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    Chapter 4.2 - Consideration

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    Thư Minh
    This document provides an overview of consideration under Malaysian contract law. It defines consideration and outlines the key principles, including: - Consideration must involve detriment to the promisee or benefit to the promisor. - Consideration can be executory, executed, or past. Executory consideration involves future promises, executed involves a contemporaneous act, and past involves a prior act. - Past consideration is generally not valid unless requested by the promisor or to compensate a prior voluntary act. - Exceptions to the requirement for consideration include natural love/affection between near relations and time-barred debts reduced to writing. - Consideration does not need to be adequate or move from the promisee,

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    Chapter 4.2 - Consideration

    Uploaded by

    Thư Minh
    24 views28 pages
    This document provides an overview of consideration under Malaysian contract law. It defines consideration and outlines the key principles, including: - Consideration must involve detriment to the promisee or benefit to the promisor. - Consideration can be executory, executed, or past. Executory consideration involves future promises, executed involves a contemporaneous act, and past involves a prior act. - Past consideration is generally not valid unless requested by the promisor or to compensate a prior voluntary act. - Exceptions to the requirement for consideration include natural love/affection between near relations and time-barred debts reduced to writing. - Consideration does not need to be adequate or move from the promisee,

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    This document provides an overview of consideration under Malaysian contract law. It defines consideration and outlines the key principles, including: - Consideration must involve detriment to the promisee or benefit to the promisor. - Consideration can be executory, executed, or past. Executory consideration involves future promises, executed involves a contemporaneous act, and past involves a prior act. - Past consideration is generally not valid unless requested by the promisor or to compensate a prior voluntary act. - Exceptions to the requirement for consideration include natural love/affection between near relations and time-barred debts reduced to writing. - Consideration does not need to be adequate or move from the promisee,

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    24 views28 pages

    Chapter 4.2 - Consideration

    Uploaded by

    Thư Minh
    This document provides an overview of consideration under Malaysian contract law. It defines consideration and outlines the key principles, including: - Consideration must involve detriment to the promisee or benefit to the promisor. - Consideration can be executory, executed, or past. Executory consideration involves future promises, executed involves a contemporaneous act, and past involves a prior act. - Past consideration is generally not valid unless requested by the promisor or to compensate a prior voluntary act. - Exceptions to the requirement for consideration include natural love/affection between near relations and time-barred debts reduced to writing. - Consideration does not need to be adequate or move from the promisee,

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    BUSINESS LAW

    Law of Contract
    Chapter 3.2 - Consideration
    2

    Objective
    • To understand the significance and importance of
    consideration
    3

    Course Content
    • Consideration
    • Past consideration
    • Exception under s26 Contracts Act 1950
    • Natural love and affection
    • Accord and satisfaction
    • Consideration need not move from the promise (Sự trao
    đổi về mặt lợi ích k cần thiết đến từ bên đưa ra lời hứa)
    • Consideration need not be adequate (Sự trao đổi về mặt
    lợi ích k cần thiết phải cân bằng về mặt giá trị)
    4

    Consideration
     There have been a number of case law definitions of
    consideration, for example Currie v Misa (1875):
    “A valuable consideration in the sense of the law may consist
    either in some right, interest, profit or benefit accruing to one
    party, or some forbearance, detriment, loss or responsibility
    given, suffered or undertaken by the other.”
     Consideration can also be defined as a detriment suffered in
    exchange for a benefit received.
     This means that each party must promise to give or do
    something for the other.
     Using the language of purchase and sale, it could be said that
    one party must know that he has bought the other party’s
    promises either by performing some act of his own or by offering
    a promise of his own.
     Must exist in every contracts and it must have monetary value
    5

    Consideration
    • The Act provides an example in Illustration (a) of section
    24: -

    A agrees to sell his house to B for $10,000. Here, B’s promise to


    pay the sum of $10,000 is the consideration for A’s promise to sell
    the house, and A’s promise to sell the house is the consideration for
    B’s promise to pay $10,000. There are lawful considerations.
    6

    Consideration
    • Defined by s2(d) Contracts Act 1950:
    “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”
    7

    Consideration
    • There are 3 types of consideration based on the
    definition in s2(d) Contracts Act 1950:
    • … has done or abstained from doing… – Past
    • … does or abstains from doing… - Executed
    • … promises to do or to abstain from doing… - Executory
    8

    TYPES OF CONSIDERATION

    CONSIDERATION MAY BE:

    EXECUTORY PROMISES OBLIGATIONS TO BE PERFORMED


    EXCHANGED LATER

    ONE/BOTH PARTIES HAVE PERFORMED


    EXECUTED
    THEIR OBLIGATIONS

    PAST ACT HAS TAKEN PROMISES


    PLACE EXCHANGED
    9

    Consideration
    • EXECUTED CONSIDERATION is a performed, or
    executed, act in return for a promise. It is an act done
    at the time, e.g. payment there and then.
    10

    Consideration
    • EXECUTORY CONSIDERATION is a promise given
    for a promise, not a performed act. It is a promise to
    do in the future, e.g. a promise to pay in the future.
    • If, for example, a customer orders goods which a
    shopkeeper undertakes to obtain from the
    manufacturer, the shopkeeper promises to supply the
    goods and the customer promises to accept and pay
    for them. It would be breach of contract if either
    withdrew without the consent of the other.
    11

    Consideration
    • Anything which has already been done before a promise
    in return is given is PAST CONSIDERATION which, as a
    general rule, is sufficient to make the promise binding
    12

    Past Consideration

    S2(d) CA 1950 S26(b) CA 1950


    Illustration (c) to s26 CA 1950

    … at the DESIRE of the S26(b) CA 1950 … it is a


    promisor … has done or promise to compensate a
    abstained from doing person who has ALREADY
    VOLUNTARILY DONE
    something for the promisor

