems to run contrary to that rule. This decision can still be reconciled with Jorden v Money (1854) because it involved 2 additional factors :

*Central London Property Trust Ltd v High Trees House Ltd (1947) KB 180 (HC, England) (Phang 174)
Facts : At the outbreak of WWII, the Plaintiff lessors agreed to reduce the rent because of low tenancy. After the war, full tenancy was achieved and the Plaintiffs claimed full rent both retrospectively and in future. They tested their claim by suing for rent at the full rate for the last 2 quarters of 1945. Denning J was of the opinion that the Plaintiffs were entitled to the full rent in 1945. However, he also believed that had the Plaintiffs tried to sue for the past rent, the agreement in 1940 would have defeated their claim. He realised that there was no consideration for the agreement, and if the Defendants tried to sue upon the promise, they would have filed. However, as they were using the promise merely as a defence and not trying to enforce a contract, Denning J felt that consideration was not relevant. Hence, to allow for the judgment he wanted, he used the decision in Hughes (1877) to espouse the Principle of Promissory Estoppel stating that if a promise to accept a smaller sum is acted upon (Reliance on Promise), it is binding even though there is no consideration. NB : The decision in Hughes (1877) merely suspended the landlords right to repairs and did not extinguish it. In High Trees (1947), by claiming that the right to past rent was extinguished, Denning J was seeking to extend the principle in Hughes (1877). This was the 1st time that the principle in Hughes (1877) was applied to a money debt.

A. The Elements of Promissory Estoppel

i)

There must be an existing Legal Relationship between the parties

However, the High Court of Australia applied the doctrine in a pre-contractual situation in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (Phang 189). Local Courts will probably follow the less radical Engalish position.

ii)

There must be a Promise or Representation which may be either Express or Implied

It must be clear, certain and unambiguous. Mere silence or inactivity is usually insufficient.

John Burrows Ltd v Subsurface Surveys Ltd (1968) 68 DLR (2d) 354 (SC, Canada) (Phang 182)
Facts : Contract provided for monthly repayment, and gave the creditor the right to demand the full amount if any payment was more than 10 days late. 11 out of the first 18 payments were more than 10 days late without objection. Held : Court held that this did not disentitle the creditor from exercising his right of acceleration when the 19th installment was late.

iii)

The Doctrine can only be used as a Shield and not as a Sword

It prevents the enforcement of existing rights but does not create new rights.

*Combe v Combe (1951) 2 KB 215 (CA, England) (Phang 180)

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Facts : Wife started divorce proceedings and obtained a decree nisi against her husband. He promised her 100 per annum. She did not apply to the Divorce Court for maintenance, which was not at his request and when he did not pay her, she sued. Judge used promissory estoppel to get around the lack of consideration. Husband appealed. Held : CA held that to allow a Plaintiff to sue on such a promise is simply to totally ignore the doctrine of consideration. Promissory estoppel must be used as a shield and not as a sword. Denning LJ said : The principle stated in the High Trees case does not create new causes of action where none existed before. It only prevents a party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties. Quare : Is detriment required?

This does not mean that only Defendants can rely on it. Plaintiffs can use it to prevent an independent cause of action. Eg. If the Defendant in Hughes (1877) was evicted, he could have sued on the lease agreement and used promissory estoppel to defeat the landlords claim for repairs.

NB : With Waltons Stores (1988), Australia has allowed for the doctrine to be used as a separate cause of action. This case was noted by the judge in the Malaysian case of Hong Leong Leasing Sdn Bhd v Tan Kim Cheong (1994) 1 MLJ 177 (HC, Malaysia) (Phang 182) who said, it would have to wait until an opportunity arises for a court, after hearing full arguments on the issue, to express its views. At present, it is expected that local courts would follow the more moderate English position.

iv)

There must be Reliance by the Promisee on the Promise

Quare : What measure of reliance is to be used?

It has been suggested that the reliance by the promisee must be detrimental to him and not only so, but it has to be detrimental vis--vis the promisor. This was the situation in the original case of Hughes (1877) although the Court there used the term inequitable and made no mention of detriment. Others (Lord Denning most notably) suggests that the promisee need only have altered his position as a sign of reliance. In WJ Alan & Co Ltd v El Naser Export and Import Co (1972) 2 QB 189 (CA, England) (Phang 186), he said : it has been suggested that there must be detriment. But I can find no support for it in the authorities cited by the judge. The nearest approach to it is the statement of Viscount Simonds in the Tool Metal case, that the other must have been led to alter his position, which was adopted by Lord Hodson in Emmanuel Ayodeji Ajayi v RT Briscoe (Nigeria) Ltd. But that only means that he must have been led to act differently from what he otherwise would have done.

