UNIVERSITI TEKNOLOGI MARA

FACULTY OF LAW

ASSIGNMENT II:

Question 1 & Question 2

COURSE: LAW OF CONTRACT I LAW 436

COURSE CODE: SUBMISSION DATE: 11 JANUARY 2021
PART/SEMESTER: 1

GROUP MEMBERS: ERIC ABDUL RASYID BIN KAMARULZAMAN (2020687676)

FATIN ATHIRAH BINTI NUROL HADI(2020683072)
MUHAMMAD ADIB AKMAL BIN SHAARI(2020399445)
Question 1

Consideration is provided in return of the promise made by another party. It distinguishes a

contract or promise from gift as gift does not require a consideration. When a promisee pay
the price of the goods, a consideration is provided by the promisor by way of ensuring that
the goods are available. However, when it comes to matter such as land transfer between
family members, does the law requires a consideration from promisor in return of the land
transfer by the promise? In the present case, Grace is worried that the land she wishes to
transfer to her son will not be valid as she does not require anything in return from her son.

The issue in the present case is whether the transfer of land from Grace to her son, Greg,
without consideration, is valid under Section 26 of Contract Act 1950 (“the Act”).

Section 2 (d) of the Act laid down the definition of consideration whereby it defines
consideration as when, at the desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from doing, or promises to do or to
abstain from doing, something, such act or abstinence or promise is called a consideration
for the promise. The consideration can be supplied when the act is executed, when the act
is performed as per promise and based on the act that has been performed in the past.

Section 26 of the Act provides the general rule concerning consideration whereby that any
agreement without consideration is considered void. Consideration is an essential element
that forms a contract, and any promise without consideration is gratuitous undertaking and
cannot be legally enforced. In the case of Chia Foon Tau v Lim Pey Lin [1998] 7 MLJ 762,
where the appellant is the estate of TC, a business run by sole proprietor, had demanded
the respondent to vacant a premise that he had an agreement with the deceased TC Chong
under memorandum of partnership. The agreement was that as long as the respondent was
the senior partner, the respondent need not pay rent for usage of the premises. If was held
that the deceased had made a contract with himself and no consideration is observed.
Hence, the court declared the agreement to be void.

However, Section 26 of the Act also provides several exceptions for an agreement to be
valid even though there is no consideration in the agreement. Section 26 (a) provides that
an agreement made on the account of love and affection that is in writing and registered.
Section 26 (b) provides that an agreement without consideration can still be valid if it is a
promise to
compensate for something done. This refers to the action that is voluntarily done for the
promisor and the compensation is for the action that was performed. The third exception
under Section 26 (c) provides that an agreement without consider can still be valid if it is a
promise to pay a debt barred by limitation law.

The present case discussed the validity of the promise from Grace to her son Greg reflect
natural love and affection since both parties are related by blood as mother and son. Under
Section 26 (a), a promise made on the basis of love and affection must clearly expressed
and put into writing. This is because not all promise made between family members were
intended to be legally bound. In Brett v JS & his wife (1600), the court held that natural
affection is not a sufficient ground for consideration. This means that the position of an
agreement without consideration on the account of love and affection is considered void
under English Law. However, considering that love and affection has been set as an
exception under Section 26 (a), such promise is accepted in Malaysia.

In the case of Tang Meng Hock v Tang Ming Seng (2010) 1 MLJ 33, the defendant was the
plaintiff’s elder brother and was appointed as the executor of their late father’s will. They
had into agreement where the defendant had agreed to give, by way of love and affection to
the plaintiff, sum of RM60,000 in cash, an apartment unit and a piece of land at Mukim
Padang Meha. In consideration, the plaintiff would not make any further claim against the
defendant or the estate of their deceased father. The plaintiff had filed the suit against the
defendant as the defendant had failed to give him the land, despite already giving him the
cash and apartment unit. The defendant contended that the family arrangements were void
as it was based on love and affection and without consideration.

