Business Law—Discussion cases on concept of Consideration

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Business Law—Discussion cases on concept of Consideration

  1. 1. Business Law Li Junxian Joshua Wong Terence Chow Twain Teo Jonathan Ng 1
  2. 2. Summary 1 Aug - Mac 4 Aug, 4.59pm 3 Aug, 2pm - faxed a letter to 3 Aug - Jojo - Donalds's Blur on behalf Donald, offering offered to buy acceptance fax of Mac sent the to sell equipment from sent and revocation equipment for Mac at $10,000 arrived at Mac's letter by post $5,000 office 4 Aug, 5pm - Deadline for acceptance 7 Aug - 10 Aug - Mac 5 Aug, 1pm - Donalds called 5 Aug, 9am - delivered Revocation Mac and asked Acceptance fax equipment, but letter arrived by to pay $3000 noticed by Max Donalds post instead. Mac refused to pay. agreed. 2
  3. 3. 1 Aug - Mac faxed a letter to Donalds, offering to sell equipment for $5,000 3
  4. 4. 3 Aug - Jojo offered to buy equipment from Mac at $10,000 3
  5. 5. 3 Aug, 2pm - Blur on behalf of Mac sent the revocation letter by post 3
  6. 6. 4 Aug, 4.59pm - Donalds's acceptance fax sent and arrived at Mac's office 3
  7. 7. 4 Aug, 5pm - Deadline for acceptance 3
  8. 8. 5 Aug, 9am - Acceptance fax noticed by Mac 3
  9. 9. 5 Aug, 1pm - Revocation letter arrived by post 3
  10. 10. 7 Aug - Donalds called Mac and asked to pay $3000 instead. Mac agreed. 3
  11. 11. 10 Aug - Mac delivered equipment, but Donalds refused to pay. 3
  12. 12. Flow Acceptance of the original offer Revocation of offer? The renegotiated contract’s validity Promissory Estoppel in the case Clean hands doctrine Additional discussion: Promissory Estoppel: suspensory or extinctive? Considering factual vs legal benefits 4
  13. 13. The case Mac sued Donalds for breach of contract For the full contract sum of $5,000 5
  14. 14. Question 1 Can Donalds argue that, even if there were to be a valid offer, there was no valid acceptance of that offer by him because his letter of acceptance was not read by Mac until 9.00 am on 5 August? No 6
  15. 15. The Offer “I’m offering to sell you my burger frying equipment for $5,000, payment on delivery. If you would like to accept this offer, please fax me your acceptance by 4 August, 5.00 pm” (Mac, 1st August) 7
  16. 16. Elements of a Contract Offer Acceptance Consideration Intention to create legal relations 8
  17. 17. Is this a valid offer? – Yes Intention of the Offeror Furnished with Terms and Details 9
  18. 18. Offeror Offeree Mac Contract Donalds 10
  19. 19. Elements of a Contract Offer Acceptance Consideration Intention to create legal relations 11
  20. 20. Acceptance Which rule should we use? General rule Postal-Acceptance rule 12
  21. 21. Applying the General Rule “On 4 August at 4.59 pm, Donalds faxed his letter of acceptance over to Mac’s office (which arrived instantaneously)” Fax follows the General Rule However, there are some exceptions to this rule 13
  22. 22. Entores Ltd v Miles Far East Corporation (1955) Court of Appeal held that “where a contract is made by instantaneous communication the contract is complete only when the acceptance is received by the offeror.” 14
  23. 23. Entores Ltd v Miles Far East Corporation (1955) “it should, however, be noted that the general rule will not apply if the offeror is at fault, eg, where he failed to maintain his equipment in a proper condition. To hold it otherwise would not be fair to the offeree.” (Principles of Singapore Business Law, George TL Shenoy, Loo Wee Ling at para 7.52) 15
  24. 24. Why Mac is at fault “Please fax me your acceptance by 4 August, 5.00pm” Blur did not read the fax sent at 4.59pm Offeree has fulfilled the obligation on his part Onus is on offeror to check his designated mode of communication (fax) 16
  25. 25. Acceptance by Conduct Donalds ignored the revocation letter Negotiation carried on after contract was concluded 17
  26. 26. Elements of a Contract Offer Acceptance Consideration Intention to create legal relations 18
  27. 27. Consideration & Intention Benefit-detriment analysis Intention to create legal relations presumed in all business and commercial agreements. 19
  28. 28. Elements of a Contract Offer Acceptance Consideration Intention to create legal relations 20
  29. 29. Question 2 Can Donalds argue in defense that there was no contract between Mac and himself because Mac’s offer, if any, had been revoked by his letter of revocation? Was there revocation? No 21
  30. 30. When is the offer considered revoked? Any time before it is accepted by the offeree In order to be effective, revocation must be communicated to the offeree 22
  31. 31. No revocation No communication to offeree Communication was made after acceptance Postal-acceptance rule is not applied to revocation 23
  32. 32. If… The letter was received and read by Donalds before he sent his acceptance? The letter was received but not read by Donalds before he sent his acceptance? 24
  33. 33. Question 3 Assuming that a valid contract existed between Mac and Donalds, can Donalds argue that he was only bound to pay $3,000 for the burger frying equipment as Mac had specifically agreed to the lesser amount in satisfaction of the full contract sum of $5,000? No 25
  34. 34. Consideration Offeree Offeror Promisor ? Promisee 26
