(3) CONSIDERATION

 Section 2(d) of CA 1950

“when, at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abtains
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”
 Consideration can be considered as bargain, the price which
one party pays to buy the promise or act of the other
 Consideration must be move from both sides. From the
promisor to the promisee and from the promisee to the
promisor.
 CASE: OSMAN B ABDUL GHANI & ORS V UNITED ASIA BANK
BHD
The respondent i.e. the bank promise not to sue the appellant
pay for the debt. Court held that if the appellant pay for the
debt, the respondent cannot sue the appellant. The
consideration is valid consideration.
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 Literally means; something that is give in return for something
RM12.00 for Big Mac Combo

RM 6.OO for a plate of Nasi Ayam Penyet

Muthu promise Samy RM50 if he cuts the grass in

Muthu’s garden. If Samy agrees and cuts the grass
in the garden, Muthu is bound to pay Samy RM50.

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 1. Executory 3. Past
consideration Consideration

2. Executed
Consideration

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1. Executory consideration
• It is a promise in return of a promise. (promise for a
promise)
• E.g. Ali agrees to sell his house to Bakar for RM100,000.
Here Bakar’s promise sum of RM100,000 is the
consideration for Ali’s promise to sell the house and Ali
promise to sell the house is the consideration for promise
to pay the RM100,000 (lawful consideration)
• CASE: K.MURUGESU V NADARAJAH.
the appellant i.e K.Murugesu promise to sell his house to
the respondent for RM26,000 within 3month from the
specific date. The respondent promised to pay within
3month. Court held that contract exist between them
due to the existence of executory consideration.
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2. Executed consideration
• It is a promise in return for the performance of an act. (promise for an act)
e.g.: I give you RM10 if you wash my car.
3. Past consideration
• Past consideration is a promise to do something in return for an act
which has already been performed
• English Law does not recognized Past Consideration but Malaysian Law do
recognize Past Consideration.
• CASE: KEPONG PROSPECTING LTD.&S.K JAGATHEESAN &ORS, V.A.E
SCHMIDT & MARJORIE SCHMIDT
The respondent assisted the appellant in getting permit for mining
iron. When the appellant succeed in his business, he promised
Schmidt that he will pay him 1% of the value of the sale of the
product for his service before and after the formation of the
company ad also for the future services. Later dispute arose
between them. The appellant did not want to pay Schmidt as
promised. Court held that the promise made by the appellant is a
past consideration. Contract exist between them. The appellant
should pay the amount promised to the respondent.
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THE GENERAL RULE
 Section 26 CA agreement made without consideration is void
 Illustration c to Section 26 “ A finds B’s purse and gives it to him.
B promises to give A RM50. This is a contract”
 However the rule is open to exception. The exception are
governed by Sec. 26 (a) (b) and (c)
EXCEPTION TO THE GENERAL RULE
Section 26 (a) Natural Love and
Affection is a Valid Consideration

The Contracts Act 1950 recognizes natural love and affection

as valid consideration if certain prerequisites are complied with.
 Section 26(a) laid down the prerequisites:-
a) It is expressed in writing
b) It is registered (if applicable)
c) The parties stand in a near relation to each other.
What it means by near relation varies from one social group to another as it
depends on customs and practices of such groups.
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Example under Illustration(b) under Section 26 : A, for natural
love and affection, promises to give his son, B, RM1,000. A puts his
promise to B in writing and registers it under a law for the time
being in force for the registration of such documents. This is a
contract.”

CASE: RE TAN SOH SIM

A woman who was dying intended to give away all her
property to her adopted Children. Court held that the
agreement should not be valid because there was not written
agreement and they are not in near relation with each other.
Element of love and affection does not exist. So the children
could not get the property.

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 SECTION 26 (b) an agreement to
compensate for a past voluntary act

 The act should be voluntary which means act performed on one’s own
free will
 Under this exception, the promisor promised to give the promisee
something because the promisee has done something voluntarily before
the promise was made.
 When this happen, the promise made by the promisor is valid although
there was no consideration on the promisee’s part. In the event that the
promisor did not do what he has promised, the promisee can sue him for
breach of promise.
 E.G: Obama your neighbour had watered your garden while you were on
Holiday in Abu Dhabi. When you returned, you promise Obama to give
him karaoke set for his trouble. In the event that you failed to give the
karaoke set to him, he can bring an action against you because the
promise that you give is valid. Although Obama did not give any
consideration after you have made the promise.

