Chapter Three

Consideration

1 General [3 01]
Definition [3 01]
Exceptions to section [3.03]
2 Types of Consideration [3.04]
Executory, executed or past consideration [3.04]
3 Consideration and existing duties [3.08]
Illustration by way of case law [3.08]
4 Waiver of performance [3.09]
Promisee may dispense with or remit performance
of promise [3.09]
5 Equity [3.10]
Equitable Estoppel [3.10]

1 General
Definition

13.01] In short 'consideration' is the value given in return for a promise

as defined in section 2(d) of the Contracts Act 1950. A classic definition of
consideration is found in the case of Currie v Misa:'

1 [1875] 10 LR Exch 153, 162.

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 CHAPTER THREE
13.02]

... A valuable consideration, in the sense of the law, may consist

co either in
right, interest, profit, or benefit accruing to the one party, or some forbearance ;
detriment, loss, or responsibility given, suffered or undertaken by the other ,
Consideration is also defined as the price of a bargain which ii„,„-,. o
„ adopted
by the House of Lords in Dunlop v Selfridge: 2
An act or forbearance of one party, or the promise thereof, is the price for
which the other is bought, and the promise thus given for value is enforceable.
(Pollock on Contracts, 8th ed., p. 175.)
13.021 A contract must be supported with consideration because acr°anntet,
is only legally binding if it is made in return for another promise
either a positive act or something given up. Otherwise the agreement is
void as stated in section 26 of the Contracts Act 1950. However, there are
exceptions.

Exceptions to section 26

j3.03] An agreement is legally binding even though it is not supported

with consideration if it falls under any of the exceptions stated in section
26 as follows:
(1) If an agreement is put in writing, registered if the law requires registration
and made on the account of natural love and affection arising from
persons standing in near relations.3
(2) A promise to compensate for something voluntarily done or for something
the promisor was legally compellable to do.4
(3) An acknowledgement put in writing and signed by the debtor to pay a
statute barred debt either wholly or in part.'

2 [1915] AC 847, HL.

3 in Re Tan Soh Sim, Deceased; Chan Lam Keong and 4 Others v Tan Saw Keow and
3 Others [1951] 1 MU 21, CA.
4 JM Wotherspoon & Co.Ltd v Henry Agency House [1962] 1 ML.1 86.
5 For acknowledgement of statute barred debt under Limitation Ordinance 1953:
s 26(1), see Halirnah binti Abdullah v Tengku Mariah binti Sultan Sulaiman [1980] 1
Mil 240; Overseas-Chinese Banking Corporation Ltd v Philip Wee Kee Puan [1984]
2 Mil 1, PC.

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 CHAPTER THREE [3.05]

2 Types of Consideration
Executory, executed or past consideration

[3.041 Consideration can be executory, executed or past:

(1) Executory consideration. Here the bargain consists of mutual promises.
The consideration in support of each promise is the other promise. For
example A orders a cupboard from B to be paid when it is delivered.
There are two promises for the law to enforce, B's promise to deliver the
cupboard and A promise to pay for it.
(2) Executed consideration. Here the consideration for the promise is a
performed or executed act. For example A orders a cupboard from B and
pays for it. If B does not deliver within the specified time, A can sue B
putting forward his executed act, ie payment of money. Similarly a person,
who return's a lost cat where there is an offer for reward, may claim the
reward. Because the act of returning the cat is executed consideration.
(3) Past consideration. Anything which has already been done before a
promise in return is given is past consideration. For example B looked
after A's cat when A was away on holiday. Upon returning, A promise
to give B RM100 for looking after his cat. Therefore A's promise to give
RM100 is for B's past consideration, ie looking after the cat.6
13.051 Both executed and executory consideration is provided at the
time when the promise is given. In Wong Hon Leong David v Noorazman
bin Adnan,7 Gopal Sri Ram JCA (as he then was) distinguishing between
executory and executed consideration in the following words:
Now, it is well settled that consideration may be executory or executed. If A
agrees to mow B's lawn for RM10 and B agrees to pay him RM10 in exchange
for this service, there is, in the eyes of the law, a valid and binding agreement
between A and B. This is borne out by the words of s 2(e) of the Contracts Act
1950 which declares: 'every promise and every set of promises, forming the
consideration for each other, is an agreement.'
The consideration in such a case is said to be executory, namely, the
exchange of the mutual promises. When the lawn is mowed, the act promised
has been done and the consideration is said to have become executed. It is
not and has never been the law of this country that to support an agreement,
consideration must always be executed. Executory consideration suffices. Of

6 Lampleigh v Brathwait 80 ER 255, (1615) EWHC KB J17; Re Casey's Patents [1892]

1 Ch 104; Poa On and Others v Lau Hu Long and Others [1980] AC 614; South East
Asia Insurance Berhad v Nasir Ibrahim [1992] 2 MU 355.
7 [1995] 3 MU 283, CA.

