Topic 4 - Consideration

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Farid Arifn
CONSIDERATION
Sources of law of contract
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Sources of
law of ct
Written
Legislation
UNwritten
Judicial
decn
English law
Common
land and
equity
Custom
Statutes of
general
application
offer
acceptance
Enforceable
agreement
Not illegal
intention
capacity
consideration
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Free consent
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Types
Executory
Executed
Past
consideratio
n
Definition
Section 2 (d)
Case: curie v Misa (1875)
Section 26 contract without consideration is void no unilateral

declaration
Section 24
See Illustrations
Farid Arifn
Some rights, interests, profit or benefit accruing to one party, or

some forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other..
Something which is given, done, or foreborne by one party in

return for some action or in action on the part of the other party.
It must have some legal value..
Forbearance to sue is a good consideration
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Farid Arifn
Definition: Curie v Misa (18741880)
Rules governing considerations

Natural love
is a good
consdn
Need not be
adequate
Provided
under the
provisions
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Past
consideratio
n is a good
consdn
Accord and
satisfactoion
Characteristic
s of
considerations
Need not
move from
promisee
Rules governing the laws
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Agreement
without
consideratio
n is void
Section 26
Exceptions
Exceptions
Expressly provided under the MCA
s 26(a): written agreement made on account of natural love and

affection and is registered;
s 26(b): a promise to compensate for something done;
S 26 (c) : a promise to pay a debt barred by limitation law
Where the legislature has waived consideration

For e.g. scholarship agreement by virtue of s.4(c) MCA
Farid Arifn
University Malaya v Lee Ming Chong (FC) 1986
Facts: Lee was given a scholarship to study in Canada on one

condition that he must work for the University for 2.5 years. Upon
Lees return, he left the University and argued that he had not
provided consideration and hence there is no contract between
Lee and UM.
Federal court held that there was consideration as UM paid the

fees. Even if there was no consideration the agreement is still
valid as s 4(c) Contracts (Amendment) Act 1976 provides that a
scholarship agreement is not void by absence of consideration.
Farid Arifn
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Definition s 2(d) Contracts Act

Guthrie Waugh Bhd v Malaippan Muthucumaru [1972] 1 MLJ 35 HC
at 38-39; [1972] 2 MLJ 62 FC 3.1.2 Act or forbearance as
consideration An act or forbearance may constitute valid
consideration under the Contracts Act.
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Farid Arifn
Case: South east asia insurance v

Nasir Ibrahim (1992)
That case was explained by the PC in their recent case of Pao On v

Lau Yiu Long [1980] AC 614; at p 630 in which the P as owners of the
issued share capital of a private company agreed to sell their shares
to the Def who were the majority shareholders of a public company.
No money had passed under the agreement but the price of the
shares was to be satisfied by an issue to the plaintiffs of shares in the
public company. So as not to depress the market for the public
companys shares, the P undertook at the defendants request to
retain 60% of the new shares for one year. Later the D gave the P a
guarantee promising to indemnify the P against any fall in the value of
those shares during the said period. Subsequently the share prices
dropped and the P sought to rely on the contract of indemnity. The D
alleged, inter alia, that there was no valid consideration
.
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has done or abstained from doing shows that our MCA

recognizes the principle laid down in Lampleigh v
Braithwait [1615]
PC
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that an act done before the giving of a promise could be valid

consideration for that promise if the act had been done at the
promisors request, the parties had understood that the act
was to be remunerated either by payment or conferment of a
benefit and the payment or conferment of a benefit would have
been enforceable had it been promised in advance; that since
the written guarantee itself referred to the plaintiffs
antecedent promise not to sell the shares before 30 April 1974,
it was not possible to treat the defendants promise of an
indemnity as independent of the plaintiffs antecedent promise
made at the defendants request; and that, therefore, since the
guarantee fixed the benefit on the faith of which the plaintiffs
antecedent promise had been given, it stated a valid
consideration for the promise of indemnity.
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held, inter alia,
Section 2(d)
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At the
desire of
the
promisor
Promisee or
any other
person has
done or
abstained
from doing
something
Considerat
ion (an
act,
abstinence
or
promises)
Forms of consideration
Consideration may be in the form of positive act or an omission
of an act;
Consideration needs not move from the promisee.
A third party can give valuable consideration;
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What makes a bare promise

binding
consideration
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Bare
Promises
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Binding
contract
Cases
Lush J. in Currie v Misa (1875) LR 10 Exch 153 referred to
consideration as consisting of a detriment to the promisee or a
benefit to the promisor:
"... some right, interest, profit or benefit accruing to one party, or

some forebearance, detriment, loss or responsibility given,
suffered or undertaken by the other."
The definition - Sir Frederick Pollock, approved by Lord Dunedin in

