CONSIDERATION

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A DEFINITION – SEC 2(d) CA 1950

B GENERAL RULE

C TYPES OF CONSIDERA-
TION

D RULES ON CONSIDERA-
TION

E EXCEPTION – SEC 26 CA 1950

 DEFINITION
Section 2(d),CA 1950 : “When at the desire
of the promisor, the promisee or any other per-
son has done or abstained from doing or does or
abstains from doing or promises to do or to
abstains from doing something, such as or
abstinence or promise is called a con-
sideration of the promise”
 SEC 2(d), CA 1950
 Consideration is the price of which one party pays to buy the
promise or act of the other.

 Literally : something that is given in return for something else.

 Eg : RM5 for a plate of fried mee.

 Forms : Act, abstinence, or promise to perform a future act/absti-

nence.
 TYPES

EXECU-
EXECUTED PAST
TORY
 1) EXECUTORY CONSIDERATION
DEFINITION EXAMPLE
An exchange of promises to per-
Salina promises to sell her purse to
form acts in the future.
Dina for RM50. Dina promises to pay
01 Eg : mutual promises. 02 RM50 for exchange of
tion. – mutual promises
considera-

WONG HON LEONG DAVID v NOORAZAMAN BIN ADNAN (1995) 3 MLJ 283

FACT : The Appellant(A) promised to pay Respondent(R) RM268,888 in return for the R’s applica-
03 04
tion to convert and subdivide certain land to be developed into a housing estate.

HELD : The exchange of mutual promise, though it is executory consideration was good con-
sideration. Therefore, there was a binding contract.
 Wong Hon Leong David v Noorazman bin Adnan
(1995) 3 MLJ 283

Ä ®

RM268,888
HOUSING ESTATE
 2) EXECUTED CONSIDERATION
DEFINI-
TIONnsists of.
Something which is already actually
done . It is done in response to some
promise by the promisee.
EXAMPLE
In this, one party has already
In reward cases
performed its part of the promise
while the other party has to perform
its part of the promise.
 EXAMPLE : In reward cases
Lina has lost her cat, Comot almost 3 days. She tried hard to find the cat but failed. At the
same time, she posted an advertisement with a reward, RM500.

Zaki, a young man who walked along the street has read the said advertisement &
interested to find the cat for reward. Luckily, he managed to find Comot & later claim the
reward from Lina.

1) Can Zaki entitle for the reward? Why?

2) What if Lina failed to pay the reward, can Zaki

file any action against Lina? Why?
 ANSWER
1) Yes, he can. According to Section 2(d),CA 1950, on the “desire of
the promisor” means that if the promise/offeree ie (Zaki) has react to
the promisor/offeror (Lina’s desire), so he is bound to the said promise
ie, reward.

2) As long as Lina has made an executed consideration, she was bound to

the said advertisement( eventhough it is an ITT but, Zaki has fulfilled the
conditions imposed on the ads ie to find the lost cat). So, at this point
Lina has a contractual duty to pay the reward to Zaki. Failure to do so may
cause a legal action will be taken by Zaki. Executed consideration is a
good contract.
 3) PAST CONSIDERATION
EXAMPLE
DEFINITION
 something that performed  in reward cases (Refer to
before the promise was Lina & Zaki’s case)
made.
 Zaki managed to found
Comot, the lost cat
RULE before knowing that Lina
 The act of Zaki is wholly has offered for the
performed before the prom- reward beforehand.
ise (before he knew about
the reward offered). Is Past Consideration A
Good Consideration?
 The act was subsequent
Malaysian Position English Position
whereby the action came
first then only the promise Good Consideration Bad consideration
comes later.
 CASE FOR PAST CONSIDERATION
MALAYSIAN LAW

KEPONG PROSPECTING LTD v SCHMIDT

FACT : Schmidt (Consulting Engineer)

Act :S obtain permit for a company to mine the iron ore in Johore. S was appointing himself as the Managing Director.

After that, the company (KPL) was formed & there was an agreement entered between KPL and S.

Agreement’s term: KPL will pay S 1% of the value of the ore sold from the mining land -for all S’s services as CE before
the incorporation of the KPL, present services and for the future services.

ISSUE: Whether the services made by S before the company was incorporated is considered as valid consideration?

HELD : Yes, valid consideration. S can claim the amount.

 CASE FOR PAST CONSIDERATION
ENGLISH LAW
ROSCORLA v THOMAS

 Thomas promised Roscorla that horse bought by Roscorla was sound and not vicious(x ganas) after
sale. Unfortunately, the horse was vicious.
 Thus, Roscorla sued Thomas for the breach of the said promise.

