THE THEORY AND DEFINITION Before situating its position in the Singapore legal climate by delving into relevant case law, it is first necessary to state the principles which govern the doctrine of consideration. In brief, consideration may be defined as follows: “A valuable consideration, in the sense of law, may consist either of some 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.2 There are also a number of rules governing consideration: (i) consideration must move from the promisee, Tweddle v Atkinson; (ii) Consideration must not be in the past, Pao On v Lau Yiu Long;3 (iii) Consideration must be sufficient but need not be adequate, Chappell & Co Ltd v Nestle Co Ltd.4 THE SOURCE OF THE CONFLICT Prima facie, the theoretical make-up of consideration seems perfectly coherent. However, it is no astonishment that a fixed formula governing the rules and definition of consideration has come under pressure in light of ever-changing contractual circumstances. To clearly display its inherent contradictions, attention will be focused on the judgment and impact of two famous contract cases: Williams v. Roffey Bros & Nicholls (Contractors) Ltd5 and Foakes v. Beer.6 In Williams, the defendant had subcontracted the joinery work required for the refurbishment of flats to the plaintiff. Williams was to receive payments in stages as sections of the work were completed. About 80 percent of the work had been done before Williams ran into financial difficulties. He had underestimated the price of the job and had not managed his workforce effectively. The defendant had a liquidated damage clause in their main contract that would apply if completion were late. To ensure that the refurbishments were completed on time, the defendants agreed to pay an additional 575 pounds per flat. The plaintiff completed a further eight flats for which the defendant paid a proportion of the original price. The plaintiff stopped work and sued for the outstanding amended amount. Unsurprisingly, the defendants argued that Williams had not provided sufficient consideration for the promise of the additional payment, as he was already contractually obliged to complete the refurbishment. The court agreed that there was an existing contractual duty to refurbish the flats and that could not amount to good consideration, nor could the courts rewrite a bad bargain. However, the courts found in favour of Williams and held that, in return for the promise of extra payment, the defendants had received a “practical benefit”, which could amount to consideration. In Foakes, Foakes owed Beer 2090 pounds. They agreed that Foakes could pay in installments. Beer agreed that no further action would be taken if the debt was paid by the agreed date. Later, Beer demanded an additional interest payment that Foakes refused to pay. Eventually, Beer succeeded in the claim for the interest payment. To sum up the cases, both promises, sought by the promisees, had the effect of causing the promisors to wind up receiving less than what was initially agreed upon when the contracts were formed. Since both cases appear to be circumstantially analogous, the attempts at resolving the two contradictory outcomes have formed the crux of the debate surrounding the relevance of consideration as a legal doctrine. ATTEMPTS TO CLARIFY Academics have sought to address the contradiction surrounding 2 3 4 5 6
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[1875] LR 10 Ex 153 at [9], Lush J’s definition of consideration [1980] AC 614 [1960] AC 87 [1991] 1 QB 1 [1883-84] LR 9 App Cas 605
the two cases, so as to safeguard consideration’s integrity. Currently, the contemporary view has sought to differentiate both cases by considering Williams as a “pay-more” case and Foakes as a “pay-less case”. This is substantiated by Mindy Chen-Wishart: “[T]he problem traditionally posed by the requirement of consideration for the enforcement of one-sided contract modifications; one-sided in the sense that one party promises to give more for the same reciprocal obligation (an adding modification), or to accept a reduced reciprocal obligation (a subtracting modification) from, the other party.”7 However, it is submitted that classifying both cases such that they may be amicably reconciled with one another is a superficial way of addressing this contradiction. The categorization of “pay-more” and “pay-less” is merely a clever play with words to force the law into line. Essentially, the cases beckon the same question: Under what circumstances of contract modification will there be sufficient consideration such as to ensure contract enforceability? SINGAPORE LEGAL OPINIONS Attempts to clarify this contradiction have been manifestly unconvincing as evident in the opinions and judgments of key legal figures in Singapore. In the dicta of the Singapore Court of Appeal case Gay Choon Ing v. Loh Tze Ti Terence Peter, Andrew Phang Boon Leong JA stated that “the [consideration] doctrine both continues to be an entrenched part of the Singapore contract law landscape and is simultaneously bedeviled by both theoretical as well as practical difficulties”.8 The term “practical benefit” does not seem to sit well with legal opinion in both Singapore and the UK – it has often been labeled a judge-made principle. This is seen in the Singapore case law of Chwee Kin Keong v Digilandmall.com Pte Ltd where Rajah JC states: “The modern approach in contract law requires very little to find the existence of consideration. Indeed, in different cases, the courts in several common law jurisdictions have gone to extraordinary lengths to conjure up consideration… The marrow of contractual relationships should be the parties’ intention to create a legal relationship.”9 The term confers wide discretion to judges and the courts to find sufficient consideration to uphold a contract. While it is arguable that judges’ discretion is integral to surmount the challenges of constantly evolving legal issues, this is not a satisfactory solution for this particular area of the law. Legal certainty is a primordial tenet of contract law and broadly speaking, an inconsistent legal framework would only operate to reduce the quality of Singapore’s rule of law. Even so, an overly formulaic approach towards consideration may suffer significant opposition as it blurs the lines between common law and legislation – the doctrine of consideration is a common law construct after all. As such, a middle ground must be established. The current contradiction has led some to feel that ‘it will, absent exceptional circumstances, be all too easy to locate some element of consideration between contracting parties. This will render the requirement of consideration otiose or redundant, at least for the most part’.10 ALTERNATIVE ACADEMIC OPINION Particularly interesting is the legal article ‘In Defence of Foakes v Beer’11 by Janet O’Sullivan. It was asserted that money is an 7 Mindy Chen-Wishart, ‘A Bird in the Hand: Consideration and One-Sided Contract Modifications’ in AS Burrows, E Peel (eds), Contract Formation and Parties (Oxford University Press 2010) at [4] 8 [2009] SGCA 3 at [92] 9 [2004] 2 SLR(R) 594 at [139] 10 Sunny Metal & Engineering Pte Ltd v. Ng Khim Ming Eric [2007] 1 SLR(R) 853 [30] 11 Janet O’Sullivan, The Cambridge Law Journal Vol.55, No.2 (jul 1996) 219-228