CONSIDERATION
By the end of this chapter, the student
should be able to:
- Define consideration;
- Identify when consideration is
present;
- Explain and apply the legal principles
relating to consideration;
- Explain the distinction between
executory, executed and past
-
Section 26 of CA 1950:
- Section 2(d) of CA 1950:
“ Consideration is the price or something which one party pays to buy the promise or the act of
the other.
It can take the form of money, physical objects, services, promised actions, or even abstinence
from a future action.
Promisee must give something in return for the
For example:
A offers to sell his house to B at the amount of RM 250K. B agreed to buy the said house and
pay RM 250K.
A’s consideration is to pass the ownership to the B.
If A signs a contract with B such that A will
1. Executory :
One promise is made in return for another promise/ other party’s promise.
example:
1. Executory :
Illustration (a) of the S. 24.
A agrees to sell his house to B for RM 10,000. Thus, B’s promise to pay RM10,000 is the
consideration for A’s promise to sell the house; and A’s promise to sell the house is the
K. Murugesu v Nadarajah [1980] 2 MLJ 82
The Appellant agreed to sell a house to the Respondent at $ 26,000 only. Later on the A
refused to sell and alleged that there is no consideration.
Court held:
There is an executory consideration where a promise made by one’s party in return for a
2. Executed
where an act is done/ promise made in return for the performance of an act. (reward
situation).
example,:
Laila lost her wallet. She offers a reward of RM100 for anyone who found her wallet and returns her wallet. Majnun found her wallet and returns it to her. She paid the reward of
2. Executed
contract arises upon the execution of the consideration.
example,:
Laila lost her wallet. She offers a reward of RM100 for anyone who found her wallet and returns her wallet (promise). Majnun found her wallet and returns it to her (performance of the
act- Majnun’s consideration is executed to Laila’s promise- binding contract). She paid the
Carlil v Carbolic Smoke Ball Co. [1893] 1 QB 256
The company’s offer= promise.
Carlil bought, used the smoke ball and still suffered from influenza= performance of the
act- Carlil’s consideration is executed to the company’s promise- It creates a binding
contract). Held:
3. Past consideration
where a promise is made subsequent to and in return for an act that has already been
performed.
act done prior to the promise
Consideration which has been done
3. Past consideration
S. 26 (b) of CA S. 2(d) of CA
“……has done or abstained from doing…..”
3. Past consideration
Illustration (c) of section 26:
- A find B’s purse and gives it to him. B promises to give A RM 50. This is a contract.
Lampeigh v Braithwait (1615) 80 ER 225
B was sentenced to death for murder. Then he requested L (a lawyer) to do all he can as to
enable him to get pardon from the King OF London.
L then do everything that he can by using his own expenses and finally B successfully got the
pardon.
B then promised to give L a 100 pound. But
subsequently he failed to pay and L sued B for that.
B then argued that “ there was no consideration from L when B made a promise to pay money
Lampeigh v Braithwait (1615) 80 ER 225
B was sentenced to death for murder. Then
he requested L (a lawyer) to do all he
can as to enable him to get pardon from
the King OF London.
L then do everything that he can by using
his own expenses and finally B
successfully got the pardon.
(performance of the act-
Consideration
which has been done /completed before
Lampeigh v Braithwait (1615) 80 ER 225
B then promised to give L a 100 pound. But
subsequently he failed to pay and L sued
B for that.(promise)
B then argued that “ there was no
Lampeigh v Braithwait (1615) 80 ER 225
Court held:
There was past consideration from L.
He entitled for 100 pound for the service
that he done before the promise was
Kepong prospecting ltd v A.E Schmidt (1968) 1 MLJ 1970
Schmidt is a consulting engineer. He is assisting Mr. X in obtaining a prospecting permit for mining an iron in Johore. He also helped in a formation of a company; Kepong Prospective
Ltd. Subsequently, he was appointed as a Managing Director of the same.
After the company was formed, there was a contract between the company and Schmidt whereby the company will pay 1% of the value
Kepong prospecting ltd v A.E Schmidt (1968) 1 MLJ 1970
The clause stated that “… in consideration of the services given by S for or on behalf of the
company before its formation, after incorporation and future services”.
Kepong prospecting ltd v A.E Schmidt
(1968) 1 MLJ 1970
The issue is: whether there is a valid
consideration from S fro the promise of
the Company?
The Court held:
The service given by S before the promise
was made is considered as a valid
Section 26 of CA 1950
an ‘agreement
made without consideration is void'.
-
But
S26(a) of CA:
an agreement made on account of natural love and affection between parties standing in near
Illustration (b) of Section 26 of CA:
A, for natural love and affection , promise to give his son, B, RM1,000. A puts his
promise to B into writing and registers it under a law in force for registration of the said
Not defined under the Act.
Usually, members of immediate family. Eg: Farther & son/daughter, mother & son/
daughter .
But depending on customs of social groups.
For e.g. : Chinese adopted children are related to their adoptive parents and brothers.
Issues:
whether the document signed was valid according under section 26(a) of CA 1950? Whether the legal next of kin of TSS are
Court held:
The Khoo’s and Tan’s children are related to the four adopted children of Tan Soh Sim only in a special limited way, which is not
near.