Another approach utilising inequitability and the concept of prejudice as a median between alteration and detriment was suggested by Robert Goff J in The Post Chaser (1982) 1 All ER 19 (Phang 187) where he said : The fundamental principle is that stated by Lord Cairns LC, viz that the representor will not be allowed to enforce his rights where it would be inequitable having regard to the dealings which have thus taken place between the parties. To establish such inequity, it is not necessary to show detriment But it does not follow that in every case it will be inequitable for the representor to enforce his rights for the nature of the action or inaction may be insufficient to give rise to the equity.

However, the concept of equity itself is difficult to define, and while it depends on the facts of each case, detriment is the most concrete manifestation of inequity.
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Locally, in Fu Loong Litographer Pte Ltd v Mun Hean Realty Pte Ltd (1989) 2 MLJ 80 (Phang 188), the Courts citation of Spencer Bower and Turners Estoppel by Representation (3rd edition) tends to support the concept of detriment and suggests that detriment is almost invariably found in any successful invocation of the doctrine. The decision was reversed by the CA in [1993] 1 SLR 714, but not on this point. Phang (at 188) suggests that detriment should be used as part of the doctrine with its weightage depending on the significance of other factors, that it must necessarily manifest itself in either prejudice or disadvantage and that it acts as a safeguard since substantive evidence of such detriment must be proved by the party seeking to rely upon the doctrine.

v)

It must be Equitable for the Promisor to Resile on the Promise

This condition is normally satisfied if the promisee relies on the promise. In the original case of Hughes (1877), one of the 2 main reasons why their Lordships departed from the rule in *Jorden v Money (1854) was because it would have been vastly inequitable for the landlord to resile on his promise since that would mean the eviction of the tenant rather than just the right to repairs. In The Post Chaser (1982), it was held that it would not be inequitable for the representor to resile on his promise, since the representees position had not been prejudiced by their reliance on the representation.

vi)

The promisee must himself have acted Equitably

This is normally in reference to improper pressure made on the part of the promisee in securing the promise.

D and C Builders Ltd v Rees (1966) 2 QB 617 (CA, England) (Phang 172/189)
Facts : Plaintiffs were a small firm who did work for the Defendant. Pressed Defendants for payment for months. Defendants wife knowing that the Plaintiffs were in financial difficulties, offered them a lesser sum in settlement, saying that otherwise they would get nothing. Plaintiffs accepted the sum and sued for the balance. Held : The Plaintiffs were not bound to their promise, with Lord Denning stating that this was so because the Defendant had not acted equitably. NB : Case could have been decided based on Economic Duress ie. Promise given out of duress. Locally, the principle in Adams v R Hanna & Sons Ltd (1967) 11 WLR 245 (Phang 190) that a debtor who seeks to persuade a creditor to accept less than is owed only acts equitably if he makes full and frank disclosure of his financial position was accepted in Liwe Ah Hock v Malayan Railway (1967) 1 MLJ 222 (HC, Singapore) (Phang 190).

vii)

The Doctrine is generally Suspensory in Nature

This was one of the 2 major precepts allowing the reconciliation of Hughes (1877) with Jorden v Money (1854) and Foakes v Beer (1884).

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1955) 1 WLR 761 (House of Lords) (Phang 183)
Facts : Respondents agreed in contract to pay compensation to Appellants if they exceeded a sales limit for the Appellants patented alloys. Compensation was duly paid until start of WWII where Appellants agreed to suspend compensation payments pending the formation of a new contract. Negotiations failed. In 1945, Respondents sued for inter alia, breach of contract and Appellants counter-claimed for compensation payments as from June 1945. Respondents action failed and CA held promissory estoppel operated against the Appellants counter-claim suspending their compensation rights till reasonable notice was given. In 1950, Appellants started 2nd action on the compensation payments stating that the counter-claim in the 1st action amounted to reasonable notice.

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Held : Judge at first instance held that the counter-claim amounted to reasonable notice that the Appellants intended to resume their strict legal rights. CA reversed the decision but the House of Lords restored the original judgment.

