CONSIDERATION

LAW 436
CONTRACT1Sept-Jan16
Consideration (return)
CA 1950
S.10(1) all agreements are contracts if
they are made by the free consent of the
parties competent to contract, for a
lawful consideration and with a lawful
object.
**S.2(d), s.2(e), s.2(f)
S.26- an agreement without
consideration is void, unless(a) (b) (c)
Definition/meaning
Something that must have value in the
eyes of the law
A return (balasan) for the promise made.

Eg:
Adam promises to be a trainer for The Voice.
The TV station will pay him 1 million dollars
as consideration for his promise.
Without consideration, a promise will only be
treated as gratuitous. (not legally binding)
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Currie v Misa (1875)- the meaning of
valuable consideration
This case was cited by Hashim Yeop A
Sani J in Macon Works and Trading v
Phang Hon Chin&Anor[1976] 2 MLJ 177
as to the meaning of a valuable
consideration.
Requirements
1. Act or Forbearance
-consideration maybe an act or an abstinence
from doing something ie; giving something
of value to another or may forbear from
exercising a legal right.
Sharma J in Guthrie Waugh Bhd v Malaiappan
Muthuchumaru [1972] 1 MLJ 35
Where he stressed that consideration may be
an act or abstinence,at the desire of the
promisor..
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..a forbearance to exercise a legal right is
also good consideration..if at the instance
of the debtor, the creditor forbears to
sue..there is sufficiency of consideration
Osman B. Abd Ghani v United Asian Bank
Bhd [1987] 1MLJ 27
- There was a request for a forbearance to
sue and there was forbearance in fact,
therefore the courts held that this was valid
consideration.
2.Mutual Promises
-consideration may contain mutual promises.
Mutual promise a promise made in return for
a promise.
K Murugesu v Nadarajah [1980] 2 MLJ 82
Appellant promised to sell his house to the
respondent but failed to do so. The
respondent applied for specific performance.
Counsel for appellant argued that there was
no consideration therefore the agreement
was void.
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Chang Min Tat FJ directed the court to
illustration (a) of s.24 CA 1950. (mutual
promise)
His Lordship cited Holt CJ in the case of
Harrison v Cage (1698) who stated that , a
promise made without consideration is void,
but where there is a promise against a
promise, one promise is a consideration for
the other because each may have his action
against the other for non performance
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Mahmud bin Adam &Ors v Mat bin Ismail &
Ors[1984] 1 CLJ 99
The consideration in this case was the oral
undertaking given by the defendants to
repay the bank loan with interest in
return for the plfs undertaking to
release the housing project to a 3rd party.
*Note the provision on reciprocal promises
in s.2(f)
Executory and Executed Consideration

Executory:
One party makes a promise in return for a
promise from the other. At the time of
the agreement, neither promise has
been fulfilled.
Eg: A promises to pay the price of the
goods he ordered from B in return for Bs
promise to deliver the goods to him.
Executed:
One party makes a promise in return for
the performance of an act. In such a
situation, one party has completed or
performed their part of the bargain, but
the other party has not fulfilled their
promise. The party who has performed
their part is said to have executed their
consideration.
Wong Hon Leong David v Noorazman Adnan
[1995] 3 MLJ 283
Appellant promises to pay the respondent a fee
for his assistance to obtain an approval for an
application for subdivision of land. When the
approval was received, the appellant refused
to pay on the grounds that the resp. did not
provide any consideration to the agreement.
The CA held that a promise in exchange for a
promise is good consideration; in this case, the
consideration was executory.
Baharuddin bin Abas v Yaacob bin Sulaiman
& Anor [1999] 6 CLJ 569
The contract was a joint venture agreement
where the plf contributed land as part of
the consideration and the def as
developers were to contribute their
expertise and working cost as
consideration in return. These were
considered to be executory consideration.
(Chin Fook Yen J)
Executory and Executed Consideration in
unilateral and bilateral contracts.