 Held: promise made AFTER sale had been completed & there was no consideration.
RULES ON CONSIDERA-
TION
 RULES ON CONSIDERATION
2019

2018
2)Consideration 5)Consideration
2017
need not be a must not be
adequate vague
1)Consideration .
4)Consideration
must have 2020
3)Consideration must not be il-
some value
can move from legal
.
2016 the promisee or
other person 6)Consideration
.
2015 must be possible to
perform
 1)Consideration must have some value
 An act or a promise to do something which one is
bound to do will NOT be a valid consideration
(duty imposed)

Collin v Godefroy (1831)

A promise had been made to pay a witness who was under an

order to attend the court as subpoena for his trouble.

The promise n was unenforceable bcz there was no consideration

for it. The duty to attend was a “duty imposed by law”.
.
. Stilk v. Myrick (1809)

The captain of a ship promised his crew that if they shared between
them the work of two seamen who had deserted, the wages of the
deserters would be shared out between them.

The promise was not binding bcz the seamen gave no consideration.
They were already contractually bound to do any extra work to
complete the voyage.
 2) Consideration Need Not Be Adequate
Thomas v Thomas (1842)
Consideration must be sufficient but
Rent payment of £1 made by need not be adequate - Sufficient
the plaintiff to defendant was means, it is freely given without
a valuable consideration even fraud, misrepresentation, and other
though it was not adequate. vitiating factors.

Chappell & Co v Nestle Co (1960)

Issue : whether chocolate wrappers were part of

the consideration?

Fact: The Nestle comp offered to the public

gramophone records of a certain dance tune for Explanation 2 to Section 26 of
1s sd each together with 3 chocolate bar wrap- the Contacts Act states that
pers. The wrappers were thrown away on receipt
by the comp.
an agreement is not void merely
because the consideration is
Held: The wrappers were part of the consideration not adequate.
even though they were of no value once received
by the comp.
 3) Consideration can move from the promisee
or any other person

Venkata Chinnaye v Verikata

Ma’ya (1881) c r. 1 3 7

F a c t - A sister agreed to pay an annuity of rs653 to her brothers who

The consideration c a n move
from a person who is not the
promisee
provided no consideration for the promise. However, on the same day their
mother had given the sister some land, stipulating that she must pay the
annuity to her brothers.
When the sister failed to fulfill the promise, her brother sued her.
Held - She was liable to pay the annuity. A party to an agreement can
enforce the promise, even if he himself has given no consideration as long
as somebody has done so. There was good consideration for the promise
even though it moved from her mother not her brothers.
 4) Consideration must NOT illegal

 Consideration should not against

the law ie criminal act (fraud)

 If an exchange of contract requires

for illegal react, the parties in the
contract may refuse to follow.

 Eg ; Abu sell a stolen bicycle to

Adam. So, Adam should not pay for
the money for a consideration
 5) Consideration must NOT be vague/
clearly made

Scammell & Nephew v Ouston (1941)

 Fact – The defendant ordered a motor van from

the plaintiff on the understanding that the balance
of the purchase price can be had on hire purchase
terms over a period of 2 years”
 Held: The order (offer) was so vague that it has no
definite meaning. Further negotiations would be
required before agreement could be reached.
 6) Consideration must be possible to perform

 No element of frustration
 subject matter need to be exist(if
damaged, no consideration
should perform)
 Example; Ali sold his house to Abu
for RM300,000. Unfortunately, the
house was collapse due to earth
quake. So, no valid consideration
should happened.
 GENERAL RULE : CONTRACTS W/OUT
CONSIDERATION ARE VOID

EXCEPTIONS

SEC 26
However, there are 4 exceptions under Sec 26 where contracts w/out
consideration are VALID
1) SEC 26(a) CA 1950
 1) SEC 26(a) CA 1950
 An agreement made on account of natural love & affection between parties
standing in near relation to each other.