Dunlop v Selfridge Ltd [1915] AC 847, is as follows:
"An act or forbearance of one party, or the promise thereof, is the

price for which the promise of the other is bought, and the
promise thus given for value is enforceable."
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Types of consideration
Executory Consideration;
Executed Consideration;
Past Consideration
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EXECUTORY CONSIDERATION
Consideration is called "executory" where there is an exchange of

promises to perform acts in the future, eg a bilateral contract for
the supply of goods whereby A promises to deliver goods to B at
a future date and B promises to pay on delivery. If A does not
deliver them, this is a breach of contract and B can sue. If A
delivers the goods his consideration then becomes executed.
Farid Arifn
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EXECUTED CONSIDERATION
If one party makes a promise in exchange for an act by the other

party, when that act is completed, it is executed consideration
Example: in a unilateral contract where A offers RM500 reward

for the return of her lost handbag, if B finds the bag and returns
it, B's consideration is executed.
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Past consideration
Good consideration? English Law no
Case: Roscorla v Thomas [1842] sale and purchase of horse

guarantee that the horse was sound.
For example, A gives B a lift home in his car. On arrival B promises to

give A 5 towards the petrol. A cannot/ can enforce this promise as his
consideration, giving B a lift, is past.
Exception under English Law Lampleigh v Braithwait an act

originally done at the request of the promisor, a promise subsequently
made to the doing of that act.. Is binding ..the act is consideration
Royal pardon for murder case.
Case: Kepong prospecting Ltd claim for services rendered before the
establishment of a company was held to be without consideration
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Consideration
is yet to be
performed or
given
past
executed
Executory -
A promises to
buy Bs car as
B helped him
by purchasing
As flat
(consideration
complete at
the time of the
contract or
when the
promise is
made
B purchased As
flat. Upon
settlement of
purchase price,
A promises to
buy Bs car
(consideration
was complete
long before the
promise and
independent
from the
promise)
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Farid Arifn
Ill buy your

car if you
promise to
purchase my
flat, A agrees
to purchase
Bs flat
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A claim may be founded on an act done prior to the promise

provided the promisee had done or abstained from doing
something pursuant to the desire of the promisor and not
necessarily in pursuance to be made by the promisor.
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Section 26, Explanation 2 an agreement to which the consent of

the promisor is freely given is not void merely because the
consideration is inadequate; but the inadequacy of the
consideration may be taken into account by the court in
determining the question whether the consent of the promisor
was freely given..
Case: Sturlyn v Albany (1587)
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Farid Arifn
Consideration needs not be

adequate
Scenario
A goldsmith agreed to sell a necklace worth RM3000 for only
RM1300. The goldsmiths consent was freely given. Based on s
26, the agreement is valid and enforceable notwithstanding the
inadequacy of the consideration;
But if the goldsmith claimed for coercion, the element of low

price is relevant for the court to consider.
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Accord and Satisfaction

Part payment may discharge an obligation
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CONSIDERATION MUST NOT MOVE FROM THE

PROMISEE ALONE
Gen rule : The person who wishes to enforce the contract must
show that they provided consideration; it is not enough to show
that someone else provided consideration. The promisee must
show that consideration "moved from" (ie, was provided by) him.
Malaysian position is clearly provided under s 2(a) any other

persons.
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Existing Public duty
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If someone is under a public duty to do a particular task, then

agreeing to do that task is not sufcient consideration for a
contract. See:Collins v Godefroy (1831) 1 B & Ad 950.
If someone exceeds their public duty, then this may be valid

consideration.
See: Glassbrooke Bros v Glamorgan County Council [1925] AC

270.
Existing Contractual duty
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Farid Arifn
If someone promises to do something they are already bound to

do under a contract, that is not valid consideration. Contrast:
Stilk v Myrick (1809) 2 Camp 317.
Hartley v Ponsonby (1857) 7 E & B 872.
The principle set out in Stilk v Myrick was amended by the

following case. Now, if the performance of an existing contractual
duty confers a practical benefit on the other party this can
constitute valid consideration.
S 26 Illustration (b)
An agreement made on the basis of natural love and affection is
valid provided a few conditions to be fulfilled:
Agreement made in writing;
Agreement is registered (where applicable)
The parties in the agreement must be of close relative or having

close relationship
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30
Case:
Re Tan Soh Sim Deceased Chan Lam Keong & Ors v Tan Saw
Keow & Ors [1951] MLJ 21
Issue: parties standing near to each other
Adopted son is related to his adoptive father but a son is not

nearly related to the family of adoptive mother..
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Payment of a lesser sum