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 26 (C) An agreement to pay
debt bared by limitation act

 Statute barred debt is a debt which cannot be recovered

under the law due to lapse of time fixed by law. In order for
the agreement to be valid, a few requirement should be
fulfilled.
i. Debtor made fresh promise to pay statute barred debt
ii. Promise must be in writing and signed by the person to be
charged/ authorized agent .
 For contract matter, the action must be bought to the court
within 6 years from the time of the cause of action arise.
 E.G : Ali owes RM1000 from Bakar but the debt is barred by
limitation. Ali signs a written promise to pay Bakar RM500 on
account of the debt. This is a contract.

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 RULES OF CONSIDERATION
1. Adequacy of consideration
• Consideration does not necessarily be adequate but must be sufficient. If
the promisor freely gives his consent to the promise, then the
agreement is valid.
• Example Illustration (f) under Section 26 CA 1950 :
“ A agrees to sell a horse worth RM1,000 for RM10. A’s consent to the
agreement was freely given. The agreement is a contract
notwithstanding the inadequacy of the consideration”
• CASE : PHANG SWEE KIM V BEH HOCK
The respondent agreed to transfer a piece of land to the appellant for
RM500 eventhough the land worth much more. After a certain time, the
respondent refused to honour the promise saying that the promise is not
enforceable by law. Court held that contract exist between the parties
regardless of inadequacy of the consideration.
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2. Part-payment May Discharge An Obligation
• Under English Law, it is a general rule that payment of a smaller sum is
not a satisfaction of an obligation to pay a larger sum.
• Sec.64 CA provides if a party pays a small sum in full satisfaction of a
larger sum, it will discharge the larger sum regardless of who makes the
payment of the smaller sum, it will discharge the larger sum.
 Illustrations (b)
“A owes B RM5,000. A pays to B, and B accepts, in satisfaction of the whole
debt, RM2,000 paid at the time and place at which the RM5,000 were
payable. The whole debt is discharged.”
• CASE: KERPA SINGH V BARIAM SINGH
The defendant owed the plaintiff RM8869.94, the defendant’s so offered
RM4000 in full satisfaction of his father’s debt. The plaintiff’s legal
advisor cashed and retained the money. Later on the plaintiff claimed for
the balance. Court held: the plaintiff has being stopped from claiming
the balance because he has accepted the smaller sum in full satisfaction
of the larger sum.

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Law requires that for an agreement to be legally enforceable, the parties
should have An intention either express or implied from the circumstances.
There are two situation Whereby intention of parties is great importance :
I. Business agreement
II. Social, domestic and family agreement

BUSINESS AGREEMENT

Presumption: parties have an intention to create legal relations

In business agreements, the law presumed that the parties have the intention
to create legal relations. Since the presumption has been establish, therefore it is
up to the party to challenge it.
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CASE: LOW KAR YIT& ORS V MOHD ISA & ANOR.
 It involved sale of land. Agreement between the parties was
subject to a formal contract to be drawn up and agreed upon by
the parties. The defendant failed to sign the document for sale.
The plaintiff sued for specific performance.
Court held that since the contract was subject to formal
contract being drawn up and agreed between the parties, there
was no contract between the parties. The plaintiff was not
liable for the specific performance.
CASE: ROSE AND FRANK CO.V CROMPTON BROS.
 It involved 2 companies in Britain and US. They agreed to enter
into contract. However, the contract is subject to a clause that
the contract is not governed by any law either Britain or US law.
Court held, that there was no contract between them because
they have no intention to have a contract which is recognized by
law.
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 SOCIAL, DOMESTIC AND FAMILY
AGREEMENT

 Presumption: parties have no intention to create legal relations.

 Agreement made in everyday in social and family life is presumed not to
have intention to create legal relation.
Husband (Defendant)
CASE: BALFOUR V BALFOUR

Wife (Plaintiff) There was and agreement bet.

husband and wife

H was on leave in England and promised

To pay his wife monthly allowance. After
A while, the H defaulted.
W sued for breach of contract.