Unilateral contract: the obligation that is

to be performed is only from one
party/side, and the consideration in an
executed consideration. (Carlill v Carbolic
Smoke Ball)
Bilateral contract: Outstanding obligations
remain on both sides consideration
being executory; both parties made
reciprocal promises to each other.
Past Consideration
Difference between executed consideration and
Past consideration
Executed consideration: Both the promise and

the act which forms the consideration are

integral and co-related parts of one transaction.
Past Consideration: A mere sentiment or

gratitude or honour prompting a return for

benefits received; the promise is subsequent to
the act and independent of it not part of the
same transaction.
Re McArdle [1951] Ch 669
The property was jointly owned by several siblings.
The plf, (wife of one of the siblings) paid for repairs
done to the house. After this has happened, the
siblings agreed to pay the plf 488 as
consideration for the repairs. The issue was
whether the consideration was good consideration?
Held: The CA stated that as the repairs had been
carried out before the agreement to pay was made,
it was past consideration, therefore not a good
consideration.
Exception
Under the English law of contract, past consideration
is no consideration. However, an exception to the
rule exist when the act was done at the request of
the promisor, although the promisors promise came
after the act was done.
Lampleigh v Braithwait (1615) Hob 105
The def had committed murder and requested the plf
to seek and obtain a royal pardon for him. The plf
succeeded in obtaining the pardon. The def then
promised to pay the plf 100.
Held: The consideration was good, although past,
because it was from the request of the promisor.
Past consideration under the CA 1950

The law in Msia is different regarding past

consideration.
s.2(d) CA 1950 stated the words, has done or
abstained from doing or does or abstains
from doing or promises to do or abstains from
doing indicates the wide ambit of the
definition of consideration. Past consideration,
is quite valid where the Contracts Ordinance is
applicable..
Sharma J in Guthrie Waugh Bhd v Malaiappan
Muthuchumaru [1993] 2 MLJ
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The provision in s.2 (d) actually incorporated the
exception to the rule of past consideration under
English law. Note that s.2(d) uses the phrase,
at the desire of the promisor.. (same meaning as
at the request of the promisor under English law)
Cases:
HSBC v Syarikat United Leong Enterprise Sdn Bhd
& Anor [1993]
SEA Ins. Bhd v Nasir Ibrahim[1992]
Lau Ngiik Ping & Anor v Bank Pertanian Malaysia
[1992]
Consideration from promisee or any other
person

s.2 (d)promisee or any other person

-consideration may come from the
promisee or any other person. (3rd party)
Kepong Prospecting Ltd & Ors v Schimdt
[1968] 1 MLJ 170
Note: There are 2 issues in this case;
consideration and privity of contract.
Only consideration will be discussed
here.
Kepong Prospecting v
Schmidt
Tan 1954-1
KPL
and created
Schmidt (engineer) apply for mining permit
continue
Held: Privy Council:
1955 agreement- Consideration from Schmidt his
services as the consulting engineer. Valid, but his
services will only be from the time the company was
created.
1954 agreement- although the agreement was
between KPL and Tan, s.2(d) states that
consideration may move from the promisee or any
other person, therefore the PC acknowledged that
the consideration from Schmidt was valid.
(note: however, because of the privity of contract,
Schmidt cannot enforce the 1954 contract)
Consideration need not be adequate, just
sufficient

Difference between sufficient and

adequate under the law of contract:
Sufficiency in law is synonymous with
validity with regards to consideration
Federal Court in Tan Chiw Thoo v Tee Kim
Kuay [1997] 2 MLJ 221
-as long as the consideration is valid in the
eyes of the law, it is sufficient. It need
not be the true value of the return or the
benefit received.
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Chapell and Co v Nestle Co Ltd [1960] AC
87
-the issue on consideration was whether
the chocolate wrappers were sufficient
consideration. To purchase the records, a
person would have to send 3 chocolate
wrappers with a postal order of 1s. 6d.
HL: the acquisition of the wrappers and
the advertisement gave benefit to
Nestle, directly or indirectly, therefore
the acquiring and delivering the
Malaysian position
Explanation 2 of s.26:
As long as consent is freely given, the
contract will not become void just
because the consideration is inadequate.
But the inadequacy of consideration will
be taken into account by the court in
determining if consent was freely given.
See illustration (f) and (g)
cases
Phang Swee Kim V Beh I Hock
Vyramuttu v State of Pahang

Sandrifarm Sdn Bhd v Pegawai

Pemegang Harta Msia

The cases above illustrated that although
the consideration seemed to be
inadequate, there was no evidence of
fraud, duress or undue influence in the
transaction. Therefore the contracts
were valid.
continue
TAC Construction Trading v Bennes
Engineering [1999] 2 CLJ 117
-the courts will not interfere into the
fairness or adequacy of the bargain as
long as there is consideration.
**See Abd Malik Ishak Js statement at p
143 of the case report.
Thong Guan Co v Lam Kong Co (No 2)

[1998] 3 CLJ 964 similar approach by

the court.
Consideration must be real (although not
adequate)

White v Bluett (1853)

A promise not to complain frequently is

considered as insufficient consideration.

