In 1952, a year subsequent to Combe’s case, Denning LJ wrote an article in The Modern Law Review where he addressed the distinction between a promise given in formation of a contract and a promise given in discharge of a contract. There he quoted Sir Frederick Pollock: “The doctrine of consideration has been extended, with not very happy results, beyond its proper scope, which is to govern the formation of contracts, and has been made to regulate and restrain the discharge of contracts.” Consequently he wrote, “If one compares the cases concerning promises on the formation of a contract, with those concerning cases on its modification and discharge, it would seem that, since the fusion of law and equity, we are approaching a state of affairs which Ames regarded as desirable, namely, that any act done on the faith of a promise should be regarded as sufficient consideration to make it binding. If the law should develop in this way, nearly all recommendations of the Law Revision Committee will be achieved without recourse to legislation at all.” Denning LJ in 1979 also wrote the following, “Looking back over the last 32 years since the High Trees case, it is my hope that the principles then stated- and the extensions of them- will come to be accepted in the profession. The effect has been to do away with the doctrine of consideration in all but a handful of cases... It has been replaced by the better precept; 'My word is my bond', irrespective of whether there is consideration to support it. Once a man gives a promise or assurance to" his neighbour- on which the neighbour relies- he should not be allowed to go back on it. In stating the principle, and its extensions, the lawyers use the archaic word 'estoppel'. I would prefer to put it in language which the ordinary man understands: It is a principle of justice and of equity. It comes to this; when a man, by his words or conduct has led another to believe that he may safely act on the faith of them--and the other does act on them--he will not be allowed to go back on what he has said or done when it would be unjust or inequitable for him to do so.” This expansive approach to the doctrine should put to rest criticisms towards consideration as being too much of a constraint. Moreover, recent developments have shown the court’s readiness to hold the rigidity of the classical doctrine yielded to practical justice and to the needs of modern commerce as seen in the landmark case of Williams v Roffrey and Nicholls (Contractors) Ltd. Nonetheless, in spite of these exceptions the courts have never outrightly sought to do away with the doctrine and have only allowed for them to act as a supplement to the rule.
Although is not likely that the doctrine of consideration be overthrown by its equitable counterparts due to problems of uncertainty surrounding the latter, promissory estoppel has been widely accepted throughout many countries that have adopted the common law to facilitate a better administration of justice. In the United States, it is seen through the enactment of a provision for promissory estoppel in Article 90 of the Restatement (Second) of Contracts. In India, this doctrine has also undergone rapid developments as can be seen in cases like Motilal Padam Sugar Mills Co Ltd v The State of Uttar Pradash and Delhi Cloth & General Mills Ltd v Union of India. Reference can also be made to the Law Commission of India’s One Hundred and Eighth Report on Promissory Estoppel (1986) where a new provision (s 25A) was proposed. Closer to home, the position of this area of the law according to the Contracts Act 1950, however, is not so clear.
The following words of Gopal Sri Ram JCA in the Malaysian landmark Boustead Trading Sdn Bhd v Arab-Malaysian Merchant Bank Bhd gives an indication of how promissory estoppel is being treated by the Malaysian courts, “The time has come for this court to recognise that the doctrine of estoppel is a flexible principle by which justice is done according to the circumstances of the case. It is a doctrine of wide utility and has been resorted to in varying fact patterns to achieve justice. Indeed, the circumstances in which the doctrine may operate are endless.” However, Sinnadurai pointed out that “without a detailed and careful analysis of the law, the observations of Gopal Sri Ram JCA in Boustead Trading... ought not to be understood as having altered or clarified the law on the doctrine of promissory or proprietary estoppel in Malaysia... these observations can only be regarded as persuasive, and not having any binding effect, until these principles are fully reconsidered and adopted in another Federal Court decision.” On the other hand, the problems associated with promissory estoppel have also been highlighted by Peh Chin J in the Malaysian High Court decision of Goh Tuck Meng v Ngan Yin Groundnut Factory Sdn Bhd: “The present state of the doctrine of equitable estoppel... may be highly vulnerable to the criticism of creating uncertainty and a good many people may find it “an unruly horse” of the worst type; they can however take comfort in the great fund of self-restraint of judges in deploying it to prevent a person from enforcing his strict legal rights where it would be unconscionable and therefore inequitable to do so.”
Owing to its lack of clarity on the issues surrounding the doctrine of consideration, it has been suggested that various sections of the Contracts Act 1950 (especially s26) be subject to a thorough examination and overhaul. Improvements via codification which will render this area of law no longer bound by the restrictive rules of equity and the statutory restrictions imposed by Section 3(1) of the Civil Law Act 1956. In clearly defining the perimeters for the doctrine, provisions can be made for these equitable principles to be practiced alongside consideration which will lead to more certainty in litigation and facilitate its application by the Malaysian courts. On the other hand, there has not been any provision bearing resemblance to equitable estoppels in the English legislature except Section 21(1) of the Sale of Goods Act 1979, which may be considered as a minuscule effort taken by the English Parliament to facilitate the application of equitable doctrines. Nevertheless, there is no such need to enact equitable doctrines in England and Wales because, unlike the position in Malaysia, the application of equitable as well as common law doctrines are not subject to the restrictions mentioned.