General rule: payment of lesser sum in satisfaction of full sum is
not binding as there is no consideration for the act to forgo the
balance
This rule is not applicable in Malaysia. S 64 of the MCA clearly

provides
Case: Associated Pan Malaysia Cement Sdn Bhd v Sya Teknikal &
Kejuruteraan Sdn Bhd (1990) 3 MLJ 287, SC
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Our law on waiver in s 64 of the Contracts Act 1950, is similar to

the Indian law on the general principles of waiver under which it
is open to a promisee to dispense with or remit wholly or in part
the performance of the promise made to him or he can accept
any promise which he thinks fit. Under our law neither
consideration nor an agreement will be necessary. But in this
case we also agreed with the respondent that it had not been
shown to the trial judge or to us that the respondent had
intentionally foregone its claims. On the other hand the learned
judge who saw and heard Mr. Ong in the witness box accepted
his evidence that the respondent did not intend to abandon its
claims under the various contracts. We therefore agreed with the
learned judge that as a matter of fact waiver did not apply in this
case.
Farid Arifn
Accord and satisfaction

Case: Kerpa Singh v Bariam Singh [1966]
Debtor took loan from creditor. Debtor made an arrangement to

settle lump sum payment by paying a lesser amount
After the creditor cashed the cheque he demanded for the

balance. The app argued there was no accord and satisfaction of
consideration
FC held that creditor cannot demand for the balance.

Case 2: Pan Ah Ba & Anor V Nanyang [1969] -
Farid Arifn
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1

Sources of law of contract

Case: curie v Misa (1875)

Section 26 contract without consideration is void no unilateral

Some rights, interests, profit or benefit accruing to one party, or

Something which is given, done, or foreborne by one party in

Forbearance to sue is a good consideration

Definition: Curie v Misa (18741880)

Rules governing considerations

Rules governing the laws

s 26(a): written agreement made on account of natural love and

Where the legislature has waived consideration

University Malaya v Lee Ming Chong (FC) 1986

Facts: Lee was given a scholarship to study in Canada on one

Federal court held that there was consideration as UM paid the

Definition s 2(d) Contracts Act

Case: South east asia insurance v

That case was explained by the PC in their recent case of Pao On v

has done or abstained from doing shows that our MCA

that an act done before the giving of a promise could be valid

held, inter alia,

Consideration needs not move from the promisee.

A third party can give valuable consideration;

What makes a bare promise

"... some right, interest, profit or benefit accruing to one party, or

The definition - Sir Frederick Pollock, approved by Lord Dunedin in

"An act or forbearance of one party, or the promise thereof, is the

Consideration is called "executory" where there is an exchange of

If one party makes a promise in exchange for an act by the other

Example: in a unilateral contract where A offers RM500 reward

Case: Roscorla v Thomas [1842] sale and purchase of horse

For example, A gives B a lift home in his car. On arrival B promises to

Exception under English Law Lampleigh v Braithwait an act

Ill buy your

A claim may be founded on an act done prior to the promise

Section 26, Explanation 2 an agreement to which the consent of

Case: Sturlyn v Albany (1587)

Consideration needs not be

But if the goldsmith claimed for coercion, the element of low

Accord and Satisfaction

CONSIDERATION MUST NOT MOVE FROM THE

Malaysian position is clearly provided under s 2(a) any other

Existing Public duty

If someone is under a public duty to do a particular task, then

If someone exceeds their public duty, then this may be valid

See: Glassbrooke Bros v Glamorgan County Council [1925] AC

Existing Contractual duty

If someone promises to do something they are already bound to

Stilk v Myrick (1809) 2 Camp 317.

Hartley v Ponsonby (1857) 7 E & B 872.

The principle set out in Stilk v Myrick was amended by the

Agreement made in writing;

Agreement is registered (where applicable)

The parties in the agreement must be of close relative or having

Issue: parties standing near to each other

Adopted son is related to his adoptive father but a son is not

Payment of a lesser sum

This rule is not applicable in Malaysia. S 64 of the MCA clearly

Our law on waiver in s 64 of the Contracts Act 1950, is similar to