Emmanuel Ayodeji Ajayi v RT Briscoe (Nigeria) Ltd (1964) 1 WLR 1326 (PC) (Phang 183)
Facts : Defendant contracted for hire purchase of lorries from Plaintiff. Plaintiffs sued to recover installments due under contract and received judgment. Defendant appealed to Fed Supreme Court of Nigeria and pleaded Promissory Estoppel in that Plaintiffs had agreed to suspend payment until certain conditions were met and was attempting to resile. Held : PC dismissed appeal on the grounds that Defendant had not proved failure to fulfill conditions. Despite this, Lord Hodson decided to clarify the doctrine of Promissory Estoppel saying that it was subject to the following conditions, that the : (a) Other party has altered his position. (b) Promisor can resile from his promise on giving reasonable notice, which need not be a formal notice giving the promisee a reasonable opportunity of resuming his position. (c) Promise only becomes final and irrevocable if the promisee cannot resume his position. An example of where the promisee could not resume his position, resulting in the permanent extinguishment of rights is seen in the following case :

Birmingham and District Land Co v London and Northwestern Railway Co (1888) 40 ChD 268
However, others (most notably Lord Denning) have argued that the doctrine allows for extinguishment of rights and not merely suspension, even in situations where the promisee can resume his position. High Trees (1947) operated as such where the right to past rent was extinguished, but the right to future rent was only suspended. Lord Denning repeated his view that promissory estoppel can operate to extinguish a debt after part payment in D&C Builders v Rees (1966). Alan v El Naser and Brikom Investments Ltd v Carr (1979) QB 467 (CA, England) also operated to extinguish rights, but these cases were mainly based on contract variance with good consideration.

B. Reconciliation of Consideration and Promissory Estoppel

i)

Foakes v Beer and Hughes v Metropolitan Railway

In Foakes v Beer (1884), the promisor is not bound by his promise to take less because there is no consideration. In Hughes v Metropolitan Railway (1877), the promisor is bound by his concession temporarily even without consideration if it would be inequitable for him to resile. The latter case was decided only seven before the former, and 2 Lords were present for both cases, hence they could not have forgotten Hughes (1877) when deciding Foakes v Beer (1884). These 2 cases can be reconciled because of the former case. Involved property repairs and not money debts. Was only suspensory in nature, and did not extinguish the landlords strict legal rights. Would have resulted in eviction of the tenant which was grossly inequitable had a ruling to allow the landlord to insist on his rights been made.

ii)

Foakes v Beer and High Trees

In High Trees (1947), the promisor was bound by his concession on the money debt without consideration, extinguishing his rights to past rent and suspending his rights to future rent. Reconciliation of this case with Foakes v Beer (1884) is difficult because the first 2 reasons in Hughes (1877) are not present and it can be argued that in both Foakes v Beer (1884) and High Trees (1947), the effect on the promisee would be just as financially catastrophic. It has been
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advanced that the High Trees (1947) principle only applies to installment debts while Foakes v Beer (1884) takes precedent over lump sum debts ie. that the principle stops short of Foakes v Beer (1884). This is unsatisfactory because : There is no reason why installment debtors should be favoured over lump sum debtors. Both concern the collection of past funds, only the manner of collection differs. Lord Denning had used the High Trees (1947) principle in both Alan v El Naser (1972) and Brikom v Carr (1979) where lump sum debts had arisen. However, it may be noted that since the landlord was not seeking past rent in High Trees (1947), Lord Dennings observations on extinguishment of the past rent are strictly dicta.

iii)

Affirmation of Foakes v Beer in Re Selectmove

It has been said that any attempt by High Trees (1947) to unseat the principle in Foakes v Beer (1884) was destroyed by the CAs resounding insistence on Foakes v Beer (1884) as good law in Re Selectmove (1995). However, it should be noted that in that case, Peter Gibson LJ dismissed the argument on promissory estoppel because : The Inland Revenues representative had no authority to make the promise, and his caution that he would have to check with his superiors and his subsequent silence on the matter cast grave doubts on whether the promise was ever made. Had the promise been made, the Company still failed to keep up with the condition of timely installment payments in the promise, and therefore it would not have been inequitable for the Company to be wound up. It is possible that had the promise been clear, certain and unambiguous, and had the promisee himself acted equitably (thereby making it inequitable for the Company to be wound up), the action upon promissory estoppel would have succeeded where the attempt to use Williams v Roffey Bros (1990) to topple Foakes v Beer (1884) had failed.

iv)

Conclusion
The principle in High Trees (1947) can circumvent Foakes v Beer (1884) in situations where : Subsequent events make contract performance impossible and the promisors right becomes extinguished. Allowing the promisor to resile even after reasonable notice would still be inequitable and the promisor right becomes extinguished. Consideration is the rule and Promissory Estoppel is an exception. A promisee is still always better off providing consideration for the promise. Promissory estoppel does not operate in situations of capitulating from a promise to pay more, eg. Stilk v Myrick (1809). Detriment? Inequity? Reliance? Shield, not Sword.

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