Topic 4: Elements of Contract (Part 2) - Consideration
Introduction to Consideration
Consideration is a key element of a contract.
Defined by Section 2(d) of the Contract Act 1950.
Consideration is what one party gives in exchange for the promise of another.
It can be an act, abstinence, or a promise.
Importance and Forms of Consideration
Consideration indicates seriousness and intent to be bound by a contract.
It can take various forms and does not need to be monetary.
Example: Willingness to refrain from an action or giving up something.
Case Study: Wong Hon Leong David v Noorazman Bin Adnan
Appellant promised to pay RM 268,888 for assistance in land development approval.
Mutual promises were considered good consideration, confirming a binding agreement.
Issues Related to Consideration
1. Consideration Need Not be Adequate
The adequacy of consideration is irrelevant to the validity of a contract (Explanation 2 to Section 26 of CA 1950).
Example: Selling a horse worth $1000 for RM 10 can be valid if consent is freely given.
2. Past Consideration is a Good Consideration
Generally not recognized in English law, but exceptions exist.
Example: Lampleigh v Brathwait - Past act at promisor's request can be valid consideration.
Supported by Illustration (c) to Section 26 of CA 1950.
3. Natural Love and Affection is Valid Consideration
Not valid under English law, but recognized in Malaysia if certain conditions are met (Section 26(a) of CA 1950).
Must be expressed in writing, registered, and between near relatives.
4. Accord and Satisfaction - Part Payment may Discharge an Obligation
Acceptance of part payment can discharge the full obligation under Malaysian law (Section 64 of CA 1950).
Example: A debt of RM 5000 discharged by accepting RM 2000 as full settlement.
5. Consideration Need Not Move from the Promisee
Section 2(d) of CA 1950 allows for consideration to come from a third party.
Case: Venkata Chinnaya v Verikatar MaYa - promise upheld even though consideration did not move from the brothers.
References
Lee Mei Pheng, Ivan Jeron Detta (2022): Business Law, 3rd Edition, Oxford University Press.
Dr. Loganathan Krishnan, Parimaladevi Rajoo, Anne Chrishanthani Vergis (2022): Principles of Business and Corporate Law, Malaysia, 4th Edition, CCH Malaysia.