  35. 35. The facts On 7 August, Donalds telephoned Mac to propose a reduced payment for the equipment Mac accepted Donald’s proposal as he was in dire need of money When Mac requested for payment upon delivery, Donalds refused to pay as he had changed his mind 27
  36. 36. Was there a re- negotiation? For a re-negotiation to be valid, fresh additional consideration should be furnished 28
  37. 37. Conditions for Consideration Consideration must move from the promisee (Donalds) to the promisor (Mac) Consideration must be requested for by the promisor (Mac) 29
  38. 38. New consideration was not furnished Mac demonstrated good consideration and forbearance by not requesting for full claim of $5,000 Donalds merely bargained for a lower price 30
  39. 39. Previous Cases Pinnel’s case (1602) Foakes v Beer (1884) Partial payment of a debt without fresh considerations is not full discharge Novation is a term used in contract law and business law to describe the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party. 31
  40. 40. Therefore the claim should be $5,000. 32
  41. 41. Question 4 Can Donalds exercise promissory estoppel? No 33
  42. 42. Promissory Estoppel In the law of contracts, the doctrine that provides that if a party changes his or her position substantially either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise although the essential elements of a contract are not present. 34
  43. 43. Promissory Estoppel Clear and unequivocal promise Shield not Sword Reliance on promise Inequitable to go back on promise 35
  44. 44. Clear and unequivocal promise In this case, Mac was willing to forgo $2,000 and accept $3,000 as payment in satisfaction of the full sum. The promise made by Mac was clear. 36
  45. 45. Promissory Estoppel Clear and unequivocal promise Shield not Sword Reliance on promise Inequitable to go back on promise 37
  46. 46. Shield not Sword Donalds can invoke it in defence. 38
  47. 47. Promissory Estoppel Clear and unequivocal promise Shield not Sword Reliance on promise Inequitable to go back on promise 39
  48. 48. Reliance on promise Donalds did not stick to promise. The agreement was for payment upon delivery, which Donalds “coldly” refused to do so. 40
  49. 49. Promissory Estoppel Clear and unequivocal promise Shield not Sword X Reliance on promise Inequitable to go back on promise 41
  50. 50. Inequitable to go back on promise Not inequitable for Mac to go back on promise No significant time lapse Donalds didn’t suffer any detriment 42
  51. 51. Promissory Estoppel Clear and unequivocal promise Shield not Sword X Reliance on promise X Inequitable to go back on promise 43
  52. 52. Clean Hands doctrine “He who comes to Equity must come with clean hands.” (Equity and Trusts, Articles on Singapore Law (18, 2005)) Under the clean hands doctrine, a person who has acted wrongly, either morally or legally – that is, who has “unclean hands” – will not be helped by a court when complaining about the actions of someone else. Does not mean “blameless in all ways” though 44
  53. 53. Donalds’s case Donalds had failed in this case Breach of contract He had no intention of paying 45
  54. 54. Promissory Estoppel Suspensory vs Extinctive 46
  55. 55. What does extinctive mean? To extinguish an obligation which is not a continuing obligation 47
  56. 56. Central London Property Trust v High Trees House Ltd (1947) 1937 Rent = £2,500 per year £2500 48
  57. 57. Central London Property Trust v High Trees House Ltd (1947) 1940 Rent = £1,250 49
  58. 58. Central London Property Trust v High Trees House Ltd (1947) 1945 Rent = £2,500 again Held that plaintiffs £2500 entitled to restore rent rate 50
  59. 59. Central London Property Trust v High Trees House Ltd (1947) The accrued payment obligations of the tenants falling within the duration of the suspension was extinguished Plaintiff estopped from claiming for period prior to 1945 51
  60. 60. What does suspensory in nature mean? Enforcement of an obligation is suspended It can be revived upon the promisor giving due notice to the promisee 52
  61. 61. Hughes v Metropolitan Railway Company (1877) Landlord gave his tenant 6 months notice to repair the premises. However, they commenced negotiations for the sale of the lease to the landlord. Tenant indicated that he would not continue repairs during that period. Notice period to continue only after negotiations ended. 53
  62. 62. Hughes v Metropolitan Railway Company (1877) Landlord wanted to forfeit lease as no repairs done. However, not allowed to do so. The 6 months notice was considered suspended during the period of negotiations. 54
  63. 63. Mac v Donalds What do you think? If Donalds paid up at first, and Mac sued for the remaining $2,000, could Donalds claim promissory estoppel? Would it be suspensory or extinctive? Depends on objective assessment of intentions of Mac’s intentions. 55
  64. 64. Benefit in fact The promisee is not getting anything more than he is technically legally entitled to, but he gets a benefit in practice What happens if factual benefit could also constitute consideration? 56
  65. 65. Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991) worried More $$$ Work faster Roffey Bros Williams Main Contractor Carpentry Work 57