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 CHAPTER THREE
[3.061

course, A's right to sue for the RM 10 may not arise until he has performed his
part of the bargain or has been prevented by B from performing it.
The illustration we have given and the principle we have stated are so
elementary that they may be found in any standard work upon the subject
But we have been compelled to do so because a reading of the judge's note of
the proceedings in the court below has left us with the distinct impression that
these elementary propositions may have been misunderstood by the appellant
and by the court.8
[3.06] Consideration can move from the promisee or any other person as
can be inferred from section 2 (d) of the Contracts Act 1950:
when, at the desire of the promisor, the promisee or any other person has done
or abstained from doing ...
Under section 2 (d), a party to an agreement can enforce a promise even
though he has given no consideration, so long as somebody else has done
so. For example A promises to give B RM500 if B can get C to paint A's
portrait. C paint's A portrait. Even though B himself has not given any
consideration, B can sue A for the RM500 if A refuses to pay because
consideration has moved from C.
[3.07] Consideration must be of some value, ie sufficient. It need not be
adequate. As long as some value is given the court will not ask whether
it is proportionate in value to the thing given in return. In other words
there is no remedy for someone who makes a bad bargain as stated in the
explanation of section 26 and illustrated in illustration (f).9 However, the
courts will question the adequacy of consideration if there is an element
of involuntariness such as coercion (force), undue influence (improper
pressure) or fraud as illustrated in illustration W."'
In Phang Swee Kim v Beh I Hock," the respondent agreed to transfer to
the appellant a parcel of land on payment of RM500 when the land was
subdivided which was worth much more. The respondent later refused to
honor the promise which they argued is unenforceable. The trial judge held
that the 'agreement was void due to inadequacy of consideration
8 Ibid at 290.
9 Explanation 2 — An agreement to which the consent of the promisor is freely given
is not void merely because the consideration is inadequate; but the inadequacy of the
consideration may be taken into account by the court in determining the question
whether the consent of the promisor was freely given. Illustration 0`44 agrees to sell
a horse worth RM1,000 for RM10. As consent to the agreement was freely given.
The agreement is a contract notwithstanding the inadequacy of the consideration.
10 Illustration (g) — 'A agrees to sell a horse worth RM1,000 for RM10.
A denies that
consent to the agreement was freely given.'
11 [1964] MU 383, FC.

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 CHAPTER THREE 13.081

The Federal Court reversed the decision and applied explanation 2

and illustration C) of section 26 and cited the following statement from
Westropp CJ in the Indian case of Kedari Bin Ranu v Atmarambhat,12
where the law is in pari materia, ie similar, held that:
Mere inadequacy of consideration, it is true, unless it be so great as to amount
to evidence of fraud, is not sufficient ground for setting aside a contract, or
refusing to decree a specific performance of it. Inadequacy of consideration,
when found in conjunction with any other such circumstances as suppression
of the value of property, misrepresentation, fraud, surprise, oppression, urgent
necessity for money, weakness of understanding, or even ignorance, is an
ingredient which weighs powerfully with a Court of Equity in considering
whether it should set aside contracts, or refuse to decree specific performance
of them.

3 Consideration and existing duties

Illustration by way of case law
[3.08] Set out below are leading cases discussing consideration vis-a-vis
existing duties:
(1) Promise to pay additional reward for the performance of an existing
contractual or legal obligation is not enforceable because there is no
consideration to make that promise binding as illustrated in the following
cases:
(a) In Stilk v Myrick,' 3 two members of the crew of a ship deserted
in foreign port. The master was unable to recruit substitute and
promised the rest of the crew that they should share the wages of
the deserters if they would complete the voyage home short-handed.
The ship owners however repudiated the promise. The court held in
performing their existing duties the crew gave no consideration for
the promise of extra pay and the promise was not binding.
(b) In Collins v Godefroy," Plaintiff (P) was called by subpoena to
give evidence in a case involving the Defendant (D). He afterwards
alleged that D had promised to pay him six guiness for his loss of
time. P failed in his action since he was bound by law to attend the
trial. Therefore P had not provided any consideration.

12 [1866] B.H.C.A.C. 11, 18, 19.

13 [1809] 2 Camp 317.
14 [1831] 1 B & Ad 950.
 CHAPTER THREE
[3.09]

(2) However, if some extra service given is over and above the pre-existi
obligation that is sufficient consideration. Additional promise of reward 1
payments is legally enforceable as illustrated in Glasbrook Brothers
Limited v Glamorgan County Council and others.' 5
In this case the owners of a coal mine asked for and agreed to pay for
a special police guard for the mine. Later they repudiated liability sayi
ng
that the police had done no more than perform their public duty :f
maintaining order. The court held the police had done more than their
general duties because in normal circumstances the police would Only
provide a mobile force and not a stationary guard. Therefore they Were
entitled to the payment because their services were over and above their
pre-existing duties.
(3) A more modern approach was taken by the Court of Appeal in the
important case of Williams v Roffey Bros & Nicholls (Contractors) Ltd.16
The plaintiffs agreed to do carpentry work for the defendants at a fixed
price of £20,000. The work ran late.
The defendants were concerned that the plaintiffs will not finish work
on time and they (defendants) would be bound to pay a penalty in the
main contract, agreed to pay the plaintiffs an extra £10,3000 to ensure the
work was completed on time. They later refused to pay the extra amount.
The court expressed that a promise to pay an additional sum to secure
performance of an existing obligation is enforceable provided it was not
obtained by coercion or force, ie voluntary and the promisor received
benefit. Therefore the plaintiffs were entitled to the extra payment.

