Why would you suggest that silence cannot be acceptance?
Class Activity Get into small groups and discuss the following:
1) Would you suggest that taxis and buses plying the roads are making an offer, or are
potential commuters making the offer to board these public transport vehicles?
2) Why would you suggest that silence cannot be acceptance?
3) When Horace lost his dog, which wandered off in the neighbourhood, he placed an
advertisement in the newspapers suggesting that if anyone who found his dog and
returned it to him, he would receive a reward of $500. Does this amount to an offer?
How can it be accepted?
COMMERCIAL LAW
KHE-LCD-SGD-00341 22
Topic 3 – The Law of Contract: Consideration & Intention to Create Legal Relations
Introduction
Having understood what constitutes a valid offer, how it is made and how it can be accepted;
the student must now grasp the other two components necessary to form a legally binding
contract – consideration and the intention to create legal relations.
Consideration
Consideration is the third necessary ingredient to form a legally binding agreement – i.e. a
contract.
Consideration is essential for all contracts (except for those under seal, such as a deed;
these are still binding notwithstanding the absence of consideration). Consideration can be
viewed as the exchange between the parties to a contract. For example, if A agrees to sell
his book to B for $50, then consideration for selling that book is $50; so A gets the $50 and B
gets the book (the exchange). In another example, in an employer-employee relationship, the
consideration between these parties is that the employer gets work done by the employee,
and the employee gets a wage (i.e. a salary consideration) in exchange.
In Currie v Misa (1875) consideration was defined as:
“……some right, interest, profit or benefit accruing to one party, or some forbearance,
detriment, loss or responsibility given, suffered or undertaken by the other”.
Further, in Chappell v Nestle (1960), the court held that “a contracting party can stipulate
what consideration he chooses……….”
Types of consideration:
• Executed consideration
An executed consideration is an act done by one party in exchange for a promise
made or an act done by the other. When the act constituting the consideration is
completely performed, the consideration is said to be executed.
For example, where A offers a reward of $500 to anyone who finds and returns his lost
cell phone, his promise becomes binding the moment B performs the act; i.e. finding
and returning the lost cell phone.
It should be noted that in the above example, A is not bound to pay anything to anyone
until that thing he requests is done.