Significance: five-person bench of the Singapore Court of Appeal refuses to abolish the doctrine and requirement of valid consideration for variation of contracts, while suggesting that contracting parties may expressly agree to dispense with the requirement for varying a particular contract.
A Supreme Court summary of the case is found here. Judgment found here.
A summary of key points of the decision are set out below.
The doctrine of consideration alongside other doctrines offers the courts a range of legal options to achieve a fair and just result, whether in formation or variation of contract cases: [61].
The alternatives to the doctrine of consideration are still plagued with unresolved difficulties: [62].
The requirement of consideration is no longer onerous to fulfil in the light of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (CA) since any factual benefit or detriment would suffice: [65].
Further, if contractual parties wanted to, they could exclude the requirement of consideration for variation of contract by stating that unambiguously at the point the contract is formed or they vary by deed: [36], [66]. This depends on the express wording of the clause purported to dispense with the requirement for consideration: [38].
The Court found that a typical boilerplate amendment clause did not so dispense with the requirement but merely sets out a minimum threshold for legally valid variation to occur: [40].
The clause states (at [39]):
No amendment or variation of this Agreement shall be effective unless so amended or varied in writing and signed by each of the Parties.
The Court observed that case law on consideration is inconclusive on doing away with the requirement in contract variation cases: [67]-[93].
The requirement of consideration for formation of contracts remains justifiable for the reasons set out by the Court of Appeal in Gay Choon Ing v Loh Sze Ti Terence Peter and another appeal [2009] 2 SLR(R) 332 (CA): [94].
On the facts, the court found that there was no consideration furnished for the supplemental agreement which sought to amend or vary the original convertible loan agreement.
Purported ‘goodwill’ to provide future loans or funding to the company or its related entities does not suffice as good consideration as it was discretionary to the party and at best referred to some improved relationship between parties or increased likelihood of providing future loans. Further, the element of request necessary in order to establish a link between the parties was absent, as there was no request for any “goodwill” by the respondent leading to the conclusion of the supplemental agreement. It is insufficient that the benefit the respondent conferred upon the appellant pursuant to the SA stirred up “goodwill” on the appellant’s part and of her own volition. Motive for making a promise is not consideration. See [52]-[53].