Looking at the way the doctrine is developing in the judicature of both English and Malaysian courts, the wholesale abolition of consideration and the replacing of it with some other equitable doctrine is both undesirable and hugely unnecessary. Consideration should be continue to be taken as a formal requirement, like the requirement that some agreements be put in writing in order for it to be enforceable, to alert parties to the fact that they are entering into a serious transaction. On the other hand, it has been said and rightfully so, that business people are not concerned with formalities as lawyers and constantly make agreements without considering the necessities to make the variation legally binding. While the classical model of consideration strictly requires for there to be a benefit to the promisor or a detriment to the promisee, the courts have in many cases adopted a more expansive approach, taking into account practical justice and the needs and practices of modern commerce. By contrasting the case of Stilk v Myrick with the case of Williams v Roffey we can see the court’s “ongoing commitment to fitting agreements which make sense in the business community into a traditional framework of analysis.” In doing so, the essential function of the doctrine in governing the formation of contracts as well as in regulating and restraining the discharge of contracts ensures that the law, as best as it can, serves to protect the best interest of both parties. In conclusion, Denning LJ was correct to point out the want of consideration as imperative to the enforcement of a promise. While equitable doctrines can serve only as a supplement and should and could not displace the far-reaching functions of the doctrine of consideration. I end with this persuasive statement made by Francis Bennion, “To usurp the function of the legislature in the name of a developing jurisprudence is surely to destroy the reality of the common law, to make its doctrines undependable and to leave those whom it should serve bereft in costly uncertainty.”
Contract Assignment by Khong Mei-Yan (0311440)
Sir Frederick Pollock, The Principles of Contract (9th edition, Stevens & Songs ltd 1921) 177
This definition was later adopted by Lord Dunedin in Dunlop v Selfridge [1915] AC 847
Lord Steyn, The Sultan Azlan Shah Law Lectures: Judges on the Common Law (edited by Visu Sinnadurai, THOMSON Sweet & Maxwell Asia 2004)
Stilk v Myrick [1809] EWHC KB J58
“the doctrine of consideration is too firmly fixed to be overthrown by a side-wind”
Combe v Combe, [1951] 2 KB 215, [1951] 1 All ER 767
See Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 where Denning J held promissory estoppel to be “a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact so acted on”
The Law Revision Committee in the sixth Interim Report (1937), recommended the abolition of the rule in Pinnel’s case, the existing legal duty rule, the requirement that consideration move from a promisee, the requirement that consideration be given for a promise to hold an offer open, and the consideration requirement itself in the case of written agreements.
Law Revision Committee, Sixth Interim Report (1937) 17
Lecturer and Tutor in Law at St. Edmund’s Hall, Oxford; of the Middle Temple, Barrister-at-Law
F.A.R. Bennion, Want of Consideration (The Modern Law Review 4, 1953) MLR 441, 441
Atiyah, Essays on Contract (Oxford: Clarendon Press, 1986)
S.F.C. Milsom, Historical Foundations of the Common Law (2nd Edition, Butterworths, 1981) 357; where he suggested that the common law judges might have been influenced by the cannon law doctrine of causa.
Robert Duxbury, Contract Law (2nd edition, Sweet & Maxwell 2011) 97
P.S. Atiyah, An Introduction to the Law of Contract (fifth edition, Clarendon Law Series 2000) 149
Denning LJ, Recent Developments in the Doctrine of Consideration (The Modern Law Review, Volume 15, 1952) MLR 1,4
Sir Frederick Pollock, The Principles of Contract (9th edition, Stevens & Songs ltd 1921) 202
Denning LJ, The Discipline of Law (Butterworths, London, UK, 1979) 223
Williams v Roffrey and Nicholls (Contractors) Ltd. [1991] 1 QB 1
Wan Izatul Asma Wan Talaat, Enacting Promissory Estoppel into the Malaysian Law: Towards More Certainty in Litigation (Vol. 5, No. 2, Journal of Politics and Law, Canadian Center of Science and Education 2012)
Motilal Padam Sugar Mills Co Ltd v The State of Uttar Pradash AIR 1979 621
Delhi Cloth & General Mills Ltd v Union of India AIR 1987 SC 2414
Boustead Trading (1985) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1995] 3 MLJ 331, 344
Dato' Seri Dr Visu Sinnadurai, Law of Contract (4th Edition, LexisNexis 2011)
Goh Tuck Meng v Ngan Yin Groundnut Factory Sdn Bhd [1990] 1 MLJ 227, 233
The reception of this doctrine as a rule of equity is subject to the exclusionary phrase stated in the beginning of Section 3(1) of the Civil Law Act 1956 which connotes that the application of equitable principles can only be carried out when there is a lacuna in such area of law in Malaysia.
Wan Izatul Asma Wan Talaat, Enacting Promissory Estoppel into the Malaysian Law: Towards More Certainty in Litigation (Vol. 5, No. 2, Journal of Politics and Law, Canadian Center of Science and Education 2012)
Linda Mulcahy, Contract Law in Perspective (5th edition, Routledge-Cavendish 2008) 85, 96
FAR Bennion, Want of Consideration (The Modern Law Review 4, 1953) MLR 441, 452