The court held that since the plaintiff and the defendant were biological brothers, clearly,
they are standing in near relation to each other and that the arrangement was made on the
account of love and affection. The court also added that the fact that the family
arrangements had been put into writing, duly stamped and registered with the endorsement
of Stamp Office under ss 47A and 48 of the Stamp Act 1949. Additionally, the defendant
had performed two of the three items stipulated in the agreement shows that the wording of
the agreements is specific, clear and unambiguous. In this case, the promise that was made
on account of love and affection is valid as it was put into writing and documented, and the
parties in dispute stand in near relation to each other as they are siblings.
In the case of Siti Haida binti Ismail v Siti Maznah binti Yahya & Ors. (as administrators for
the estate of Yahya bin Shafii, deceased) (2018) 6 MLJ 701, where the respondents were
the administrators for the estate of their deceased father, had employed the appellant to
look after their deceased father and take care of his day to day affairs, seven months prior
to his death. The respondents had brought the deceased to the land office where they had
filed a transfer of land belonging to the deceased to the appellant on the account of love and
affection. The High Court had declared the transfer to be void, subsequently the appellant
had filed an instant appeal against the High Court’s decision. While the primary issue in this
case is focusing on undue influence, the court also had that the deceased and the appellant
were clearly not standing in near relation to each other as per specified under Section 26 (a)
of the Act, and does not suffice to love and affection as they are not related by blood and
only know each other seven months prior to the deceased’s death.

In the present case, Grace wants to give her land to her son, Greg. However, she does not
require her son to make any payment to her. Any agreement without consideration is
considered void and this is a concern to her since it concerns the validity of the transfer.
While common law rejects promise without consideration on the account of love and
affection, the position of this exception is permissible in Malaysia, where it is provided in
Section 26 (a) of the Act. The contract is still valid, and she can make the transfer without
asking any payment from her son, provided that the requirement is fulfilled.

The relationship between Grace and Greg must be established. Considering that Grace is the
biological mother of Greg, they are related by blood and naturally they stand in near
relations to each other. Grace had given birth to Greg and had known each other for a long
time and there is no indication that their relationship is in negative manner and in fact, the
act of transferring the land itself indicate the love of the mother to her son. Hence, there is
love and affection between Grace and Greg to make the promise. Since they are related by
blood, this satisfy the need to be in near relations to each other as stated in the Section 26
(a) of the Act.

In order to make it a valid contract, it cannot solely rely on the relationship of the parties.
The transfer of land from Grace to Greg must also be documented. If Grace is planning to
make the transfer, Grace has to put the promise into writing by going to the land office to
make the transfer and follow the procedure. The agreement must be stamped and
registered to indicate seriousness of the contract. By having the transfer to be documented,
Grace has
fulfilled all the requirements to make a contract without consideration on the account of love
and affection.

To conclude, the transfer of land from Grace to her son, Greg, without consideration is a
valid agreement. Her position as the biological mother of Greg is recognized by the law in
Malaysia and hence the transfer does not require any consideration from her son. The
agreement of the transfer must be documented to enforce the contract as their relationship
alone is insufficient to prove the validity of the contract.

Question 2

In brief, a contact is a legally binding exchange of promises or agreement between parties.

To establish a contract, there must be an agreement which is the meeting of minds between
the parties concerned. One of the elements of a valid contract is consideration.
Consideration is given in return of the performance of the promise and stated under Section
2 (d) of the Contract Act 1950 (“the Act”). However, there will be at times when the
contract could not be partly or fully performed by the promisor. Does waiver of the
performance of contract is recognize in Malaysia? In the present case, Rizuan has offered
Krishan sum of RM7,500.00 to in cheque, and asked if it could waive the loan agreement
between them amounting to RM10,000.00. Krishan had appointed a solicitor and demanding
the remaining of the loan, even though he had cashed the cheque.

In the present case, the issue is whether Rizuan is bound to pay the remaining balance of
RM 2,500.00 to Krishan under Section 64 of the Act.

