Formation of Contract II

Question 1

What are the two analysis used in consideration?

Answer 1

1. Benefit-Detriment Analysis
2. Price of Promise Analysis

Question 2

What is past consideration and in what circumstances will it be considered as good consideration?

Answer 2

Past consideration is when the act was done independent of the promise.
Past consideration can be good consideration by applying Pao On’s Case:
1. Act was done at the request of the promisor
2. Both parties understood the act is to be compensated
3. Such compensation is enforceable if promised in advance of act

Question 3

Name the types of insufficient considerations

Answer 3

1. Moral Obligation: Love & Affection (Eastwood v Kenyon)
2. Vague/Insubstantial Promise (White v Bluett)
3. Existing Public Duty (Glassbrook Bros v Glamorgan County Council)
4. Existing Contractual Duty to Promisor (Stilt v Myrick)
5. Part Payment of Debt (Pinnel’s Case)

Question 4

In what circumstances does existing contractual duty gives rise to sufficient consideration?

Answer 4

When promisor obtained practical benefits (e.g., forbearance to sue) without duress and fraud from promisee’s performance of existing contractual duties

Question 5

What is promissory estoppel?

Answer 5

A valid defence to the promisor’s claim even in absence of consideration from the promisee

Question 6

What are the four conditions to establish promissory estoppel?

Answer 6

1. Existing legal relationship between both parties
2. Clear and unequivocal promise made by promisor
3. Promisee relied on promise and altered his position (need not be detrimental)
4. It will be inequitable for the promisor to go back on his promise

Question 7

Is promissory estoppel suspensive or extinctive?

Answer 7

Both, depends on wordings and facts of the case.
Suspensive: Suspends promisor’s rights temporarily (Tool Metal v Tungsten Electric)
Extinctive: Promisor unable to resume original position (status quo ante) (QBE v Winterthur Insurance)

Question 8

What is the doctrine of privity?

Answer 8

Only parties to a contract can enjoy the benefits and suffer the burdens of that contract

Question 9

In what circumstances can third parties enforce a term in a contract?

Answer 9

CRTA
s2(1)(a): Contract expressly provides that he may enforce a term in the contract
s2(1)(b): The term purports to confer a benefit on him (subject to s(2)
s2(2): On proper construction of the contract, the parties of the contract did not intend the term to be enforceable by the third party
s2(3): The third party is expressly identified in the contract by name, as a member of a class, or answering a particular description but need not be in existence when the contract is entered into
s2(5): Third party need not give consideration to enforce a term in the contract