Held: the parties made the agreement as Husband and wife in which there is
no intention that it can be sued upon. 14
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Rebuttable presumption : CASE: MERRIT V MERRIT

Wife (Plaintiff)
Husband (Defendant)
The husband left the matrimonial home which in the
joint names of Husband and wife. The house is subject to
the mortgage.

Later they come to an agreement that the husband was to pay the wife $40
A month for maintenance and paying the mortgage. He promised that after
The wife completed the payment, he would transfer the house to the wife.
An agreement was put into writing and signed by the husband. However the
Husband refused to transfer the house.

** Held: the parties intended to create legal relations. The agreement is

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Enforceable. The husband should transfer the house to the wife.
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 Certainty refers to the terms of the
contract.
 Section 30 CA provides that agreements,
the meaning of which is not certain or
capable of being certain, are void.
 See illustrations (a), (b), (e) & (f) of section
30 CA.
 CASE: KARUPPAN CHETTY V SUAH THIAN
The term of the contract provides that
lease of $35 per month is for “as long as he
likes”. Court held that the word of “as long
as he likes” is uncertain. Therefore the
contract is void.

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• Capacity of parties refers to competency of parties to
enter into contract.
• Sec. 10(1) - a contract is void if one or both parties lack
the legal capacity to contract.
• Sec. 11 - Every person is competent to contract if he is:
i. Age of majority
ii. Sound mind
iii. Not disqualified from contracting by any law (not to be
discussed)
Case: Mohari Bibee v Dhurmodas
An infant entered into a contract to get a loan from the
appellant. Later the infant commenced an action through
his mother for a declaration that the contract was void
for lack of capacity. HELD: the contract was void
because a party to the contract is an infant.

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• According to section 2 Age of Majority Act 1971, the age of
majority is 18 years and above. The person is called major .
• Those who is below 18 years old is a minor.
• The General rule: contracts made by minors
are void
Reason for this is to prevent the minors against any
consequences of its own action.
CASE : TAN HEE JUAN V THE BOON KEAT
it involved a transfer of land. The plaintiff who was a minor
executed transfer of land in favour of the defendant. Then the
plaintiff by his friend applied to court an order setting aside
the transfer for incidental relief. Court held that the contract
was void on the ground that the party to the contract was a
minor.

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Exception to the general rule.
1) Under Age of Majority Act 1971
2) Under Contract Act 1950
***************XXXXXXXXXXXXX****************
Under age of majority act 1971
i. In matters relating to marriage, divorce, dower and
adoption
ii. In religious matter
iii. Any other law fixing the age of majority e.g. 21 years
for voting.
 CASE: RAJESWARY & Anor V BALAKRISHNAN
a promise of marriage entered into by minor. The
agreement entered into with provision for dowry and
penalty for breach. Then the promise to marry is
repudiated. The plaintiff sued for breach if promise to
marry. The defendant pleaded that since the plaintiff is
a minor then the agreement is void. Court held that the
marriage contract entered into by the minors was valid.
Since one of the parties breach of the contract, the
other party has right to sue.
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 Under contract Act 1950

necessities

scholarship

Insurance

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 1. Necessities

Necessities are minor’s actual needs and his station in life.

For e.g.: clothes, food, education, shelter, transport etc.

Section 69 CA 1950 provides that contract with a minor is a

valid contract provided that :
i. The necessities must have been supplied to a minor.
ii. The minor’s liability includes necessities supplied to anyone
whom he is legally bound to support such as wife or child.
iii. The supplier of necessities may claim only a reasonable
price which may not be the same as the contract price.
iv. Minor may only pay if he has the property to do so.

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 CASE : NASH V INMAN
The defendant is minor. He ordered certain clothes
from plaintiff Including 11 fancy waistcoats. The
plaintiff sued the defendant to recover the cost of
the clothes supplied. According to the evidence Given
by the minor’s father, the minor already had adequate
supply of clothes suitable and necessary for his
condition in life. Court held that since the clothes
supplied by the plaintiff were not necessities, the
minor should not be liable for the clothes.