  66. 66. Implications If the slightest benefit could constitute consideration, then almost all modified contracts would stand The promisor would almost always benefit from the promisee’s continued performance rather than suffer a breach of contract Consideration loses traditional role 58
  67. 67. Conclusion Acceptance of the original offer Revocation of offer? The renegotiated contract’s validity Promissory Estoppel in the case Additional discussion: Promissory Estoppel: suspensory or extinctive? Clean hands doctrine Considering factual vs legal benefits 59
  68. 68. End 60
  69. 69. ways. In the first case, orders were made on the telephone by the defendants in Malaysia and confirmed by the plaintiffs in Singapore. In the second situation, orders were sent by telefax from Malaysia and the plaintiffs responded by despatching the goods from Singapore to the defendants. 17 When an offer is made and accepted over the telephone, a contract is formed at the time and place where the acceptance is received. It is established in Entores Ld v Miles Far East Corporation [1955] 2 QB 327; [1955] 2 All ER 493, that a contract made by instantaneous communication is formed when the acceptance is received by the offeror. The rule was explained by Birkett LJ ([1955] 2 QB 327 at 335; [1955] 2 All ER 493 at 497): The ordinary rule of law, to which the special considerations governing contracts by post are exceptions, is that the acceptance of an offer must be communicated to the offeror, and the place where the contract is made is the place where the offeror receives the notification of acceptance by the offeree. [emphasis added] 18 Transniko Back Accordingly the first category of contracts was made in Malaysia. 19 For the second class of contracts, there were written offers to 61
  70. 70. "&'()*''+,,-"#.,/01,,23%4"56,2.!&.7*.(,896,899/,,:;<=,>? 946 SINGAPORE LAW REPORTS (REISSUE) [1995] 3 SLR(R) Wilde CJ said (at 305): “An order for goods is binding upon the party sending it, before the letter containing the acceptance of the contract is received by him.” (In the context of the facts of the case, the words “upon the party sending it” meant upon the supplier sending the goods.) Creswell J asked rhetorically: “If a man writes ‘send me such and such goods, and I will pay for them’, – is not the sending the goods, without more, an acceptance of the offer?” 21 On this analysis, the second category of contracts was made in Singapore. 22 These are material facts that should be disclosed by the plaintiffs in Transniko Back their application. The materiality of the plaintiffs’ failure of disclosure must also be considered. The plaintiffs did not disclose that some of the contracts 62
  71. 71. Brinkibon Back 63
  72. 72. Back 64
  73. 73. his reliance upon the representation was reasonable in the circumstances. Where it may be inferred from the circumstances that the party seeking to raise the estoppel had acted upon the representation, the burden of proof shifted to the other party to show that there was no reliance in fact: at [206] to [209]. (6) A plaintiff in equity had to approach the court with clean hands but this did not mean he had to be blameless in all ways. First, the undesirable behaviour in 94 SINGAPORE LAW REPORTS [2007] 1 SLR question had to involve more than general depravity. It had to have an immediate and necessary relation to the equity sued for; it had to be a depravity in a legal as well as in a moral sense. The question was whether in all the circumstances it would be a travesty of justice to assist the plaintiff given his blameworthy participation or role in the transaction. The circumstances had to be considered as a whole, having regard to the relief sought. This was because relative blameworthiness only emerged after a complete and exhaustive scrutiny and relief which was less drastic did not have to be defeated by conduct that was less opprobrious: at [224] to [226]. (7) Section 76(3) of the Land Titles Act (Cap 157, 2004[2007] 1 SLR was unique to 292 SINGAPORE LAW REPORTS Rev Ed) our legislation and designed to protect certain interests from the draconian effects Hong Leong Singapore Finance Ltd of a foreclosure order. Because Yongnam had an equitable interest in the property v qua a purchaser that had paid a portion of the purchase price, the foreclosure United Overseas Bank Ltd Back proceedings were fatally flawed in having been initiated and concluded without [2006] SGHC 205 notice having been given to them and65Hong Leong. Nor were those interests
  74. 74. The Maxims 18.2.4 Some significant maxims of Equity are: Equity looks on as done which ought to be done Equity follows the law. He who comes to Equity must come with clean hands. He who seeks Equity must do Equity. Where Equities are equal the law prevails. Where equities are equal, the first in time prevails. Equity is equality. Equity assists the diligent, not the tardy. Equity looks to the intent, rather than to the form. Equity will not assist a volunteer. Equity acts in personam. Equity will not suffer a wrong without a remedy. Equity will not allow a statute to be made an instrument of fraud. Back 66
  75. 75. Back 67

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