1.

INTRODUCTION

1.1. Definition
Contract is an agreement of a two parties especially once it is written its enforced
law. An agreement refers to a "meeting of the minds". There is no magic language
necessary to inform an agreement. However, there is an offer must be made by a
person to another and so acceptance. In other words, the sides (parties) of a contract
must agree given basic terms in order to avoid any misunderstandings which come up
after making contract.
Consideration is essential to the formation of any contract made without deed. It
distinguishes a bargain or contract from a gift. Lush J in the case of Currie v Misa
(1875) referred consideration consist of a benefit to the promisor or a detriment to the
promises as “valuable consideration, in the sense of the law, may consist either in some
right, interest, profit, or benefit accruing to one party, or some forbearance, detriment,
loss or responsibility given, suffered or undertaken by other”.
Lord Dunedin in Dunlop v Selfridge (1915) defined consideration as an act or
forbearance of one party, or the promise thereof, is the price for which the promise of
the other is bought, and the promise thus given for value is enforceable.
However, it is much wider in Section 26 of the Contracts Act 1950; the general
rule of an agreement without consideration is void and is defined in Section 2(d) of the
Contracts act 1950 as follows, “when at the desire of the promisor, the promise 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 court held that as far as the defendant was concerned, the deed was
executed by him neither for any past consideration, nor in respect of forbearance to sue
him for the supplies made to the estates, nor in consideration of any promise to supply
him goods on credit in future. Therefore, there was no cause defendant could be said to
have undertaken was a moral obligation (Lee Mei Pheng, 2005).

1
2. TYPE OF CONSIDERATION
There are three types of consideration which is executory, executed, and past.

2.1 Executory Consideration (future)

It is when one promise is made in return for another or a promise in return of
promise. For example:

 A agrees to sell his car for RM20 000/- to B. B promise to pay the sum of
RM20 000/- in consideration for A’s promise to sell the car, and A’s promise
to sell the car is the consideration for B’s promise to pay RM20 000/-. These
are lawful considerations.
2.2 Executed Consideration (present)
It is when a promise is made in return for the performance of an act. For
example:

 M lost pen and offered RM200/- to anyone who finds and returns the
documents to him. K found M’s pen in response to the offer and returns them
to M. By returning the pen, K has given consideration to M’s promise to pay.
Should M refuse to pay, K may take a legal action against him.
2.3 Past Consideration
Past consideration is where the promise is made subsequent to and in return for
an act that has already been performed, the promise is made on account of a past
consideration. For example:

 If K finds and returns M’s pen and gratitude, M promise to pay K RM200/- the
promise is made in return for a prior act.

2
3. THE CONDITIONS FOR VALID CONSIDERATION
There are few elements governing the law of consideration in Malaysia law which
is:

 It can be Past, Present, or Future Consideration

If one party voluntarily performs an act before the promise was made, the
consideration for the promise is said to be in past. Generally, English law does not
recognize past consideration.

 It needs not Necessarily Adequate, but Must be Sufficient

There is no requirement that the consideration must be at market value, as long

as the promise provides something in value.

 It needs not be Moved by the Offeree only

If a person provides consideration other than the promise then the promise
cannot enforce the contract. If the third party involved then problems may arise.

 It must be Real and Sensible

 It must be Lawful

4. EXCEPTIONS TO A REQUIREMENT FOR CONSIDERATION

Section 26 Contract Act 1950 provides:
i. Contract on account of natural love and affection.
ii. Contract to compensate something done in the past voluntarily.
iii. Contract to compensate something which the promisor legally compellable to
do.
iv. Contract to pay statute-barred debts.

3
5. CONCLUSION
As the conclusion, consideration is the important things to avoid legal issues in
the future, parties must come to an agreement by setting a value to specific goods,
services, or job performance. Consideration legally binds a contract, protecting both
parties from potential lawsuits or misunderstandings. In addition, consideration often
includes a section that determines loss responsibility. Having a contract that clearly
states this information helps a court to determine where the failure occurred, who is at
fault, and what penalty to award.

PHANG SWEE KIM v BEH I HOCK [1964] MLJ 383