Title: Business Law (LAW1013)
URL Source: blob://pdf/3188a64b-4118-49c2-83da-34e53df1d572
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BUSINESS LAW
## TOPIC 4:
## ELEMENTS OF CONTRACT
(PART 2)
- CONSIDERATION
PREPARED BY: ABIGAIL C. C.
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BLAW / LAW2013 REV 00
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when, at the desire of the promisor , the promisee 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 .
ELEMENTS OF CONTRACT:
3. Consideration
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Consideration is value for a promise .
When someone is willing to give value for a promise,
it shows that he takes the deal seriously and intends
to be bound by it .
Consideration comes in many forms .
It need not be quantified in terms of money .
For example : your willingness to stop from doing
something or give up something can constitute
consideration .
ELEMENTS OF CONTRACT:
3. Consideration
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ELEMENTS OF CONTRACT:
3. Consideration
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Wong Hon Leong David v Noorazman Bin Adnan
[1995] 3 MLJ 283
Appellant promised to pay RM 268 ,888 if the respondent assist him in
obtaining the approval for the application to convert and subdivide
certain land to be developed into housing estate .
The Respondent promise that he would assist the Appellant .
Judgment:
The exchange of mutual promises was a good consideration .
There was a binding agreement between them and the Respondents
claim for the fee succeeded .
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ELEMENTS OF CONTRACT:
3. Consideration
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ISSUES RELATED TO CONSIDERATION
1. Consideration Need Not be Adequate
2. Past consideration is Good Consideration
3. Natural Love and Affection is Valid Consideration
4. Accord and Satisfaction Part Payment may
Discharge an Obligation
5. Consideration Need Not Move from the Promisee
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ELEMENTS OF CONTRACT:
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Explanation 2 to Section 26 of CA 1950:
An agreement is not void merely because the consideration is
inadequate .
Illustration (f) to Section 26:
A agrees to sell horse worth $1000 for RM 10 . As consent to the
agreement was freely given .
The agreement is a contract notwithstanding the inadequacy of
the consideration .
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1. Consideration Need Not be Adequate
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3. Consideration
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2. Past Consideration is a Good Consideration
General rule : English law does not recognize past consideration .
Exception to general rule :
Lampleigh v Brathwait [1615] 80 ER 255
Judgment:
An act originally done at the request of the promisor , a promise
made subsequent to the doing of that act , was deemed binding
since the act constituted consideration .
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Section 2(d) of CA 1950
has done or abstained from doing implies that even if the
act done before the promise, such an act can constitute
consideration as long as it was done at the desire of the
promisor .
Section 26(b)
An agreement made without valid consideration is void unless
it is a promise to compensate a person who has already
voluntarily done something for the promisor .
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2. Past Consideration is a Good Consideration
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3. Consideration
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Illustration (c) to Section 26 of CA 1950
A finds Bs purse and gives it to him .
B promises to give A RM 50 . This is an agreement .
South East Asia Insurance Bhd v Nasir Ibrahim
[1992] 2 MLJ 355
Judgment:
Essence of consideration is that the promisee has taken upon itself
some kind of burden or detriment .
If the consideration and the promise are substantially one
transaction, it should not matter in what order they are given .
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2. Past Consideration is a Good Consideration
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English law :
Does not recognize natural love and affection as a valid
consideration .
Malaysian Contract Act :
Recognizes natural love and affection as valid
consideration if certain conditions are complied with .
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3. Natural Love and Affection is Valid Consideration
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3. Consideration
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Section 26(a) of CA 1950
Agreement without consideration, void, unless -
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
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3. Natural Love and Affection is Valid Consideration
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3. Natural Love and Affection is Valid Consideration
An agreement made on account of natural love and
affection would be held binding in Malaysia if the
requirements of section 26 (a) are present :
it is expressed in writing
it is registered (if applicable)
the parties stand in a near relation to each other .
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3. Natural Love and Affection is Valid Consideration
Illustration (b) to Section 26 of CA
A, for natural love and affection, promises to give his son, B,
RM 1, 000 .
A puts his promise to B into writing and registers it under a
law for the time being in force for the registration of such
documents .
This is a contract .
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English law :
General rule payment of a smaller sum is not satisfaction
of an obligation to pay a large sum .
Malaysian law :
General law in English law does not apply in Malaysia .
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
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3. Consideration
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Section 64 of the CA
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 .
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
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3. Consideration
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
Illustration
A owes B RM 5, 000 .
A pays to B, and B accepts, in satisfaction of the whole debt,
RM 2, 000 paid at the time and place at which the RM 5,000
were payable .
The whole debt is discharged .
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
Illustration
A owes B RM 5,000 . C pays to B RM 1,000 and B accepts
them, in satisfaction of his claim on A.
This payment is a discharge of the whole claim .
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
Kerpa Singh v Bariam Singh [1966] 1 MLJ 38
Court ordered the Respondent to pay the Appellant for a sum of
RM 8,650 .
30 July 1963 Rs son offered to pay RM 4000 as payment in full
in order to discharge his father from liability .
If the Appellant did not agree to the said settlement, the money
should be returned to him .
The cheque was cashed and the money retained by the
appellants solicitor .
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
Kerpa Singh v Bariam Singh [1966] 1 MLJ 38
On 6 Feb 1964 Appellant took out bankruptcy notice against the
respondent .
Court order :
Bankruptcy notice taken out by the appellant be set aside on the ground
that the appellants debt had been satisfied by smaller amount than the
original debt .
Appellant cashed the cheque given by the Rs son .
Appellant appeal on the ground : there was no accord and satisfaction .
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4. Accord and Satisfaction Part Payment may Discharge
an Obligation
Kerpa Singh v Bariam Singh [1966] 1 MLJ 38
Held :
As the creditor had accepted the tender by cashing the
cheque and retaining the money, he must be taken to agreed
to discharge the debtor from any further liability .
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A party to an agreement can enforce the promise even if he
himself does not give any consideration as long as
somebody has done so .
Section 2(d) of CA 1950
whenthe promisee or any other person has
done something, such actis called a consideration for
the promise
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5. Consideration Need Not Move From the Promisee
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3. Consideration
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5. Consideration Need Not Move From the Promisee
Venkata Chinnaya v Verikatar MaYa [1881] 1 LR 4
Facts:
A sister agreed to pay an annuity of Rs 653 to her brothers who provided
no consideration for the promise .
But on the same day their mother had given the sister some land,
stipulating that she must pay the annuity to her brothers .
The sister subsequently failed to pay the annuity and was sued by her
brothers .
Judgment:
She was liable to pay the annuity . There was a good consideration for the
promise even though it did not move from her brothers .
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REFERENCES
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> 1.
Lee Mei Pheng , Ivan Jeron Detta (2022), Business Law, 3rd Edition,
Oxford University Press.
> 2.
Dr Loganathan Krishnan, Parimaladevi Rajoo , Anne Chrishanthani Vergis
(2022), Principles of Business and Corporate Law, Malaysia, 4th Edition,
CCH Malaysia.
> 3.
Contracts Act 1950 (Act 136)
> 4.
Federal Constitution
> 5.
Civil Law Act 1965 (Act 67)
> 6.
Subordinate Courts Act 1948 (Act 92), Subordinate Courts (Amendment)
Act 2010
> 7.
Courts of Judicature Act 1964 (Act 91)