Chinese adopted children are related to their
adoptive parents and brothers. However, they were not related to the family of the adoptive
S26(b) of CA:
“…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
Facts: Schmidt, an engineer, had assisted an
Court held:
there was a valid consideration and Schmidt was entitled to the amount owed to him by the
Performed or done of one's free will, impulse or choice, not constrained or
Facts:
- A dispute arose between a Malaysian and
English company resulting from an
arrangements. Both had acted as agents for various products.
- The arrangement is that the Malaysian company
Facts:
- In this particular dispute, the Malaysian
company had arranged a buyer for such confectionary and the English firm found a seller.
- The D (Malaysian firm) wrote a letter to the P
(English company) agreeing that if X Co defaulted in payment, it will pay the price of the goods.
- Later, X Co went bankrupt and defaulted in
- Issue: Whether the P was a person who had
already voluntarily done something for D?
- Court Held:
- There were promises of compensation made by
the defendant firm to the plaintiff in respect of consignment , but these promises were not
supported by consideration.
- The P had acted on the suggestion of the D =
could not be said to have been done voluntarily. Thus, the promise to compensate was not
Illustration (d) of S. 26:
A supports B’s infant son. B
Promises to pay A’s expenses in so
doing. This is a contract.
A pays the fine imposed on B by the
Section 26 (c) of CA:
an agreement to pay a statute-barred
debt.
a promise, made in writing and
signed by a debtor /his authorised
A statute-barred debt
refers to a
debt which cannot be recovered
through legal action because of
a
Limitation for action in contract
under Limitation Ordinance 1953:
6 years.
Eg: 6 years is given for action arising
from a breach of contract. After the
allocated time expires, the
Illustration (e) to s. 26
A owes B RM 1,000, BUT the debt is barred by limitation. A signed a written promise to pay
what is the amount of
Explanation 2 of Section 26:
Agreement is not void merely because the
consideration is not adequate. It
might be void if the parties to the
contract can show that the consent
Illustration (f) of CA?
A agrees to sell a horse worth RM 1,000 for
RM 10. A’s consent to the agreement
was freely given. The agreement is a
contract notwithstanding the inadequacy
Facts:
There was an oral agreement made
between A and R in which R agreed to
transfer the land to A on payment of
$500. upon payment of $500, A possessed
the land.
Later, R claimed that the A had trespassed
on his land and he brought an action
Court Held:
Consent given by R was freely given. It was
not caused by coercion or undue
influence.
The inadequacy of consideration is
Section 2(d) of CA 1950
Eg: A, B and C are parties to an agreement in which C promises to pay A RM1000 if B will
repair C's house. B repairs C's house and C does not pay A anything.
COMMON LAW OF ENGLAND:
Consideration must move from promisee.
MALAYSIAN LAW:
Party to an agreement CAN enforce a promise eventhough he has given NO consideration,
as long as has been done by someone.
S. 2 (d) ...consideration can move from the
Facts:
A sister agreed to pay an annuity of Rs653 to her brothers (who provided no
consideration), if their mother transfer some land to her.
When their mother had given the sister some land, the sister failed to fulfill her promise.
Court Held:
She was liable on the promise on the
ground that there was valid
consideration for the promise
General rule (English Contract Law):
Waiver of a right that is not supported
by consideration is VOID.
Payment of the SMALLER sum IS NOT A
EXAMPLE
A owes B a debt of RM 200. Then, B
accept RM 100 being the payment made
by A in full satisfaction of debt.
B IS NOT BOUND by his performance of
waiving .
He may subsequently sue A for the
EXAMPLE
Pinnel owes Cole 8 pounds 10s at
11/11/1600. Then he paid 5 pounds 2s
only and has been accepted in full
Court
Payment of the lesser sum in
satisfaction of a greater sum is not
satisfaction on the whole.
Malaysian Law:
Section 64 of CA 1950,
“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
Illustration S. 64:
a) Where the promisee forbids the promisor from performing his act.
b) Payment of smaller sum in satisfaction of larger sum c) Payment by third party in discharge of a debt
d) Where the amount owing under a contract is
unascertained and a person accepts an agreed sum in satisfaction, the debt is discharged.
e) A composition with creditors for the payment of a smaller sum, an arrangement whereby each creditor
Court laid down principle:
When promisee / creditor agrees to accept the smaller sum in satisfaction of a large sum, he
IS BOUND to such waiver of promise.
He CANNOT LONGER CLAIM for the balance of the whole debt even though he receives NO
Facts:
Bariam Singh (Debtor) owed Kerpa Singh
(Creditor) $8869.64. The debtor’s son wrote a letter to Kerpa that Kerpa Singh’s offering $4000 in full satisfaction of his father’s debt
and endorsed a cheque for the amount and stipulating that should Kerpa Singh refuse to accept his proposal, he must return the cheque.
Kerpa Singh having cashed the cheque and
retained the money and secure the balance of the debt by issuing a bankruptcy notice on the
Facts:
Kerpa Singh having cashed the cheque and
retained the money and secure the balance of the debt by issuing a bankruptcy notice on the
Court held:
The acceptance of the cheque in full satisfaction precluded them from claiming the balance.
The act of promisee/creditor by acceting the smaller sum of cheque WILL WAIVE the performance of promise that made
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