CASE: GOVERNMENT OF MALAYSIA V GUCHARAN SINGH

The defendant was sued for the amount of $11 500 alleged to be
sum actually spent by the government in educating the defendant.
The defendant argued that at the time of the contract the
defendant was a minor. Court held that the contract was void but
since education was necessaries, the defendant was LIABLE for
the repayment of reasonable sum spent on him.
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2. SCHOLARSHIP
• Sec.4 (a) contract (Amendment) Act 1976
provides that no scholarship agreement
should be invalidated on the ground that the
person entering the contract is a minor.
3. INSURANCE
• Under the Insurance Act 1963 (Revised
1972) a minor over the age of 10 may enter
into a contract of insurance. If under 16
year, then the consent of the parents or
guardian is needed.

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 State of mind
• Section 12 (1) of CA 1950 “ A person is said to be of sound mind
for the purpose of making a contract if at the time of making a
contract, he is capable of understanding it and forming a rational
judgment as to its effect upon his interest”.
• The person who is unsound mind/incapacity refers to person who is
mentally disorder and also those who is incapacitated through
sickness, alcohol or drug.
• Section 12(2) a person who usually suffers from mental disorder
may make a contract during those periods when he is sound. A
person who is mentally disorder can make a contract at a time when
he is sound.
• Section 12(3) a person who is usually of sound mind but occasionally
of unsound mind, may not make a contract when he is unsound
mind. A person who is sound cannot make a contract when he is not
sound. E.g.: drunk, sick, or under influence of drug.
• Effect of contract: the Malaysian law is silent on the effect of the
contract. However the English law treated the contract is
voidable.

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 General rule: free consent is the basis of a contractual
relationship.
• Sec.10 (1) requires all agreements to be made by “the
free consent” of the parties
• Sec. 13 - meaning of consent
“ Two or more persons are said to consent when they agree
upon the same thing in the same sense”
• Sec. 14 - Definition of free consent
Consent is said to be free when it is not caused by
i. Coercion;
ii. Undue influence;
iii. Fraud, VOIDABLE CONTRACTS
iv. Misrepresentation and
v. Mistake

• Section 19 (1) CA 1950 “ when consent to an agreement

is caused by coercion, fraud or misrepresentation, the
agreement is voidable at the option of the party whose
consent was so caused.

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• Meaning- section 15 Contract Act 1950 “ coercion is committing
or threatening to commit any act forbidden by the Penal Code or
the unlawful detaining or threatening to detain any property, to
the prejudice of person whatever, with the intention of causing
any person to enter into an agreement.
• Coercion includes
i. Commit or any act forbidden
ii. Threaten to commit by Penal Code
iii. Unlawful detaining any property of
iv. Unlawful threat to detain other person
– Coercion is used to force another person to make a contract
i.e to influence the creation of contract
•

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• CASE: CHIN NAM BEE DEV. SDN BHD V TAI KIM
CHOO & ORS. [1988] 2 MLJ 117
Respondent purchased a home plan from the appellant.
The respondent has signed a sale and purchase
agreement at $29 500. subsequently the respondent
was made to pay additional $400 if not the appellant
will cancelled the booking. HELD: the payment was not
voluntary but had been made under threat.

• Effects of coercion on contract

– Sec. 19(1) – a contract made under coercion is
voidable at the option of the victim

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 Sec. 16(1) - Undue influence exists where the relations
subsisting between the parties are such that one of the
parties is in a position to dominate the will of the other
and uses that position to obtain an unfair advantage over
the other.
 The two elements of undue influence
i. One party is in a dominant position (able to dominate the
will the other) over the other and
ii. He uses that position to obtain an unfair benefit
• Sec. 16(2) - the following persons are deemed to be in
a position to dominate the will of another person:
i. One person holds a real or apparent authority over the
other or
ii. One party stands in fiduciary relation to the other
iii. One person makes a contract with a person whose mental
capacity (temporary or permanent) is affected by reason
of age, illness, and mental or bodily distress.
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• Purpose: to protect people from being forced, tricked or missed in
anyway by others into parting with their properties without their
consent.
• CASE: ALACARD V SKINNER
When Miss Alcard was about 35 years of age she felt desire to
devote her life to good works. She became associated with the
sister of poor and after a few years became a professed member of
that sisterhood and bound herself to observe the rules of poverty,
chastity and obedience . The rule as to poverty required a member
to surrender all her property either to her relatives, the poor or the
sisterhood itself. The rules also provided that no sister should seek
from anyone outside the order without the consent from lady
superior. Within a few days of becoming a member, Miss Alcard
made a will bequeathing all her property to Miss Skinner, the lady
superior and in succeeding years made gift to the value of about
$7000 to the same person. When Miss Alcard left the sisterhood
about eight years later, she immediately revoked her will to recover
what was left of the money given to Miss Skinner.
HELD: if she had sued to recover the amount of her gifts which has
been expended on the fulfillment of the purpose of sisterhood at an
earlier date, she would have succeeded on the ground of undue
influence. But as it was he acquiescence rendered her claim barred
by laches (lapse of time)