    It is restricted only to
    Illustration (c) to s26 CA
    cases where there has 1950 “A finds B’s purse and
    been a PRIOR REQUEST gives it to him. B promises
    by the promisor to give A $50. This is a
    contract”
    13

    Past Consideration
     The definition of the word “consideration” in s2(d)
    Contracts Act 1950 appears extensive enough to cover
    the aforementioned rule
     It provides that if the act was done at the desire of the
    promisor, then such an act would constitute
    consideration
     The phrase “has done or abstained from doing” implies
    that even if the act done was prior to the promise, such
    an act would constitute consideration
    14

    Past Consideration
    • Though s2(d) CA 1950 may not cover all cases of past
    consideration, one of the exceptions to the general rule of
    consideration, as provided in s26 CA 1950, appears to
    cover most of other such cases
    • S26(b) CA 1950 provides that an agreement made without
    consideration is void unless it is a promise to compensate
    a person who has already voluntarily done something for
    the promisor
    15

    Past Consideration
    • Illustration (c) of s26 lends further support to the view that
    past consideration in the circumstances provided
    constitutes a valid consideration. It provides: -

    A finds B’s purse and gives it to him. B promises to give A $50.


    This is a contract.
    16

    Exception under s26 Contracts Act 1950


    • According to s26 Contracts Act 1950, an agreement made
    without consideration is void, unless: -
    a) It is in writing and registered; OR
    b) Is a promise to compensate for something done (PAST
    CONSIDERATION); OR
    c) Is a promise to pay a debt barred by limitation law
    17

    S26(a) Contracts Act 1950


    • S26(a) Contracts Act 1950 states:
    “An agreement made without consideration is 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”
    • In other words, an agreement made on account of natural
    love and affection would be held to be binding in Malaysia
    if the requirements of s26(a) Contracts Act 1950 are
    expressed: -
    • It is expressed in writing;
    • It is registered (if applicable); and
    • The parties stand in a near relation to each other
    18

    S26(a) Contracts Act 1950


    • The meaning of the words ‘near relation’ varies
    from one social group to another as it depends
    on customs and practices of such groups
    • Under s26(a) Contracts Act 1950, it is a valid
    consideration provided the condition of ‘near
    relation’ between the parties is also met
    • Unfortunately, ‘near relation’ is not defined in the
    Act
    19

    S26(a) Contracts Act 1950


    • In Re Tan Soh Sim [1951] MLJ 21, an attempt was made
    to define ‘near relation’. The Court, in its judgment, said
    that ‘relationship’ and ‘near’ must be applied and
    interpreted in each case according to the mores of the
    group to which the parties belong and with regard to the
    circumstances of the family concerned
    20

    S26(a) Contracts Act 1950


    • If no consideration is given, then there will only be a
    contract if:
    • Writing
    • Registered (if necessary/required)
    • Love and affection between 2 people of near relation

    ReTan Soh Sim – look at the family & the situation they are in
    21

    S26(c) Contracts Act 1950


    • According to s26(c) Contracts Act 1950, if a debt is
    statute/time barred and the debtor promises in writing
    and he signs the document stating that he will return the
    money on a particular date, then this is a new contract

    • NOTE:
    • Under the Limitation Act 1953, any legal action must be brought
    within 6 years from the date of the breach
    • If NOT, time/statute barred from bringing an action
    22

    Consideration need not move from the


    Promisee
    • Under the Contracts Act 1950 a party to an agreement
    can enforce the promise even if he himself has given no
    consideration as long as somebody has done so
    • S2(d) Contracts Act 1950 reads “…when…the promisee
    or any other person has done…something, such act…is
    called a consideration for the promise.”
    Sold car to Ahmad & told him
    that the payment for the car
    should be made to Sam
    Ali Ahmad
    If Ahmad does not pay
    Sam, then Sam can sue
    Ahmad for payment
    under s2(d)

    Sam
    23

    Consideration need not move from the Promisee

    • Even though the contract is between A and B, the contract


    can be performed by C

    Sold car
    Ali Ahmad

    Money

    Ahmad’s father
    24

    Consideration Need not be


    Adequate
    • Under Malaysian law, the consideration need NOT
    BE adequate BUT must be SUFFICIENT
    • Explanation 2 to s26 Contracts Act 1950 provides
    that an agreement is not void merely because the
    consideration is inadequate
    • Illustration (f) to s26 Contracts Act 1950 shows the
    application of the rule: -
    “A agrees to sell a horse worth $1000 for $10…The
    agreement is a contract notwithstanding the
    inadequacy for the consideration.”
    25

    Consideration Need not be Adequate


     The issue of adequacy of consideration was dealt with
    by the Federal Court in Phang Swee Kim v Beh I Hock
    (1964)
     Here, R agreed to transfer to A a parcel of land on
    payment of $500 when the land was subdivided although
    the land was worth much more. R later refused to
    honour the promise contending that the promise was
    unenforceable. The trial judge held that the agreement
    was void due to inadequacy of consideration. The
    Federal Court reversed the decision and applied
    Explanation 2 and Illustration (f) of s26
    26

    Consideration Need not be


    Adequate
    • Consideration NEED NOT BE ADEQUATE (that is, equal
    in value to the consideration received in return). There is
    no remedy at law for someone who simply makes a poor
    bargain.
    27

    Let’s do some MCQs first

    Please download “Socrative for Student” app from your


    App Store/Google Play Store in your handphone

    Or alternatively, go to
    https://b.socrative.com/login/student/

    Under Room Name, type SINGH7905

    Start doing the questions now


    Q&A

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