Contrast with:
Ward v Byham [1956] 2 All ER 318

the consideration here was to take care of

their illegitimate child and to ensure that
the child was happy. This was sufficient
consideration.
AGREEMENTS WITHOUT CONSIDERATION
(under CA 1950)

s.26. An agreement made without consideration

is void, unless
it is in writing and registered

(a) it is expressed in writing and registered under the

law (if
any) for the time being in force for the registration of
such
documents, and is made on account of natural love
and
affection between parties standing in a near relation to
each other;
Natural and affection
Queck Poh Guan v Quick Awang [1998] 3 MLJ 388
A transfer of land from the deceased mother to
the defendant was held as a gift , on account of
natural love and affection. The defendant had
assumed responsibility in taking care of her
mother as compared to the other children.
In determining the interpretation of natural love
and affection, the HC stated that this can be
gathered from evidence adduced from both
parties and surrounding circumstances.
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Kwan Teck Meng v Liew Sam Lee [1963] 1 MLJ 333
HC - memorandum of transfer made to his children are
on account of natural love and affection.(Gift)

Meaning of near relation

Taylor J in Re Tan Soh Sim v Tan Saw Keow [1951] 1 MLJ
21- the words relationship and near must applied and
interpreted in each case according to the mores of the
group to which the parties belong and with regards to
the circumstances of the family concerned
continue
Briggs J- on natural love and affection
-means, not only reasonably to be
expected but reasonably to be
expected, having regard to the normal
emotional feelings of a human beings.
standing in near relation: emotional
feelings required must be a special type,
which springs from the near relation
aspect. Therefore the near relation is
crucial to determine whether this section
applies.
s.26(b)
or is a promise to compensate for
something done
(b) it is a promise to compensate, wholly
or in part, a person who has already
voluntarily done something for the
promisor, or something which the
promisor was legally compellable to do;
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Meaning of voluntary done
JM Wotherspoon v Henry Agency House
[1962] MLJ 86
Plf did something at the suggestion of the
def firm. Court decided that in the
ordinary meaning of the word
voluntary, this is not considered as
voluntary. Therefore, the promise made
without consideration was not a contract
continue
Leong Huat Sawmill Pte Ltd. v Lee Man
See [1985] 1 MLJ 47
The logging work done by the respondent
was not voluntary because there were
conditions attached to it (payment will
only be made at the end of the contract
and provided that the work was
satisfactory). Hence the section does not
apply here.
s.26(c)
or is a promise to pay a debt barred by
limitation law
(c) it is a promise, made in writing and
signed by the person to be charged
therewith, or by his agent generally or
specially authorized in that behalf, to pay
wholly or in part a debt of which the
creditor might have enforced payment but
for the law for the limitation of suits.
Sri Kapaleeswarar Temple v T
Tirunavukarasu AIR 1975 Mad 164
Illustration (e) under s.26

Special Case:
Scholarship agreement- s. 4 Contracts
Amendment Act 1976- valid even if there
is no consideration.
UM v Lee Ming Chong [1986] 2 MLJ 148
Agreements without consideration under
common law

Tutorial Task:
Appoint group members to present each of
the sub-topics below:
3 situations:
1. Public Duty

2. Contractual Duty with the other party

3. Contractual Duty with a 3rd party

Pinnels Rule: s.64 CA 1950
Pinnels Case (1602) 77 ER 237
Pinnel brought an action against Cole for the
recovery of a debt owed by Cole. Cole pleaded that
he had repaid part of the debt and that it was
accepted by Pinnel, in satisfaction of the whole
debt.
Held: Payment of a lesser sum cannot satisfy the
whole amount of the debt., unless it is made on an
earlier date, it is payable at a different place or is
made in a different mode. These different forms
may constitute the consideration for the promise to
dispense the larger debt.
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Foakes v Beer (1884) 9 App Cas 605 HL
Accord and satisfaction.
s.64 CA 1950
Promisee may dispense with or remit
performance of promise 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.
cases
Tutorial Task
Tiun Eng Jin v Wong Sie Kong

Amusu Properties v Muruchadayah

Jagjit Singh v Arthur Heng

Kerpa Singh v Beriam Singh

Chunna Mal Ram Nath v Mool Chand Bhagat

NOTE: The difference between the Pinnel

Rule and s. 64 CA 1950.