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CASE: DATUK JAGINDER SINGH AND ORS V TARA
RAJARATNAM
• The respondent was the registered proprietor of land, claimed
that she was induced by the fraud and undue influence of the first
and second appellants to transfer her land to the second appellant.
HELD: the appellant and the respondent were in solicitor
relationship, the transaction was unconscionable and therefore the
burden was on the appellant to rebut the presumption of undue
influence.
CASE : SALWATH HANEEM V HADJEE ABDULLAH
• The plaintiff’s husband executed a conveyance of property
belonging to himself and the plaintiff to B and C, his brothers. The
plaintiff agreed to the conveyance but after her husband’s death,
she bought an action seeking to set aside the agreement and the
conveyance. HELD: there was a confidential relationship existed
between the plaintiff and B & C. The burden of proof therefore
lay on B & C to show that the plaintiff fully understood the
transaction & executed the conveyance freely without being
subject to undue influence. Since B & C failed to disclose to
burden the transaction was set aside.

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 Burden of Proof

Lies upon the one who dominating the will of

another i.e.: he must prove that the contract was
not induced by undue influence.

The effect of the

contract
sec.20 an agreement caused by undue influence is a
contract voidable at the option of the party whose
consent was so caused.

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 Fraud
• Meaning : Various acts committed by a party to a contract with
intent to deceive the other contracting party . Includes:
i. Making an untrue statement which the maker does not believe
the truth of it
ii. Concealment of fact by one having knowledge of belief of fact
iii. A promise made without any intention of performing it
iv. Any act fitted to deceive
v. Any act or omission declared by law as fraudulent
• Important element :
- an act done by a party to a contract with the necessary
intention to deceive the other contracting party.

Act done= deceitful act that is

intended to induced the other Intention =state of a
party to enter into a contract. representor’s mind
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CASES
WEBER V BROWN
• The plaintiff- respondent sued the defendant-appellant for
damages in respect of an alleged false and fraudulent
misrepresentation relating to the number of rubber trees where
the number of trees represented was in excess of the number,
which actually existed on the estate. HELD: the defendant had
made the alleged misrepresentation falsely & fraudulently and such
act had caused the plaintiff to acquire & subsequently to exercise
the right of purchase.

LETCHEMY ARUMUGAM V ANNAMALAY

• The defendant had asked the plaintiff to sign a document for a

loan. Actually the document was a sale agreement. HELD: the
agreement is voidable in the option of the plaintiff. The initial
agreement and the further agreement relating to a purchase of
the three unapproved sub lots could be rescinded & the court
awarded her damages for the loss suffered by the Plaintiff due to
the defendant’s fraudulent misrepresentation.
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 Kheng Chwee Lian V Wong Tak Thong

The respondent has been induced to enter into a second contract on the
false representation that the area of land to be transferred was on the
same size as the land which the respondent has agreed to buy under the
first agreement. HELD: the respondent was right in repudiating an
agreement with the appellant on the ground that it was induced by
fraudulent misrepresentation within the meaning of section 17 (a)

Burden of proof: falls on party making the claim that there is a fraud
Effect of the contract: voidable in the option of the parties.