 Requirements;

I. The agreement/contract must be in writing, not in oral/verbal.

II. The agreement/contract must be registered.
III. It must be made in account of natural love & affection between parties in near
relation to each other – members of immediate family( mother, father, sib-
lings etc)
 1) SEC 26(a)
Between Parent + Child
Between Siblings

Example: Pak Majid has the only daughter

named, Sarah. He entrusted all his properties
to her includes 10 acres of lands, bungalow,
cash money and others.
Sec 26(a) provides no consideration to any
contracts/agreements on account of natural
love & affection ie family members. Sarah no
need to pay in return for all the properties
given by her father; Pak Majid. Although no
consideration provides with, but the contract
is VALID & she is entitle for the properties
Example : Alif and Adam were siblings. Alif
is in the financial difficulties after got fired
from the job. He tried to set –up own busi-
ness and manage to get a money from Adam
amounting to RM10,000 as a capital . But,
Alif did not promise to return back the money
to Adam.
Sec 26(a) applied as an agreement made on the
natural love and affection between siblings whereby
no consideration is require. Although no considera-
tion is require, but the said promise is VALID. Failure
to return back the money to Adam may cause a legal
action can be taken from him to his brother, Alif.
 EXAMPLE
Kamal & Kamil are siblings. Kamal promises to give
Kamil his car ie Proton SAGA. Kamil accepted the
promise but did not promise to give Kamal anything
in return. In the event that Kamal breach the promise,
Kamil can bring an action against Kamal for breach of
promise.
 1) ISSUE
i- Whether Sec 26(a) apply to Tan Soh
Sim in near relation to her 4 adopted chil-
drens.
ii- Whether Sec 26(a) also apply to Tan
Soh Sim’s family members in relation to
her adopted children.
2) FACTS
 Tan Soh Sim(the deceased) had expressed a wish for all her estates/proper-
ties should be divided amongst her 2 adopted sons & 2 adopted daughters.
 Her legal next of kin(3 sisters, 7 half sisters & brothers) by respecting her
wish drew up an agreement revoking all their rights in favor of 4 adopted chil-
dren who were their nephews & nieces.

3) HELD

 According to Chinese Adoptive Custom, an adoptive children are only related to their adoptive parent with natural love an
affection. Its means, the children may become their real children in the eyes of law.(Tan Soh Sim & her adoptive children)

 But, the adoptive children are not related to their adoptive parent’s family ie, their uncles & aunties – the agreement
signed by them for revoking their rights in favor of these adoptive children are INVALID.

 In this case, there was no natural love & affection btwn signatories(uncles & aunties) & receivers(4 adopted children).

CASE : RE TAN SOH SIM

 2) SEC 26(b) CA 1950

Sec 26(b);
i- promise to compensate wholly or in part a person who has already
voluntarily done something for the promisor.
Ii- something which the promisor was legally compellable to do
 2) SEC 26(b) CA 1950
 Similar with Executed & Past Consideration in regards to reward cases.

 Sec 26(b);
i- promise to compensate wholly or in part a person who has already
voluntarily done something for the promisor.

- Requirements;
a. a promise to compensate either wholly or partly
b. to promisee
c. Promisee did the act voluntarily

- Case : J.M Wotherspoon & Co Ltd v Henry Agency House

 EXAMPLE
Ali and Emy were neighbor. One day, Ali had watered
Emy’s garden when he & family were away for holiday.
When Emy returned, Emy promised Ali to give him a book
for his trouble. In the event that Emy had failed to give
the book to Ali, Ali can bring an action against Emy
because the promise that Emy gives is VALID although Ali
did not give any consideration AFTER Emy had made the
promise.
 2) SEC 26(b) CA 1950
 Sec 26(b);
ii- agreement to compensate for an act
which the promisor was legally compellable
to do

- Requirements;
a. Promisee has done the act voluntarily,
b. The act is one which the promisor was
legally compellable to do,
c. An agreement to compensate wholly
or partly, the promise for the act
 EXAMPLE
You had look after your neighbor’s infant son while
he was away on holiday. When they came back, they
promised to compensate you for the expenses that
you have incurred. In this situation, if they failed to
give you the compensation, you can bring an action
against them for breach of promise.
3) SEC 26(c) CA 1950
 3) SEC 26(c)
 An agreement to pay statute-barred debt
 Debt that cannot be recovered through legal action bcz lapse of
time fixed by law
 Legal action can be taken against any civil action(for debt issue) if it not more than 6
years from the date of debt issued.

 Exceptions;

a. There is a fresh promise made by the debtor to pay the statute barred debt after
the lapse of 6 years
b. The promise is made in writing and signed by the person to be charged or his
authorized agent acting on his behalf.
 EXAMPLE
Sarah owes Murni RM1000 since 2013 but, the
debt is barred by limitation. Sarah signs a new
written promise to pay Murni RM500 on account
of the debt. This is a contract.