4 Waiver of performance
Promisee may dispense with or remit performance of promise
[3.091 Section 64 of the Contracts Act 1950 and the illustrations states
that the promisor can waive performance of the contractual obligation of
the promisee either wholly or partly. In doing so, the promisor cannot later
insist on performance of the contractual obligation. For example if, A owes
B RM500, B must give back A RM500.
However if B says A need not give back the debt due, then by virtue of
section 64 B can't sue A for non payment of the debt. If B accepts RM200
in satisfaction of the RM500 due, he cannot later sue for the balance of the

15 [1925] AC 270, HL.

16 [1990] 2 WLR 1153, CA.

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 CHAPTER THREE [3.101

debt. Acceptance of part payment discharges the actual sum due." Section
64 reads:
Every promisee 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.

ILLUSTRATIONS
(a) A promises to paint a picture for B. B afterwards forbids him to do
so. A is no longer bound to perform the promise.
(b) A owes B RM5,000. A pays to B, and B accepts, in satisfaction of
the whole debt, RM2,000 paid at the time and place at which the
RM5,000 were payable. The whole debt is discharged.
(c) A owes B RM5,000. C pays to B RM1,000 and B accepts them, in
satisfaction of his claim on A. This payment is a discharge of the
whole claim.
(d) A owes B under a contract, a sum of money, the amount of which
has not been ascertained. A, without ascertaining the amount, gives
the amount to B, and B, in satisfaction thereof, accepts the sum of
RM2,000. This is a discharge of the whole debt, whatever may be its
amount.
(e) A owes B RM2,000, and is also indebted to other creditors. A
makes an arrangement with his creditors, including B, to pay them a
composition of fifty sen in the ringgit upon their respective demands.
Payment to B of RM1,000 is discharge of B's demand.

5 Equity
Equitable Estoppel

13.10] Estoppel is a legal principle by which a person who makes a

statement may be prevented from retracting it. For example, if Ben, a party
to a legal relationship, promises Rose, the other party, that he will not insist
on his full rights under a legal relationship, and this promise is intended
to be acted upon by Rose, and is in fact acted upon, then Ben is estopped

17 Kerpa Singh v Bariam Singh [1966] 1 Mil 38, FC; Pan Ah Ba & Anor v Nanyang
Construction Sdn Bhd [1969] 2 MU 181, FC. This case dealt with a sale and purchase
of land. The deceased paid the respondent $10,000 as a deposit. Later the appellants,
as administrators of the deceased sued for the return of the deposit under the Contracts
Act 1950, s 64. The Federal Court held that the letter by the repondent company
dispensed the deceased from performing her part of the contract and therefore the
estate was entitled to the return of the deposit.

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 [3.10] CHAPTER THREE

(stopped because of his own previous conduct) from bringing an action

against Rose which is inconsistent with his promise, even if Rose give
consideration. Rose can use the principle of equitable estoppel a defen s se
against Ben should he attempt to enforce his original rights.
In Central London Property Trust v High Trees House,18asP leased a
block of flats to D. Due to the war, D was unable to sublet the flats, and s -
P agreed to accept half rent. P later claimed the full rent for the post waro
period. This claim succeeded.
However the court also considered whether P would have succeeded if
he had claimed the full rent back to the start of the war. Denning J (as he
then was), said that he would not have been successful because he would
have been estopped in equity from going on his promise.
Note that:
(1) The promise must be clear and unequivocal;
(2) There is pre-existing legal relationship between the parties;
(3) It must be inequitable for the promisor to go back on his promise and
insist on his strict legal rights;
(4) The promisee must have altered his position in reliance on the promise
made to him;
(5) Promissory estoppel can be used as a defense but not as an independent
cause of action.
Application of the doctrine of estoppel can be seen in Boustead Trading
Sdn Bhd v Arab-Malaysian Merchant Bank Bhd, 19 Gopal Sri Ram JCA
(sitting in the Federal court) made the following observation:
The time has come for this court to recognize 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.2°

18 [1947] 1 KB 130.
19 [1995] 3 MILJ 331, FC.
20 His Lordship restated this observation in the subsequent decision of the Court
of Appeal in Teh Poh Wah v Seremban Securities Sdn Bhd [1996] 1 MU 701 at
706-707, CA.