Does silent amount to fraud? Mere silent as to facts likely to

affect the willingness of a person enter into a contract is not
fraud. For parties who is under uberrimae fidei e.g. insurance
contract or have fiduciary relationship e.g. solicitor and client, the
parties is under the duty to disclose material facts. If not
disclosure is made, silence may amount to fraud.
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• Section 18, Contract Act 1950- misrepresentation are false
statement made by the representation and which induce the
other party to enter the contract.
• Three limbs of misrepresentation under section 18:
i. A person making a statement which he believes it to be true
but it is not true
ii. Representation made by a person which gives advantage to him
eventhough he has no intention to deceive.
iii. The person who receives the representation makes a mistake
as to the substance of the thing which is the subject matter
of the agreement. Even if the representator is innocent.
CASE: GOH CHOOI LEONG V PUBLIC LIFE INSURANCE
• The insured had failed to disclosure that he had previously
suffered from Tuberculosis when he contracted for a life
insurance. HELD: there was a deliberate non disclosure by a
assured in which can be avoided for non disclosure of material
facts.
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 The effects of misrepresentation on contract

Sec. 19(1) – the agreement is a

voidable contract at the option
of the innocent party

Sec. 19(2) – the innocent party

may insist that the contract
shall be performed.

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• Misapprehension – failure to understand something
- believe about something which is not correct.
• Section 21: both parties make mistake as to fact of an
agreement. The agreement is void.
• CASE: RAFFLES V WICHELHAUS
– Two parties agreed to a sale of a cargo of cotton arriving in
London by a ship called “The Peerless” sailing from Bombay.
But unknown to both parties, there were two ships of the
same name, both sailing from Bombay at different times. One
in October and on in December. One party referred to
Peerless which sailed in Oktober whereas the other party
referred to December. HELD: there could be no binding
contract because Wichelhaus and Raffles each intended to
contract with respect to different ships. No contract could
be formed because each party has made his won mistakes.
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Section 22 of the Contract Act 1950: Mistake as to the new law in Malaysia
should not make the contract voidable.
CASE: SECK V WONG & LEE
A contractor asked for work plan from an architect. The architect asked for
payment from the contractor . The contractor paid without knowing that
the law does not allow such payment. HELD: the contract between the
parties is valid.
Section 23 of the Contract Act 1950
A contract is not voidable merely because it was caused by one
of the parties to it being under a mistake as to a matter of fact.
CASE: INGRAM V LITTLE
In order to buy a car from the owner, the buyer introduced
himself as well known person. The owner checked on him and
agreed to the contract. It happened that the cheque was a
bounce cheque. The car had been sold to a third party. The
owner tried to get back the car. HELD: the contract between
them is valid merely because it was caused by one of the parties.

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MISTAKE as To Document
General rule: a person is bound by the terms of the
contract he signs. Mistake as to document exists
when the party has make a mistake as to the nature
of the document that he has signed.
CASE: L’ESTRANGE V F.GRAUCOB
The plaintiff, who had signed printed contract
without reading the written conditions proffered by
the defendant, was bound by them including an
exclusion clause.
CASE: SUBRAMANIAM V RETNAM
Despite the fact that the defendant had signed the
agreement in English language was ignorant of the
language, the court found in favor of the plaintiff.
The contract was valid.

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 VOID & ILLEGAL CONTRACTS
 A void contract is an agreement not enforceable by law –
section 2(g)
 According to section 24, the consideration or object of an
agreement is lawful unless:
a) it is forbidden by a law
b) it is of such a nature that, if permitted, it would defeat
any law
c) it is fraudulent
d) it involves or implies injury to the person or property
of another
e) the court regards it as immoral, or opposed to public
policy
 Agreements are void if any part of their considerations
and objects are unlawful – section 25

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 VOID & ILLEGAL CONTRACTS
• Agreements declared void by the Contracts Act 1950:
1. An agreement made without consideration unless it is
in writing and registered, or is a promise to
compensate for something done, or is a promise to
pay a debt barred by limitation law – section 26
2. An agreement in restraint of marriage – section 27
3. An agreement in restraint of trade except for an
agreement not to carry on business of which goodwill
is sold; or an agreement made prior to a dissolution
of a partnership or an agreement made during the
continuance of a partnership – section 28

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 VOID & ILLEGAL CONTRACTS
4. An agreement in restraint of legal proceedings except
for a contract agreeing to refer disputes to arbitration or
a contract relating to scholarships – section 29
5. An agreement, the meaning of which is not certain, or
capable of being made certain – section 30
6. An agreement by way of wager – section 31
Consequences of Void or Illegal Agreements
 the courts will not enforce an illegal contract – ex turpi
causa non oritur
 right of restitution – section 66

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