Section 2 (d) of the Act set the definition on consideration. consideration is when, at the
desire of the promisor, the promisee or any other person has done or abstained from doing,
or does or abstains from doing, or promises to do or to abstain from doing, something, such
act or abstinence or promise is called a consideration for the promise. Consideration gives
value to the promise as it is something that is given in return of the promise. Section 26 of
the Act provides that any agreement without consideration is considered void. Any promise
without consideration cannot be enforced as it does not satisfy the requirement to be a valid
contract.
In common law, the position of waiver of performance is not supported by consideration
void. This general rule was established in Pinnel's Case (1602). In this case, Pinnel had sued
Cole, for the debt with sum of £8 10s. The defendant, Cole, argued he had, at Pinnel's
request, paid £5 2s 2d before the debt was due, and Pinnel had accepted it as full
settlement of the debt. The decision in Pinnel’s case has set the rule that a smaller sum
cannot satisfy a larger sum unless the payment is made on earlier date that was due, it is
payable at a different place or it is made in a different mode.

However, the law in Malaysia does not follow the same position as common law. Section 64
of the Act provides that “promise may dispense with or remit performance of promise”
which means every promise may dispense with or remit, wholly or in part, the performance
of the promise made to him, or may extend the time for such performance, or may accept
instead of it any satisfaction which he thinks fit. A waiver of performance can take the form
of a forbearance waiver or a unilateral waiver. This section provides that it is permissible to
waive the full performance of the promise, as it deemed fit.

In the case of Associated Pan Malaysia Cement Sdn Bhd v Syarikat Teknikal & Kejuruteraan
Sdn Bhd, it is illustrated how the position of waiver of performance in Malaysia is positioned
differently compared to common law. The Supreme Court’s decision on the issue of waiver
may be summarized as; i) The law in Malaysia on waiver represents a departure from
English Law in that, our law does not require consideration or an agreement by virtue of s
64 of the Act, both of which are needed in English Law; ii) There was no evidence to show
that the respondent intended to abandon its claims under the various contracts.

Another case that be observed is Kerpa Singh v Bariam Singh (1966) 1 MLJ 38, the
defendant’s son had offered to give a cheque of RM4000 as full payment in order to
discharge his father from debt. He had endorsed the cheque and specified that should the
plaintiff rejected the settlement; the plaintiff should return the cheque. The Plaintiff’s legal
advisor had cashed the cheque and proceeded to secure the balance by issuing bankruptcy
note. The Federal Court held that since the plaintiff had accepted the offer by cashing the
cheque and retaining the money, it has indicated that he had agreed to discharge the
defendant from any further liability.
In the present case, Rizuan owed Krishan sum of RM10,000.00 and had promised to pay the
loan in 6 months. However, he had failed to fulfill his part of the contract and did not pay
Krishan the sum owed. Hoping to resolve the matter, Rizuan endorsed a cheque with sum
RM7,500.00 to Krishan and inquired whether the offer can be accepted as full settlement of
the loan. Krishan had cashed the cheque and subsequently appointed a lawyer to demand
the remaining balance.

The act of Krishan cashing the cheque and retaining the money does amounts to accepting
the offer of RM7,500.00 as full and final settlement of the loan. It has been stipulated that
should Krishan refused to accept the amount as final settlement, he should have decline and
return the cheque to Rizuan to indicate that the smaller sum is rejected. If Krishan intended
to recover the full amount of the loan, his action should be clear and unambiguous. As the
condition of the acceptance has been conveyed to Krishan, Krishan’s action has acted in
accordance to the terms of acceptance which send a message that he had accepted the
offer. In the case of Kerpa Singh v Bariam Singh, similar outcome was delivered as the act
of cashing the cheque, retaining the money has indicated that the loan has been resolved
with the settlement.

In applying the issue of Rizuan and Krishan, in light of the case Associated Pan Malaysia
Cement Sdn Bhd v Syarikat Teknikal & Kejuruteraan Sdn Bhd, the lesser sum was paid at
the same time and place at which the greater sum was owed. Therefore, RM 7,500 is in
satisfaction of the whole debt, the said payment is a good consideration. Hence, the whole
debt is discharged. Neither consider nor an agreement will be necessary

To conclude, Rizuan is not obliged to pay the balance amount of the loan. Krishan is not
entitled to the remaining of RM2,500 as his action has indicate that he had agreed with the
manner of resolving the loan which, through accepting the smaller sum. While no verbal or
written acceptance was conveyed, his action of cashing and retaining the money are in line
with the terms stipulated by Rizuan. Hence, Rizuan is not bound to pay the remaining
balance of RM 2,500.00 to Krishan under Section 64 of the Act.